Why did gold barely pop when the equities tanked in August '15?

[Sam Brazil]

Gold has been doing poorly, as all commodities have been, but I had been assuming that gold retained a latent special power...a quality that would cause people to flock to it when fear rises. Well, out of the blue the DOW crashes 1100 points in one morning, everyone panics, and the market continues gaping down the next couple days amid wild swings up and down, all the while China continues to crash and suddenly people think things have gotten so bad the Fed will no longer raise rates.

TLT shot up. GLD, ya, not really. If a huge crash like that can't get gold to pop, what can?

I'm starting to think of gold purely as an inflation hedge...it no longer seems to have the "safety" quality it once did. This most recent crash really has my doubts going...as far as GLDs place in the PP, sure I guess it serves its purpose to fight inflation, but as a form of insurance against black swan financial events it seems a bit shite.

[dragoncar]

Wild guess-- people think Chinese are big gold buyers so of they are hurting maybe gold will sell off

[dualstow]

I don't understand gold at all. As my previous sig stated, it's the one thing I buy that I don't understand.
I'm certainly reluctant to plow more money into it, but when it hits 15%, I think I will.
But, I'm prepared for it to not pop in my lifetime (I'm in my mid-forties).

[stuper1]

Every time I hear people say that gold is an inflation hedge, I think about the period of 2002 to 2012.  Gold went up like a rocket, but inflation was low.

To me, gold is just an uncorrelated asset (and very importantly a hard asset, if you hold physical, which will be great when financial Armageddon hits).  Uncorrelated means that nobody knows when it's going to go up or down, but it helps to dampen out the volatility of a stock/bond portfolio.

[mathjak107]

gold is a confused asset . it has no clue what it is supposed to respond to .  to me it is really not a hedge anymore asmuch as a speculation since you can't figure out when and where it will respond . it has not even been a good inflation hedge .

[Reub]

It seems that the PP goes as gold goes.

[mathjak107]

it seems that way since recently it has no horse to hitch to and as it falls it seems to get deeper and deeper in the hole .

since the most common growth engine historically with the shortest recovery times is equity's , it just seems with equity gains weak there is nothing to get the pp on positive track.

the same quality's that gave it its low volatility and claim to fame now seem to be crushing it as any gains equity's can muster get watered down by asset classes fighting to hard against it .

with rates this low there isn't much in the way of gold or treasury's that can sustain things once they do get a lift from fear . once the fear ends they go right back  down again .

[Fred]

It seems that the PP goes as gold goes.

It only accounts for 25% of the strategy so how does that work?

[mathjak107]

long term treasury bonds have been reversing direction since feburary taking heavy losses except for a bump every so often in a short term flight to safety  , there is near zero interest on cash , gold has been in a tail spin  .

with equity''s gains when they happen  being offset by  treasury losses it only leaves gold to be the tie breaker .

gold is confused and has no clue what it is supposed to respond to so until gold has a purpose to move basically the portfolio is losing value .


you can look at all the charts and back testing you want  but the real deal is just watch what the portfolio is doing  and has been doing  since 2008-2009  when gold is not doing anything .

[ochotona]

It seems that the PP goes as gold goes.

It only accounts for 25% of the strategy so how does that work?

Because addition.

[ochotona]

gold is confused and has no clue what it is supposed to respond to so until gold has a purpose to move basically the portfolio is losing value .

So we just wait until it wanders into $350 per ounce, then we buy. Then we wait twenty years until it stumbles for unknown reasons up to $2000 per ounce, then we sell. Nominal CAGR 9.1%. But if it doesn't then we pass it to our heirs, and it might do something in their lifetimes.

Maybe it would be more interesting to buy white industrial / precious metals (silver, platinum, palladium). A rougher ride, but more exciting.

[mathjak107]

if that is what you want your money to do for  so many years then stick with the plan .  i just hope it does not end up the typical case of waiting so long or the ship to come in the pier collapsed .

[dualstow]

It seems that the PP goes as gold goes.

Perhaps because gold has had an amazingly long and powerful run, and one that we can still call recent.

[MachineGhost]

Gold has been doing poorly, as all commodities have been, but I had been assuming that gold retained a latent special power...a quality that would cause people to flock to it when fear rises. Well, out of the blue the DOW crashes 1100 points in one morning, everyone panics, and the market continues gaping down the next couple days amid wild swings up and down, all the while China continues to crash and suddenly people think things have gotten so bad the Fed will no longer raise rates.

Surprise!!!  Stop listening to gold bug doom porn.  Its mostly all lies.