Gold, in 3 charts

Some weeks, it seems like gold gets more mentions in the news than pop singers and movie stars!  This week, the precious metal talk has been about a big drop in the price of gold.  Below are charts for the price of an ounce of gold in US dollars over three months, 5 years, and 10 years (all displayed as % change in price over that period):

Gold Price in US Dollars data by YCharts

Gold Price in US Dollars data by YCharts

Gold Price in US Dollars data by YCharts

As always, there are many ways to interpret charts, and it may be that none of those interpretations capture the whole reality.  A few thoughts about investing in gold:

• buying and holding gold is inherently different that buying a stock or a bond.  If you choose to hold the actual metal, you must consider the costs of shipping and storage, as well as the risk of theft or loss.  If you choose to invest by proxy, in an ETF or the stock of a company involved in gold exploration and mining, there are risks that your performance may diverge materially from that of the underlying price of the metal in the world marketplace
• gold and other precious metals do not pay dividends or interest, and in fact feature a "cost to carry" as referenced above
• investors in precious metals should anticipate considerable volatility in both the short and the long term, particularly in relation to their home currency
• gold and other metals are often less liquid than securities (like stocks and bonds) or packaged investment vehicles like mutual funds and ETFs.  One factor decreasing liquidity is the size of the typical "bid and offer spread" - the difference in prices at which a member of the metals marketplace will buy or sell a unit of the metal

This blog post and all others on DRWFinancial.com are intended for general education and not as specific investment advice.  Additional disclaimers in the website footer apply.