Why gold is a bad investment

On February 14, 2011 | By | In News

Hedge-fund managers George Soros, John Paulson and Eric Mindich have surmised as much, judging by the massive stakes they held in SPDR Gold Trust ETF(GLD 130.44, +0.06, +0.05%), the leading exchange-traded gold fund and the world’s second-largest ETF with assets of almost $58 billion versus about $40 billion a year ago.

The three hedge-fund titans alone controlled around 10% of the Gold Trust’s shares outstanding at the end of June, according to the most recent data available. Of course, they staked their claim early, and their view on gold and the dollar now may have changed, as investors will soon discover when these influential funds release Sept. 30 portfolio holdings.

Other exchange-traded products that own gold have also seen rapid asset growth and trading volume, including iShares Gold Trust (IAU 13.06, -0.01, -0.08%), the leveraged PowerShares DB Gold Double Long ETN (DGP 38.02, +0.06, +0.16%), and ETFS Physical Swiss Gold Shares (SGOL 132.92, -0.59, -0.44%).

SAN FRANCISCO (MarketWatch) — Gold does not always glitter, but you wouldn’t know that from surging worldwide interest that has turned the yellow metal red-hot.

Gold has become highly prized bling, as anxious and astute buyers alike, from hedge-fund players to central bankers, flock to the “currency of fear.” Gold at around $1,400 an ounce is almost double what it commanded two years ago, and gold’s price is up almost 25% so far this year alone.

It’s been a great ride. Except gold is a bad investment.

Gold’s feverish run has made a lot of people a lot of money, and though the rally has taken a breather in the last few days, there’s no shortage of flag-waving supporters who claim gold is on a march to $1,600, $1,800, $2,000 and beyond. After all, gold is still well below its 1980 peak, when it was worth around $2,300 an ounce in today’s dollars.

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