By Barbara Kollmeyer, MarketWatch

MADRID (MarketWatch) — Europe stocks turned sharply lower on Wednesday as global worries piled on investors. Fears of a government collapse in Portugal, turmoil in Egypt and downbeat data from China dented sentiment, with all sectors in the red.

A downgrade from Standard & Poor’s hit three of Europe’s biggest banks.

The Stoxx Europe 600 index XX:SXXP -1.25% fell 1.4% to 283.24, a day after closing 0.4% lower in the prior session.

Click to Play
The Next 24: Oil traders eye Egypt, Suez
Oil could break through $100 a barrel depending on what happens in Egypt. An unusual combination of jobs reports before the open could set the tone for the market. Bassett Furniture and International Speedway report before the open.

On the worry list was fears of another crisis in Europe. The biggest hits were seen in Portugal, where the PSI 20 index PT:PSI20 -5.59% tumbled 6.5% to 5,160.05, with Banco Comercial Portugues SA PT:BCP -11.83% sinking 13% and Banco Espirito Santo SA PT:BES -10.29% dropping 12%. The yield on Portugal’s 10-year government bond BX:TMBMKPT-10Y +21.44% shot above 8%.

Portugal assets tumbled on fears the government may not survive the second resignation of a cabinet minister, as Reuters reported more ministers may be ready to go.

Prime Minister Pedro Passos Coelho said he will not step down after Foreign Minister Paulo Portas resigned Tuesday afternoon in protest over the country’s austerity policies. On Monday, the country’s finance minister, Vitor Gaspar, stepped down.

“Expect the government to fall in the course of the next 48 hours. A new election will be called amid a huge drive towards ‘anti-austerity,’” said Steen Jakobsen, chief economist with Saxo Bank. “This is EXACTLY what German Chancellor Angela Merkel does not need.”

Losses in Europe pressured U.S. stock futures, which were sharply lower ahead of a shortened day for Wall Street and a busy one for data.

Investors were also keeping a close eye on turmoil in Egypt, with crude-oil prices soaring above $102 a barrel as President Mohammed Morsi refused to step down, as clashes amid protests over his rule turned deadly on Tuesday. Morsi has just a few hours to go to a deadline imposed by the military, which called on him to resolve the country’s political crisis or the army will step in. Read: Egypt’s Morsi rebuffs calls to step down

Reuters
A Deutsche Bank logo is pictured in front of the Deutsche Bank headquarters in Frankfurt February 24, 2011.
Banks in Portugal were not the only ones suffering. Shares of Barclays PLC UK:BARC -2.82% BCS -1.33% and Deutsche Bank AG DB -2.02% DE:DBK -3.09% dropped over 4% and Credit Suisse SA CS -1.25% CH:CSGN -4.09% fell over 3% after Standard & Poor’s lowered its long-term ratings on those banks. The ratings firm said new regulations and uncertain market conditions will make it tougher for those banks to operate.

The German DAX 30 index DX:DAX -1.73% fell 2% to 7,748.42 as shares of Adidas AG DE:ADS -4.12% sank 5% after Deutsche Bank cut shares to hold from buy. BMW AG DE:BMW -2.65% fell 3% after J.P. Morgan Cazenove cut the automaker to neutral from overweight. The investment bank said it was switching out of BMW into Daimler AG DE:DAI -0.06% , which it lifted to overweight from neutral. Shares of Daimler fell 1.6%.

The French CAC 40 index FR:PX1 -1.75% fell 1.6% to 3,678.56, with BNP Paribas SA FR:BNP -3.23% sinking over 4% in line with European banks. Shares of heavyweight Total SA FR:FP -1.14% fell 1%, not helped by a sharp rise in crude prices.

London stocks were under equal pressure as losses for Barclays helped knock 1.6% off the FTSE 100 index UK:UKX -1.67% to 6,204.40. Mining stocks were among those losing ground — BHP Billiton PLC BHP -0.05% UK:BLT -3.62% slid 3.7% and Rio Tinto PLC RIO -2.07% UK:RIO -3.06% sank 2.8% — after China services data showed sluggish growth in June.

