Gold May Come Down, But How Much? (NYSE: AUY), (NYSE: ABX), (NYSE: GG), (NYSE: GLD)

At some point, gold has to stop going up and then start going down.  Obviously that will hurt shares of Yamana Gold Inc. (USA) (NYSE:AUY), Barrick Gold Corporation (USA) (NYSE:ABX), Goldcorp Inc. (USA) (NYSE:GG) and SPDR Gold Trust (ETF) (NYSE:GLD). The question remains though, how much will gold go down when it starts?

Justin Fox reports at Time.com that the recent gold fever may start a decline at some point, but it won't ever decline as in the '80s and '90s.  He believes this because the mechanics of gold investing have changed and weaknesses of the current gold-free international monetary system.

Fox provides us a great intro as to why gold is a buzzing right now.  " Part of it is the fact that "gold's gyrations are the Dow Jones index of anxiety," as this magazine put it three decades ago amid the last big gold fever. When investors are scared — about inflation, about political turmoil, about financial breakdown — they return to the soft, shiny metal that has for millennia served as a store of value. When things calm down, as they did after the gold price peaked in 1980 at $850, demand for gold subsides and the price declines. "

An excellent point that Fox makes is in regards to gold as an investment vehicle.  He says, “Gold is unlikely ever to be a great investment in the sense that buying into Microsoft in 1986 or Google in 2004 has been a great investment. The price of gold in dollars has more than quadrupled since the end of the long gold bear market in April 2001, but over the long run the return has averaged about 2% a year, says George Milling-Stanley, managing director for government affairs at the World Gold Council in New York. (That compares with about 8% for stocks.)

Read Fox’s entire article here.  It is interesting and a quick read.

If you have rode the gold high and show a profit, it might be time to consider a contrarian approach and think about some stocks.  Good luck investors!

Disclosure: No positions in any securities mentioned.