Gold Investments Down As Terrible Year Closes

12/31/13 11:05AM EST

Gold Investments Down As Terrible Year Closes Gold Investments Down As Terrible Year Closes

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Gold was in for another rout as 2013 drew to a close. The yellow metal is just not that attractive as the world economy appears ready to get back into gear, and the Federal Reserve tones down its bond-buying program. The price of the metal has fallen by about 0.8 percent on today’s market. As the market gets ready for the economic realities of 2014, they have to face facts. Gold has been touted as a great investment for a period of massive inflation, but that inflation has never arrived.

The biggest advocates of gold as an investment will stick to the story, and they may be right. The last five years have clearly shown that the world’s central banks are not able to predict the consequences of their actions. There is not sign of any inflation just yet, but it may be on the way in the next year.

Gold Is Security

Gold became popular over the last few years as a relative safe haven. The metal is still seen as one of the only assets that is able to hold its value through periods of inflation and periods of economic instability. This year has shown that the gold is not a safe haven by definition. The price of futures to be delivered in February has dropped by close to 30 percent through the year so far. Gold is not a secure asset.

2013 on the market has been defined by the actions of the Federal Reserve. The central bank’s quantitative easing policy has been the single most important factor in the massive expansion of value on the stock market. Now that investors are expecting 2014 to be a relatively calm period of economic growth, gold has lost its luster.

For hedge fund managers like John Paulson, that likely spells disaster for end of year returns. Gold miners and others in the industry will also suffer from the change in the market. Investors will need to change the way they see the market, but there may be value still hiding in gold.

Gold For Growth

Gold is not just an asset class, it’s a good that’s demanded by a large swathe of the world’s population. As China and India continue to grow, their populations are likely to demand more gold, though India’s demand has seen reductions in recent weeks on the back of tax changes.

Investors may see now as a good time to buy into gold. The metal has seen a large drop in price, and that is the right time to take a second look at any investment. Gold may be right for some investors heading into 2014, though more are likely to stay away on the back of recovery rumors.

Gold is an investment that’s worth another look, but there’s no guarantee that it’s in for an increase in the coming months. If a hint of inflation appears the price of gold is likely to jump once again. 2014 will surprise investors, and gold may benefit. It’s certain that the metal shouldn’t be written off just yet.