ARM Holdings PLC ARMH -0.16% UK:ARM +1.12% was nearly the only gainer in London, up 1% after UBS lifted those shares to buy from neutral on the view a pullback in shares due to news-flow looks overdone.

Barbara Kollmeyer is an editor for MarketWatch in Madrid. Follow her on Twitter @MWBarbaraKollmeyer.

By Barbara Kollmeyer

XX:SXXP UK:HSBA HBC FR:SAN SNY
MADRID (MarketWatch) — European stocks opened sharply lower on Wednesday, with banks and resource stocks coming under pressure. A growing crisis in Egypt, political turmoil in Portugal and downbeat data from China weighed on sentiment. The Stoxx Europe 600 index XX:SXXP -1.26% fell over 1% to 284.13, with HSBC Holdings PLC UK:HSBA -2.86% HBC -0.32% dropping 1.5%, Sanofi SA FR:SAN -1.60% SNY -1.49% falling 1.5% and Vodafone Group PLC losing 1%. Total SA FR:FP -1.17% TOT -1.39% lost 1%. Portugal’s PSI 20 index tumbled nearly 6% to 5,199.59, with Banco Comercial Portuges SA PT:BCP -11.83% sinking 12% and Banco Espirito Santo SA PT:BES -10.29% down 9%. Shares of Adidas AG DE:ADS -4.12% fell 4% on a downgrade, dragging the German DAX 30 index DX:DAX -1.71% down 1.4% to 7,800.59. The FTSE 100 index UK:UKX -1.66% fell 1% to 6,239.94 and the French CAC 40 index FR:PX1 -1.79% slid 1.3% to 3,693.59.

By Carla Mozee, MarketWatch

LOS ANGELES (MarketWatch) — Gold futures posted thin gains in electronic trade Wednesday ahead of reports about the U.S. labor market, which the U.S. Federal Reserve is monitoring as it assesses the future of monetary stimulus.

Gold for August delivery GCQ3 +0.32% rose 20 cents to $1,243.60 an ounce.

On deck for investors is a private-sector payrolls projection for June from payroll processor ADP, followed by the U.S. Labor Department’s weekly update on jobless claims.

Bloomberg News Enlarge Image
Gold edges up ahead of fresh data.
Also, the Institute for Supply Management is likely to show somewhat faster growth in June among service-sector companies. The reports will lead up to Friday’s release of the highly anticipated U.S. monthly unemployment report.

“Investors continue to read U.S. economic news flow in terms of its implications for the timing and size of Federal Reserve stimulus reduction,” wrote DailyFX.com currency strategist Ilya Spivak on Tuesday. “As such, soft results may boost sentiment and cycle-sensitive copper prices. Gold and silver may likewise rise as downgraded QE “taper” bets underpin anti-fiat demand.”

Analysts have said monetary stimulus by the Fed and other central banks helped fuel prices gains for gold in recent years.

Gold prices in 2013 have plunged, in part as the Fed has said improvement in the economy may lead it to pull back on bond purchases as early as this year. Fed Chairman Ben Bernanke late last month said asset purchases may be reduced to zero by the middle of 2014 when the unemployment rate is expected to have dropped to 7%.

The central bank currently buys $85 billion a month in bonds.

Gold futures on Tuesday fell 1%, their first decline in three sessions.

Meanwhile, September copper HGU3 -0.02% on Wednesday rose 3 cents, or 0.8%, to $3.17 a pound, and September silver SIU3 +1.25% rose 16 cents, or 0.8%, to $19.47 an ounce.

Platinum for October delivery PLV3 -0.23% , however, fell $1.60, or 0.1%, to $1,366.20 an ounce. September palladium PAU3 -1.03% fell $2.10, or 0.3%, to $686.80 an ounce.

U.S. markets will be closed on Thursday for Independence Day.

Carla Mozee is a reporter for MarketWatch, based in Los Angeles. Follow her on Twitter @MWMozee.

By Carla Mozee, MarketWatch

LOS ANGELES (MarketWatch) — The Australian dollar fell to a nearly three-year low Wednesday on suggestions that further interest-rate cuts are in store, as the nation’s central bank seeks to aid the economy through a period of slowing.

The Australian dollar AUDUSD -0.6503% bought 91.08 U.S. cents compared with 91.43 U.S. cents late Tuesday in North America. The Aussie hit an intraday low of 90.92 cents, according to FactSet data, after having remained above the 91-cent mark since September 2010.

