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Why I Sold My Gold

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In Brief...

Since the dawn of this financial crisis, my portfolio has included an allocation to gold via the SPDR Gold Trust ETF (GLD). The financial crisis created such systemic instability that something as solid and as long-standing in its value as gold seemed appealing.. Export intensive economies who accumulated significant dollar reserves in order to generate exchange rate stability accumulated gold in order to diversify their holdings. Countries reliant on exports will seek a global basket of currencies and assets to replace the dollar as the world's reserve currency. This movement should continue regardless of whether the dollar reverses higher. Ultimately in my vision of the directional current in global finance, gold would be but one component of a much larger basket of global currencies. Along those lines, this year Russia added the Canadian dollar and is in the process of considering the Australian dollar as the next addition to their reserves. The gold bugs would have you believe that this move up in gold is the loss of faith in fiat paper, yet looking at the charts one can clearly see that the U.S. dollar is actually slightly HIGHER today than it was at this time last year, while gold is about 16% higher. The move in gold certainly can't be explained in terms of the much-hyped but mostly mythological "dollar decline.

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