Whatever Happened to Gold?

As events in Europe have roiled the U.S. markets over the last month, one usually precious element of the market talk has been missing: gold.

“Whatever happened to gold?” asked an audience member at the Lipper Investment Series 2012 Outlook on Tuesday in New York. The panel talk included speakers from Merrill Lynch, Vanguard, Fidelity, T. Rowe Price and Columbia Management Investment Advisers.

Not one of them was bullish on bullion.

“We don’t see it as a long-term asset class,” responded Lisa Shalett, chief investment officer of Merrill Lynch Global Wealth Management. “It’s a hedge in your portfolio. Don’t get too excited about it. The minute you do, it will go the other way.”

Shalett advised investors to put no more than 5% to 7% of their assets into gold.

Colin Moore, CIO with Columbia, added that investors usually execute gold trades poorly, confusing it with the asset class of commodities. Prior to joining Columbia Management Group, Moore was CIO of global and international value equities and associate director of research at Putnam Investments.

Like Shalett, Moore said gold should simply be viewed as a small hedge, adding that the U.S. dollar is still seen by many as a safe haven.

The price of spot gold has followed a downward path over the last month, dropping to $1,708 per ounce on Tuesday from $1,782 on Nov. 7. On Tuesday, gold bulls faded after the U.S. dollar index held steady on Monday’s news that Standard & Poor’s threatened to downgrade the credit ratings of European Union countries, Kitco News reported Tuesday on Forbes.com.

Although gold has declined in popularity over the last month, the precious metal is still a big seller in the world of exchange traded funds. The SPDR Gold Shares (GLD) ETF has complicated questions about gold since the ETF’s launch in 2004, according to Standard & Poor’s senior financial writer Vaughan Scully in a recent column at AdvisorOne.

Prior to the fund’s launch, Scully said, there really was no convenient way to invest in gold, so few investors owned it. “Those who wanted to speculate traded futures, and the true believers stashed coins in their attic,” Scully wrote. But now, he said, more than $2 billion in gold shares trade every day, making GLD the second largest U.S. ETF by assets.

Read Precious Metal from the December 2011 issue of Investment Advisor at AdvisorOne.com