Your gold fund investments are down about 20 percent year-to-date.
Goldman expects another 20 percent decline through 2014. They've been right so far on their gold call, but wrong on other things (see the video below).
The pros (hedge funds, I guess) have been cutting back their gold exposures since September 2011.
Gold is meant to be a diversifier, not a core holding. It functions as a hedge in your portfolio for two reasons:
1) If you believe the value of the U.S. dollar is declining, you buy gold. Gold holds its value better than the dollar (currency) if the dollar is declining. You can buy more with gold than a dollar.
2) If you believe the economy is going to implode. For the same reason as point #1, people buy gold as a safe haven. Save Haven is this weeks WTF Wall Street Word, stay tuned.
Here's the video:
This post is part of a regular series of money explainers for non-finance people. Follow along and join in the conversation at good.is/makinsense.
Image via (cc) flickr user Buy Silver Gold