It's amazing what a $50-per-ounce drop in the price of gold does nowadays.
The decline is front and center in the financial papers. CNBC hosts are grilling every analyst they can find with drivel like, "What a drop! Is the gold rally now dead?"
Our advice to the nervous gold owner: Sit back and take the "long view" of gold. Remember, no bull market rises in a straight line to the sky. And gold regularly experiences wild swings in price.
Gold is the "odd man out" among financial assets. It's not like a rental property, where you can say, "I'll pay eight times annual rent for this." Or a blue-chip stock, where you can say, "I'll pay 10 times annual cash flow for this." Gold represents real wealth and crisis protection. Folks go through periods where they'll dump this protection... or buy it with both hands. This leads to lots of volatility, like we've seen in the past few days.
It could even lead to a bigger drop in gold. But as you can see from today's five-year chart of gold, the yellow metal could drop all the way down to $850 an ounce and still remain in the confines of a big bull market. This sort of drop is unlikely, but anything can happen in the gold market... so be prepared.