Over the past decade investors have poured billions into exchange-traded funds that track the price of gold. Now with gold prices falling, many are yanking some of that money back out -- a move investing pros say misses the whole point of owning the shiny metal in the first place.
Gold's recent slump -- down 4% so far this year -- has turned many former gold bulls into bears. In the first two weeks of March, investors pulled $1.6 billion from gold ETFs, according to data compiled by BlackRock, the largest ETF provider. That follows outflows of more than $5.6 billion from the funds in February, the largest monthly outflow ever.
Many of these investors are simply seeking better returns: The decade-long gold rally may have stalled (or be over), but stocks are on a tear. So far this year, the Dow Jones Industrial Average has returned 11% and is hovering near an all-time high.
"Some people chase momentum," says Russ Koesterich, BlackRock's global chief investment strategist.
But some advisers say that strategy could backfire. For starters, they point out that gold could bounce back if there's a sudden jump in inflation, a flare-up of the European debt crisis (perhaps tied to the Cyprus crisis) or a stock-market correction at home. But more importantly, they say owning gold isn't about buying low and selling high, but about owning an insurance policy for the long term.
Gold's recent slump -- down 4% so far this year -- has turned many former gold bulls into bears. In the first two weeks of March, investors pulled $1.6 billion from gold ETFs, according to data compiled by BlackRock, the largest ETF provider. That follows outflows of more than $5.6 billion from the funds in February, the largest monthly outflow ever.
Many of these investors are simply seeking better returns: The decade-long gold rally may have stalled (or be over), but stocks are on a tear. So far this year, the Dow Jones Industrial Average has returned 11% and is hovering near an all-time high.
"Some people chase momentum," says Russ Koesterich, BlackRock's global chief investment strategist.
But some advisers say that strategy could backfire. For starters, they point out that gold could bounce back if there's a sudden jump in inflation, a flare-up of the European debt crisis (perhaps tied to the Cyprus crisis) or a stock-market correction at home. But more importantly, they say owning gold isn't about buying low and selling high, but about owning an insurance policy for the long term.
More information can be found online at http://www.goldbullionadvisors.com
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