The price of gold dropped $31 an ounce yesterday. Gold has dropped $400 since the summer. Gold still shows gains over one year ago. And of course people who bought gold at the prices that prevailed before 2008 can claim profits of 50% or better on their investment. (NB: The best returns have flowed to large-scale investors who eschewed physical gold in favor of futures. And as always, coins are for suckers.)
Further declines look likely. Gold sales have plunged in India, the world’s largest market for gold jewelry. The rupee has steeply declined against the dollar, raising the cost of gold to Indian customers. Traders are speculating that India’s gold imports could tumble by possibly half.
Gold is a uniquely strange asset, because so many people in the gold market buy gold as a matter of ideology and identity. Cocoa, copper, or cotton trade as commodities. Gold trades as a way to make a statement. That’s simply not a sensible way to invest. A great many Americans are paying a steep price – and may pay a much steeper price yet – for allowing hucksters and ideologues to sway their economic judgment.