Shutterstock/Robyn Mackenzie
Australia’s currency falls after dovish comments from the central-bank governor.
In a speech Wednesday, Reserve Bank of Australia Gov. Glenn Stevens said the central bank “will be able to continue to do our part, consistent with our mandate, to assist the transition in sources of demand that is needed.” He made the comments in reference to helping strengthen and broaden economic growth, as investment in Australia’s mining sector is expected to peak soon.

Stevens said the RBA deliberated for a long time before Tuesday’s decision to hold the key rate at a record-low 2.75%.

“Cold comfort to those of us looking for a cut yesterday, but [Stevens’s comment] does provide confirmation (if anyone needed it) that the door is open for August, where we expect a 25-[basis-points] cut,” wrote RBC Capital Markets fixed-income and currency strategist Michael Turner on Wednesday.

Interest-rate cuts from the 4.75% level started in late 2011.

Stevens also said Wednesday that if the economy continues to slow, the currency will likely fall further. In a statement Tuesday, he said the Aussie “remains at a high level” despite its sharp drop since early April.

Click to Play
What does the jobs report mean for Fed policy?
The June unemployment report could signal a policy change for the Federal Reserve.

Australian investors received mixed economic data Wednesday. Retail sales in Australia rose 0.1% in May, below expectations for a 0.3% increase. The trade surplus, meanwhile, widened to a better-than-expected 670 million Australian dollars ($615 million).

Among U.S. data due later Wednesday, meanwhile, ADP is slated to release private-sector payroll projections for June, and the Labor Department is scheduled to publish weekly jobless-claims numbers. Also, the Institute for Supply Management is due to report on activity at service-sector companies in June.

Ahead of the data, the U.S. dollar USDJPY -1.1332% bought 100.71 Japanese yen, up from ¥100.66 late Tuesday in North America.

The greenback on Tuesday pushed back above ¥100 for the first time since early June, with traders appearing more confident the U.S. Federal Reserve would move to slow the pace of monetary stimulus later this year.

The euro EURUSD -0.0775% fetched $1.2970, down slightly from $1.2974. The European shared currency fell below the $1.30 level ahead of an interest-rate decision due Thursday from the European Central Bank. The ECB is widely expected to keep rates on hold.

The British pound GBPUSD +0.6902% bought $1.5147, down from $1.5206.

The ICE dollar index DXY -0.12% , which measures the U.S. unit against six other major currencies, rose to 83.590 from 83.561 late Tuesday.

The WSJ Dollar Index XX:BUXX -0.28% , a rival gauge with a slightly wider comparison basket, rose to 75.51 from Tuesday’s level of 75.46.

Carla Mozee is a reporter for MarketWatch, based in Los Angeles. Follow her on Twitter @MWMozee.
Get news alerts on U.S. Dollar Index (DXY) — or create your own.

By Heidi Mitchell

The Binge Bulge
Eating after 8 p.m. may increase the risk of obesity, according to a 2011 study at Northwestern University. A five-year study on weight changes in college students which Dr. Hoerr is working on also suggests that eating late disrupts sleep patterns. “Our data shows that those who got the most sleep were more likely to maintain a healthy weight,” she says. Researchers still don’t know all the reasons why poor sleep is correlated to weight gain.
Bad Snacks vs. Good Snacks
Specific foods, she says, interfere with sleep. Avoid anything high in tyramine, a naturally occurring chemical that helps regulate blood pressure and can keep you awake, at least an hour or two before bedtime, says Dr. Hoerr. This includes aged cheeses, processed meats and soy sauce. High-protein and fatty treats should also be avoided because they take longer to digest. The good news: Some foods, when eaten in small amounts (under 200 calories), may actually aid in quality sleep, and not add inches to the waistline. Unprocessed turkey and nonfat milk are both high in the amino acid tryptophan, which can be converted to serotonin and melatonin—neurotransmitters that help promote good shut-eye. Foods high in the minerals magnesium (almonds), potassium (bananas) and calcium (low-fat yogurt) encourage muscle relaxation, and are OK to eat before bedtime. “The glucose in honey is easily digestible and comforting, which explains why a warm cup of milk sweetened with honey might be an ideal bedtime snack,” says Dr. Hoerr.
Teenagers: The Exception
When teens hit their growth spurt, they almost can’t eat enough, says Dr. Hoerr. “This is when you see an 11-year-old boy consuming more than the active man of the house,” she says. “He should have extra snacks, like those suggested. The snack should be finished more than an hour before he goes to sleep.”
Eat Early, Not Late
How can you kick a late-night eating habit? Try breakfast. “If you don’t eat too close to bedtime, by morning, your liver has fully processed the sugar and fat and protein and your appetite is stimulated,” she says. Many of Dr. Hoerr’s overweight patients report to not eating anything until 3 p.m. and then they’ll cram in thousands of calories by midnight. Invariably, their sleep quality is disrupted, and they put on more weight.
-Heidi Mitchell

