Gold buyers are buffeted by market conditions, but many remain bullish on bullion.
The price of gold fell this morning as gold buyers became sellers in an effort to cover losses on the stock market, which fell on concerns over sovereign debt in Europe.
Equities dropped on fears that a changing political landscape in Germany make it more likely that Greece will ultimately default on its debts, according to Bloomberg News. Gold traded at $1,842 an ounce this morning, down from a high of $1,923 reached on September 6.
The price of gold has rallied for 11 consecutive years in the longest-lasting bull market since the 1920s. Many investors remain bullish on gold and dismiss fears that the run up has made gold the latest asset bubble waiting to burst. They point to sovereign debt crises, such as the one threatening European banks, as a key reason to become a gold buyer. The website Gold News describes the precious metal as an “air raid shelter in a currency blitz.”
Gold is retaining its place in the portfolios of affluent investors who tend to invest a small percentage of their assets in alternative products, including precious metals. The steep market selloff in early August - following the downgrade of the U.S. credit rating - prompted some investors to shore up their investment in gold, but the move was anything but a gold rush, according to a Millionaire Corner survey conducted after the downturn.
About 13 percent of the 1,252 investors surveyed said they reacted to the downturn by moving investments into less risky instruments, but less than 4 percent purchased gold. Investors preferred equities with more than 23 percent of those surveyed saying they took advantage of the downturn to purchase additional stock.
Gold holds more appeal for some investor groups than others. Men, for example, were much more likely to buy gold in the most recent downturn than women, according to Millionaire Corner research. Investors with $500,000 or more were more inclined than less affluent investors.
Retired individuals were more attracted to gold than those still working, but the investors most likely to be gold buyers were senior corporate executives. Nearly 7 percent of the executives said they sold some investments to purchase gold, but they were also the most likely to take advantage of the downturn by buying additional stock.