During the worst part of the Wall St sell-off in mid-March, gold futures suffered their two biggest single-day losses in history, in consecutive sessions. The second chart below shows gold during the same period quoted in US dollars, euros and Canadian dollars (indexed to 100 for comparative purposes). The Gold Price Per Ounce of gold in euros and Canadian dollars fell less and recovered faster than gold quoted in US dollars. Malleability is one of the special properties of gold, which allows it to be hammered into sheets, stretched into wires and shaped into different shapes. TVs, cell phones, calculators, Global Positioning System (GPS) devices and computers are examples of products produced with small quantities of gold.
Richard Baker, editor of Eureka Miner, said that the QE program helped put gold and, in fact, all asset prices on a roll. It was a terrifying journey for anyone holding gold at the time, but it's an incomplete view of gold's performance during the crisis. In a variety of ways, buying gold or related derivative products isolates the holder from financial risk. The main reason for the exodus to gold was the great concern faced by asset prices in general.
The prices of clothing and other manufactured textile products, consumer plastic products, civil aircraft and platinum and gold jewelry also rose less than the previous year. And to the extent that recent years have made people more concerned about the possibility of a major crisis, they have gold as protection. However, we can identify broader trends and cycles to draw some conclusions about the likely future performance of gold. The second thing investors should understand is that gold, as an asset that has performed well, is a source of funding for margin adjustments made on declining assets.
For example, when analyzing gold prices compared to an aggregate of copper, silver and WTI crude oil from five years ago and earlier this month, the valuations are not much different.