Gold Prevents Post-Thanksgiving Investor Indigestion

Investors whose portfolios were overly allocated to risky assets experienced a severe case of post-Thanksgiving indigestion on Friday, November 26 as financial markets plummeted around the globe on news of a new coronavirus variant. The Dow Jones Industrial Average lost more than 900 points, or more than 2.5 percent, the Standard & Poor’s 500 Index cratered 2.3 percent, and the Nasdaq Composite Index fell 2.2 percent. Gold withstood the panicked selling, once again proving to be a safe haven as it closed with a slight gain.

This is among the most important reasons to own gold. The precious metal serves as a stabilizing force to investment portfolios, especially when bad news triggers panic selling of stocks. The price of gold has relatively little correlation to the stock market, and, indeed, has an inverse correlation to stocks when they suffer steep declines. Investment strategists say it is wise to hold some assets that do not correlate with stocks, with many suggesting allocating five percent or more of a portfolio to an asset like gold.

Sadly, though, many people have been lured by the appeal of speculative investments that grab headlines when they soar, but garner less attention when they fall back to earth, cybercurrencies being a current case in point. Bitcoin sank nearly 8 percent as the stock market was selling off on November 26, dropping to a seven-week low of $54,265, and entering bear market territory. The cybercurrency had collapsed more than 20 percent since topping $68,000 on November 8, less than three weeks earlier. This is yet further evidence that cybercurrencies are no replacement for genuine gold in anyone’s investment portfolio.