Gold has been a lousy hold over the last few months. According to Google Finance the SPDR Gold Trust (GLD), which is a client holding, is down 15% for the last six months. It has been below its 50 DMA for months and is approaching its 200 DMA. We own GLD essentially as insurance in the belief that when external shocks that drive down equity prices occur, gold is likely to go up.
It plays out this way often enough for me to continue to believe in this attribute. I've said in the past that if gold is the best performing thing in the portfolio then chances are things in the stock market aren't so great. We have owned GLD since shortly after it listed although we did sell 1/3 of the position in August 2011. The magnitude of the euphoria then seemed far more extreme than the level of negativity now so while we might buy some more on this pullback, it seems early yet.
Any time gold goes down a lot - and this sort of fast decline happens in gold every so often - I immediately think of the pundits who recommend keeping 20% in gold. Actually what I think about is the people who take that advice. While I was getting the link I embedded above I saw a quote that I blogged about from Nicole Elliott who said that anything that goes down 10% in a week can't be considered a safe haven. While not everyone would agree with her, it is an interesting concept.
Gold is capable of very large declines which is important to consider when sizing it for your portfolio.
Disclosure: Long GLD