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What Happened to Gold?

While the ride has been anything but calm, the S&P 500 has risen about 3% since the start of September.  At the same time, however, the price of gold has seen its price decline by nearly 6%.  In a three month period where seemingly everything that could go right for gold has occurred, the fact that gold has failed to rally has many bulls on the metal scratching their heads.  The confusion is further compounded because of the fact that gold's recent weakness has come at a time of the year when it typically sees its strongest performance.

Although the price of gold has seen some near term weakness, it should be looked at in the perspective that it is still up 20% this year.  Furthermore, even after the declines of the last three months, gold's performance this year is right inline with the average ytd return of the last five years (19.73%) and well above the average YTD return going back to 1980 (3.8%).  So relative to just about any other asset class this year, gold is still glistening.

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