Managing Editor

Hard Assets Heresy: Talking Down Gold

Thanks for the comments. This pretty much approximates the discourse at the Hard Assets Conference. Strong emotions all 'round.

Whether or not you believe gold is in a secular bull market, there's no denying its volatility. And volatility is (or at least OUGHT to be)dampened by hedging.

Reducing volatility reduces the size of drawdowns which means an asset requires less upside to recover from sell-offs. Simply put, if you started with $10,000 of risk capital and suffer a 20% loss, you'll need a subsequent 25% gain to reach breakeven.

Investment management is all about looking at the horizon: what asset size is needed at certain points to fund retirement or some other need. Hedging is simply a tool that can be used to increase the odds of obtaining an anticipated outcome.