“Gold is money. Everything else is credit.” ~J.P. Morgan in 1912
Loyal readers of our Investor Alert and my blog Frank Talk are no doubt aware that the U.S. dollar’s rising strength has put pressure on commodities such as oil and gold. I wrote about this as recently as my roundup of the top commodities stories of 2014, which you can read here.
Gold took a blow in the second half of 2014 as a result of the dollar’s ascent, and sentiment toward the yellow metal right now is less than ideal. But to keep things in perspective, its performance this year has far outpaced that of 2013, when it fell 28 percent—its worst showing since early into President Reagan’s first term.
Even though gold has lost 0.8 percent year-to-date as of this writing, it still leads all major world currencies except for the U.S. dollar.
For the rest of us, gold remains an exceptional instrument to diversify your portfolio with. Despite its decline midway through the year, its price has remained relatively stable, much more so than oil’s. What investors—especially the gold bears—need to remember is that bullion has a 12-month standard deviation of ±18 percent, meaning that its price action this year is well within normal behavior.
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