Gold Burns, From Singed to Scorched

thenews 2013.04.20 06:24

Investing in gold during the metal’s rally was a little like wandering into a jewelry store with a number of different counters.

Straight ahead, you could buy physical gold itself. Off to one side, you might be tempted by gold exchange-traded funds, which seek to mirror the metal’s performance, with more liquidity and none of the hassles of storing the stuff. Yet another offering: shares in companies that mined gold, which offer the potential for leverage returns but also exposure to the stock market. In the back, you might buy silver or platinum, which have historically moved in the same direction as gold, with added exposure to certain industrial factors.

The point is, if you bought the general premise of gold—that inflation was nigh, that the metal’s value over the centuries was the best guard against lurking calamities in the euro zone or the Fed or other scary corners—you had your options.

And now that gold has tarnished, officially entering a bear market since last fall, those various strategies have blown up in various interesting ways. Since Oct. 4, the 2012 high, the price of gold itself has fallen 22 percent, including a 9 percent plunge on April 15, its worst one-day performance in 33 years. ETS have followed in near-perfect sync.