After an 11-year run, gold underperformed the S&P 500 in the first quarter of 2012 by almost 50%. Retirees as well as other risk averse investors have been enamored with the stuff. Gold is also an illiquid investment and it is underperforming other precious metals investments like platinum and silver. This makes it difficult for retirees to generate the income they need, especially if their allocation to gold is too high.
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What may have seemed to be a safe inflation and capital markets hedge may have actually introduced greater risk to retiree portfolios
. Back in 1980 after the 1979 oil crisis, investors also invested significantly in gold. Many ended up buying at the height of the market only to see gold prices decline over the next 27 years. This makes price declines of any magnitude a significant risk for investors approaching retirement and may need to liquidate such holdings for income or to reinvest in income producing vehicles.