July 1, 2013 11:01 PM

By KELLY GREENE

Long-term care is a vastly misunderstood part of the health-care world. Many people assume that Medicare, the federal program that provides health coverage for people who are 65 and older or disabled, also provides long-term care, but those benefits are limited, mainly to brief rehabilitation stays in nursing facilities. Here are the basics:
Question: What exactly is long-term-care insurance?
Answer: Long-term-care insurance typically provides custodial care needed when an elderly or disabled person becomes so frail that he or she needs help with two “activities of daily living,” such as bathing or eating. Newer policies generally cover dementia care as well.

Q: How does it work?
A: Besides your age and health, there are three moving parts that have the biggest impact on your premium: The daily benefit amount, the length of coverage and your level of inflation protection.
When deciding how much coverage you need, consider how much family support you realistically could expect, costs where you live and whether you would use other savings to supplement your benefits.
Coverage periods typically range from two to six years. If you select $250 a day for three years, for example, you would have a “pool” of $273,750. If you used less than $250 a day, your benefits typically would stretch longer than three years.
Inflation protection is considered by many experts the most crucial piece, since people typically make their first claims around age 80—possibly decades after buying coverage.
The gold standard is 5% compound inflation protection, meaning your benefits would increase in value by 5% each year. (The $273,750 pool would be worth $726,343 in 20 years.)
But the 5% option is climbing in cost, with many buyers turning to 3% compound, 3% or 5% simple (meaning a $100,000 benefit, for example, would get $3,000 or $5,000 tacked onto it each year), 5% compounded for 20 years only or a rate increase linked to a consumer-price index.

Q: How much does long-term-care insurance cost?
A: A 55-year-old single adult can expect to pay $2,065 a year for $162,000 in benefits with 3% compound inflation protection, which would increase to about $330,000 in coverage at age 80, according to the American Association for Long-Term Care Insurance, a trade group.
Costs are rising, and they vary widely. Among 12 insurers, the most expensive policy cost 87% more than the comparable cheapest policy, the group found.
Costs of care are climbing as well. But home care can cost much less than more-intensive institutional care, as long as you don’t need round-the-clock assistance.
Q: What are the risks?

A: The biggest risk is that rates will go up beyond what you can pay. Although insurers can’t raise rates on individuals, they can do so on a defined group of policyholders if they get state approval. So, it pays to look for insurers with strong financial statements who conduct significant business in your state.
Still, some independent insurance brokers are telling clients to expect at least one increase in the 20% range at some point. If that happens, the insurer may let you reduce the increase in exchange for lower benefits.
The other big risk: You’ll die without using your benefits. The downside is that you would have paid thousands of dollars in premiums and gotten nothing in return. The upside is that you never would have needed long-term care.

Q: What are some alternatives?
A: The biggest hurdle for buyers is writing premium checks for coverage they hope never to use. Increasingly, older adults are turning to life-insurance policies packaged with long-term-care benefit riders instead. That way, any heirs generally get a payout even if you don’t use long-term care. And in most cases, people buy the product with a lump-sum payment, effectively removing the risk of future premium increases.
The downside: It often costs more to buy combined coverage than separate policies, and the benefits may not be as generous.
Wartime veterans and their spouses or widows also may qualify for long-term-care benefits through the Department of Veterans Affairs, though the paperwork involved in qualifying is extensive and approval can take as long as a year.
Married couples with some savings might want to consider buying an immediate annuity that pays benefits for a set number of years to preserve savings for the “well” spouse while the other spouse gets care.
The annuity generally shouldn’t count against them in qualifying for assistance from Medicaid, the state and federal program that pays for health and long-term care for the poor. However, the well spouse would have to live through the entire annuity period. If not, the state would have the first claim on any remaining payments.
Q: Doesn’t Medicare pay for long-term care?

