In case of a sharp drop in the price of gold, investors normally tend to reevaluate their portfolios. Gold, unlike bonds, fixed deposits, or dividend stocks, does not earn periodic income. Thus, the drop in price of gold can make investors seek other avenues where they can earn more profit.<\/p>\n\n\n\n
A drop in the price of gold does not always indicate an unfavorable situation in the economy. In some situations, the price drop is indicative of strong economic performance, a rise in interest rates, or improved faith in financial assets. Thus, money invested in gold tends to flow into debt securities and stocks.<\/p>\n\n\n\n
Investors who have invested in gold for defense purposes may suffer from higher opportunity costs in case of a prolonged fall in the price of gold.<\/p>\n\n\n\n