Gold dropped 13% in the second quarter. Worst quarter since 2013. Financial journalists now feel obligated to explain what this means for your portfolio hedge.
Here's what it means: the thing you bought because it was supposed to go up when everything else went down just went down. That's the hedge. That's the whole hedge. You hedged yourself into a loss while the thing you were hedging against also lost money. Spectacular work.
The metal spent decades marketed as the one asset that moves opposite to risk. Then it decided to have its worst quarter in thirteen years during a period when investors were supposedly fleeing to safety. But don't dump it from your portfolio, the experts say. Because the next time you need protection from market volatility, you'll want to own something that just proved it can lose 13% in three months.
Retail traders bought gold at the top. They always do. They read an article about portfolio construction. They learned the word diversification. They felt smart. Then the hedge fell faster than the thing being hedged and they went online to ask Reddit why their insurance policy was on fire.
The technical picture is simple. Gold went down. A lot. For a long time. That's not noise. That's price. Everything else is a story people tell themselves while watching their hedge fail to hedge.
Second quarter of 2013 was the last time gold did this poorly. Thirteen years later it found a way to repeat the performance. Really nailed the callback.
Your portfolio hedge just had its worst quarter in over a decade, but sure, keep holding it because some analyst said the word diversification in a soothing tone.
Photo by Dash Cryptocurrency on Unsplash
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