A: Not much. Medicare will help pay for a short nursing-home stay if you are hospitalized for at least three days and you need skilled care.
If you meet those hurdles, Medicare will pay all your costs for the first 20 days. But you are responsible for $148 a day for days 21 through 100. After that, Medicare runs out.
Medicare also provides limited coverage for home-health services when your doctor says they are medically necessary.
Hospice care is covered as well, as long as you meet specific conditions. Medicare’s consumer handbook, “Medicare & You,” spells out what it does and doesn’t cover (at medicare.gov).

Q: Can I get coverage if I already have a medical condition?
A: Insurers are getting tougher, and almost always deny people with diagnosed memory loss or arthritis. They are getting tougher on diabetes and osteoporosis as well.
Surprisingly, some will approve survivors of some conditions, as long as they can show resolution and stability, including cancer, bypass surgery, Crohn’s disease, congestive heart failure and some forms of hepatitis.

Q: Where can I get help online?
A: Two insurers, Genworth Financial Inc. (Genworth.com/costofcare) and MetLife Inc. (metlife.com) track future daily costs by metro area nationwide. Those studies can give you a sense of daily costs where you expect to retire or already live.
And the U.S. Department of Health and Human Services has extensive resources at longtermcare.gov.

Write to Kelly Greene at kelly.greene@wsj.com
Kelly Greene

June 29, 2013 8:56 PM

Save on Mobile Service Abroad
International plans and Wi-Fi help travelers avoid hefty roaming charges.

By DANIEL LIPPMAN
The price of staying in touch while traveling abroad can quickly add up. But there are ways to minimize your international cellphone expenses.
If you plan to take along your existing phone, call your wireless carrier ahead of time to find out what it charges for calls and data use for the country or countries you’ll be visiting.
For example, a Verizon Wireless customer going to Italy would pay $25 per 100 megabytes of international data used, according to Brenda Raney, spokeswoman for Verizon Wireless. (100 megabytes will allow you to download or upload roughly 33 high-resolution photos.) Without an international plan, the person would end up paying $20.48 per one megabyte of data.
AT&T charges $30 for the first 120 megabytes of data in a global plan and it sends customers a text alert when their international roaming usage has hit $100. T-Mobile offers a feature called “WiFi Calling” on most of its phones, where you can make and receive calls abroad over Wi-Fi for no additional cost.
If you’re traveling to Mexico or Canada, rates are often cheaper for those countries so check plan specifics with your wireless provider.
If you end up using more data or minutes than expected, call your provider and ask it to retroactively add an international plan that will cut down your bill. Some carriers will do this.
If you want to just access apps or email on your smartphone, you can turn off the phone’s international data roaming and find a Wi-Fi hot spot.
Also, depending on the type of phone, some providers will unlock your phone, allowing you to use a SIM card from another country.
Another option is to bring or buy an inexpensive cellphone on your trip, purchase a SIM card and buy minutes to add to the phone.

Write to Daniel Lippman at daniel.lippman@dowjones.com

By Barbara Kollmeyer, MarketWatch

MADRID (MarketWatch) — European stock markets traded lower in early action on Tuesday as investors appeared to cash in on gains seen from the prior session’s rally. Broker moves weighed on shares of RWE AG, Hannover Re SE and Munich Re, but lifted Burberry Group PLC and Michelin.

The Stoxx Europe 600 index XX:SXXP -0.68% fell 0.3% to 287.52, following a gain of more than 1% in the prior session, after upbeat economic data in Europe and the U.S.

Fresenius Medical Care AG & Co. KgaA DE:FME -9.59% was the biggest decliner, tumbling nearly 10%.

