What's going on?

The price of gold has been smoked lately � down 8% this year and down 16% in the past 12 months (in US dollar terms). Investors who bought during the gold boom, 2008-2011 could be�down as much as 40%.

What does this mean?

Part of the reason for gold�s decline is that gold had a phenomenal run from 2008-2011 when it almost tripled in price. The financial crisis and huge sell-off in stocks saw investors flee to the perceived �safe haven� of gold. The price action of the past four years is, in some respects, just a deflation of that bubble. There are also other reasons, such as the strengthening US dollar, the expectation for higher interest rates in the near future and central banks, especially in China and other emerging markets, holding less gold. In the context of this development, some analysts believe gold has lost its status as�a safe haven and prices will continue to drop.

Why should I care?

1. Investors are often advised to hold a small but significant portion of their investments in gold, but it has been a painful holding for those that have owned it for the past few years.
2. Despite the pain, owning some gold in a diversified portfolio is still probably a good idea. Gold might have a lot further to fall, but historically it has helped investors to improve the risk and return profile of their portfolios.
3. Especially in regions with an uncertain or volatile currency (think of Greece before the Euro agreement), some physical gold coins might indeed be handy�you never know.