It didn't really, it sold off initially because it was "up", people sold winners in order to cover losses and gold was one of those winners. It didn't peak until 2011 at around $1900 and had risen from it's lowers in the early 2000's.
Up to 2006 gold was priced less than $20,000/kg and after 2010 it has never dropped below $35,000/kg.
Anyone who had any large % of their wealth in gold felt & feels very, very clever. Saying 'tanked' is appropriate for day-trader thinking but for investors (which in my book implies return periods of 5-30 years) looking to preserve wealth they'd barely notice.
The problem is that gold is not a hedge against market risk, it’s simply (mostly) uncorrelated to equities. If you’re specifically trying to mitigate the possibility of a large market downturn, gold isn’t necessarily going to help you at all. Instead you should look into assets that have a negative correlation with equities. Bonds are a good choice but are more strongly correlated than they once were with the market. Or you could go witb some sort of portfolio insurance: VIX futures, index puts, or whatever. I personally wouldn’t recommend them though because they are almost always a rip-off (more natural buyers than sellers).
On the otherhand, if all you’re looking to do is lower your volatility, gold isn’t a bad choice. Whenever you diversify into different investments you alwaya reduce volatility as long as the correlation is less than one. Though if that is your goal, maybe consider investing in many different metals, as well as crypto.
At least for me, there's not a huge gap between "all the other investments crater to the point that my 10% in gold is useful" and "oh boy looks like things are collapsing now", if that makes any sense.
It’s a very risky bet for sure. But there is a very small possibility central banks will go back to gold standard to instil confidence during a Great Recession when markets fall by 50+% in a very short time.
Personally, I'd take central banks heading back to the gold standard as a massive signal that things were about to get worse, not better. It'd be like having your oncologist suggest enrollment in a phase-one study - they aren't doing that because the outlook of a patient in a phase-one study is good, but because the alternative is worse, and now they're reduced to trying for a hail mary.
Gold is able to support entire global GDP and also growth. It all depends on the price. With current gold price a return to gold standard would be a disaster and would bring on the greatest recession of our lifetimes.
But at about 10k price gold standard starts to make sense. The idea is that during the next big crises central banks will have no tools to use (we are close to 0 in the US and in negative rates across the world) to support a recovery so a radical move will be needed to bring back confidence in the financial system.
A return to gold standard at a much higher gold price (calculated based on the world GDP and GDP growth) would be a very drastic move central banks could go for if situation got very dire but it might be the only choice they will have since we haven't really normalised the financial system after the 2008 crises and during the next crises we will be at 0 interest rates.
And if there is a choice between 556 nato rounds and going back to gold standard and returning back to some sort of stability for the world economy, gold would be much preferred to the anarchy and shots being fired.
I'm not saying that a return to a gold standard couldn't work - just that I think it would be extremely unlikely to work. And I'd greatly prefer "move to gold standard" over "society collapses", too. It's just I don't think I get to choose.
You could have asked the same question when last Great Recession was unfolding and Lehman was going under. I believe that central banks will find a way to prevent a really bad scenario from happening.
