Gold thrives in times of turmoil. The stock market's recent highs, the job market's slow improvement, and increasing consumer confidence do not make for the chaos that benefits gold. When the economy swoons, that's when gold booms. But gold prices are near two-and-a-half-year lows as a new week of trading begins.
Six weeks ago, the price of an ounce of gold fell $225 in two days. That 14 percent drop was a stark reminder to gold investors that nothing is without risk, even one of the world's oldest and most treasured assets. After rebounding a little, gold is whipsawing investors who had turned to it for protection.
For the better part of a decade, it was difficult not to make money owning gold. The precious metal had climbed from $350 in 2003 to $1,800 an ounce last fall. The threat of global terrorism, the Great Recession, and massive government and central bank spending has underpinned the demand for gold from investors. Anxiety about inflation and government budget deficits has led to billions of dollars pouring into gold.
The investment industry also has helped. No longer do you have to buy bullion or even coins. Gold investing has expanded way beyond miners and numismatists. Exchange-traded funds, sector funds and specialized mutual funds have been created to make it easier to buy gold, opening the door to less-sophisticated investors.
All the worries that helped fuel the gold rally remain. But just as pure gold is pliable, so too is the sentiment of its investors.
Tom Hudson, a financial journalist based in Miami, is the former co-anchor and managing editor of "Nightly Business Report" on public television. Follow him on Twitter@HudsonsView.