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Studies show stocks bought by insiders slightly outperform the market. MarketWatch’s Laura Mandaro discusses five stocks that insiders have bought recently. (Photo: AP)

Utility company RWE DE:RWE -4.22% shares fell 2.3% to 22.68 euros after Morgan Stanley cut shares to equal-weight from overweight and cut its price target to €28 from €36 a share. Analyst Bobby Chada cited a tough operating environment and higher-than-expected leverage, and said there is little scope for a power-price rebound.

Insurers were also in a negative spotlight. J.P. Morgan Cazenove said it expects a 10% decline in natural catastrophe reinsurance and sees flat rates on other reinsurer lines, and reduced its 2014 earnings-per-share estimates for key reinsurers. In light of this, Hannover Re SE DE:HNR1 -3.26% was cut to underweight from neutral, leaving shares nearly 2% lower. Shares of Munich Re DE:MUV2 -3.26% fell 0.8% as it was dropped to neutral from overweight. Swiss Re AG CH:SREN -2.55% fell 0.8% after being cut to neutral from overweight.

The German DAX 30 index DX:DAX -1.11% fell 0.4% to 7,955.32, dragged by Munich Re and Fresenius.

On the upside, shares of Burberry Group PLC UK:BRBY +3.47% rose around 4% to 1,418 pence after HSBC lifted the luxury retailer to overweight from neutral, and lifted its price target to 1,750 pence from 1,530 pence.

Shutterstock Enlarge Image
Those gains helped London keep losses in check, with the FTSE 100 index UK:UKX -0.49% flat at 6,309.87.

Shares of Michelin FR:ML +1.91% added 2.4% after UBS upgraded shares to buy from neutral, saying the tire company is only part of the way towards improving its cost positions significantly. Analyst Philippe Houchois also said its more-aggressive pricing on light-vehicle tires is positive.

Those gains supported the French CAC 40 index FR:PX1 -0.65% , which kept losses to a fall of 0.2% to 3,761.09.

Analysts said traders were growing cautious ahead of central bank meetings in the U.K. and Europe on Thursday, along with all-important U.S. payrolls data later this week. U.S. stock futures pointed to gains for Wall Street later, while Australian and Japan stocks rallied. China stocks fell.

Barbara Kollmeyer is an editor for MarketWatch in Madrid. Follow her on Twitter @MWBarbaraKollmeyer.

By Mark Hulbert, MarketWatch

Bloomberg News
Is gold undervalued or overvalued? The question is all the more relevant now that the precious metal is trading at $1,200 an ounce, having shed $700, or 38%, over the past two years, including nearly 14% during June alone.

One study stirring much controversy among gold enthusiasts suggests it has more to fall.

The study — titled “The Golden Dilemma” — was published earlier this year by the National Bureau of Economic Research, a nonpartisan think tank in Cambridge, Mass. Its major finding is that regardless of how you define gold’s “fair value,” gold sometimes trades well above it and at other times well below. An ancillary finding: Whenever bullion deviates significantly from fair value, it eventually returns to trade at that level.

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Gold price continued to slide on Friday, hitting the lowest level in almost three years.

Campbell Harvey, a finance professor at Duke University and one of the study’s co-authors, concedes that there isn’t one agreed-upon definition of gold’s value. But he says that he and his co-author closely analyzed all the criteria of which they were aware.

The list they studied included defining gold’s value as a hedge against inflation, currency fluctuations, or low real interest rates, or as an insurance policy against hyperinflation or collapse of the financial system. They found that each definition was unable to explain more than a small portion of gold’s price swings over the shorter term.

While this finding is frustrating to traders who want to forecast gold’s shorter-term moves, gold is hardly different in this regard than the other major asset classes.

Consider the price/earnings ratio, a popular valuation metric for equities. According to research conducted by Cliff Asness, co-founder of AQR Capital Management, which oversees $80 billion, the P/E ratio historically has been unable to explain more than 5% of the variation in next-year stock-market returns.

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The situation improves when we focus on the very long term, however, according to Harvey. When measured over many decades, gold is a decent inflation hedge, maintaining its purchasing power. His study therefore provides confirmation of the conclusion reached by a seminal book that enjoys almost biblical status among gold enthusiasts: “The Golden Constant,” which was written in the 1970s by the late Roy Jastram, a professor of business at the University of California, Berkeley.

Gold bugs need to be careful drawing the proper investment implications of Jastram’s conclusion, however, according to Claude Erb, a former commodities portfolio manager at TCW Group and the other co-author of the National Bureau of Economic Research study.

“For Jastram, the short run was the next few years, and the long run was perhaps a century,” Erb said in an interview. “And over the short term of a few years, both Jastram as well as our recent study found that gold’s track record as an inflation hedge is quite poor.”

Consider: Investors who bought gold at its January 1980 peak of $875 an ounce are today still below water in inflation-adjusted terms. They even were showing a loss two years ago when gold was trading for more than $1,900.

The investment implication is to pay careful attention to gold’s longer-term cycles before buying gold — or be willing to hold it for many decades.

• The six best investment lessons ‘The Sopranos’ can teach us
So how should you decide where gold is in its long-term cycle? As a rule of thumb, the researchers urge investors to calculate a ratio of gold’s price to the level of the consumer-price index. This ratio’s historical average has been about 3.4 to 1, so it is a good bet that gold is overvalued whenever the ratio is well above that level.

When gold hit its high over $1,900 an ounce in September 2011, for example, the ratio was more than 8 to 1. In January 1980, the ratio stood at more than 11 to 1.

Unfortunately for the gold bugs, the current gold/CPI ratio — 5.3 to 1 — is still above average, even in the wake of gold’s plunge over the past three months. To be in line with that average, gold would have to trade for $780 an ounce. “Note carefully,” Erb says, “our research doesn’t provide a basis for predicting when gold will once again trade at fair value, however — only that it will eventually do so.”

Michael Bordo, an economics professor at Rutgers University and director of its Center for Monetary and Financial History, also is not surprised by gold’s pullback. Referring to the statistical tendency for high or low readings to eventually move back toward the longer-term average, he said in an email: “My research has shown that there is a lot of mean reversion in the nominal price of gold, reflecting the relatively steady very long run behavior of the real price of gold.”

Erb acknowledges that his study’s conclusions are controversial. But that is at least partly because the “gold bugs believe bullion has some exalted status that exempts it from the price fluctuations that cause every other major asset class to sometimes trade well above or below fair value,” he says.

Also controversial is the suggestion that a gold/CPI ratio can be helpful for determining if gold is undervalued or overvalued, since many believe the CPI understates inflation. But gold will fluctuate wildly relative to whatever inflation index you choose, Harvey says, and it will inevitably regress to the mean following any period of extreme undervalue or overvalue.

If you believe, like the study’s authors, that gold is still overvalued, you might consider an exchange-traded note that gains in price to the extent gold declines: PowerShares DB Gold Short DGZ -1.66% , which carries an expense ratio of 0.75%, or $75 for every $10,000 invested.

If you instead believe that gold is undervalued, or just due for a rally following its recent plunge, you might consider the SPDR Gold Trust GLD +0.11% , an exchange-traded fund with fees of 0.4%. Another gold-oriented ETF is the iShares Gold Trust IAU +1.50% , with fees of 0.25%.

Still, there are more conservative — and cheaper — ways to hedge against inflation than by investing in gold. Investing in the U.S. Treasury’s inflation-protected bonds, or TIPS, is one example; an ETF that does that is Schwab U.S. TIPS SCHP +0.24% , with fees of 0.07%.

Mark Hulbert is the founder of Hulbert Financial Digest in Chapel Hill, N.C. He has been tracking the advice of more than 160 financial newsletters since 1980. Follow him on Twitter @MktwHulbert.

Marlene Y. Satter

Mandatory retirement planning. Will it gain traction?
BY MARLENE Y. SATTER | July 2, 2013
Policy experts and politicians are increasingly calling for some sort of mandate at the employer level.

Top 10 cheapest states for long-term care
BY MARLENE Y. SATTER | May 3, 2013
Will you or your client be one of the 70 percent of people over 65 who will need long-term care at some time in your life? Genworth’s annual study on the cost of LTC indicates that if you are, you will — unsurprisingly — be paying more for it.

How much is too much?

BY MARLENE Y. SATTER | February 21, 2013
Increasingly, employers use automated retirement plan features to boost employee participation. With it, participation soared above 90 percent, but is everyone happy?