The problems in Greece and China threw the world markets into a tizzy over the past month. The Greeks seem schizophrenic rejecting then accepting the latest deal from their creditors, while the Chinese government layers on one new program after another to halt the rout in Chinese stocks. Every morning American investors must check the latest headlines to find out if something blew up, unraveled, or simply fell apart the night before.

It’s been a bit exhausting.

But if we step back a bit and look at the bigger picture, some corners of the market haven’t reacted to the manic-depressive swings from overseas.

One area that seems impervious to the emotional rollercoaster ride is precious metals. When it comes to gold, the market appears particularly relaxed. So relaxed that it’s at risk of falling into a coma.

After spiking to $1,300 at the start of the year, yesterday the price of gold dropped to a near-term low of $1,106, falling 2.2% in a day. It actually fell below $1,100 that morning, hitting the lowest levels in five years.

If financial chaos drives the price of gold, then the near-exit of Greece from the euro zone, coupled with a free-falling Chinese stock market, should have sent the metal soaring.

To be fair, there was a spike in mid-June to $1,200. Or maybe it was a blip. It could’ve been an accident when a trader hit the wrong key while dusting off his computer.

Whatever it was, the momentary rebound stopped almost as quickly as it occurred, driving the price of gold ever lower. For the moment, the fear-of-financial-chaos trade appears dead.

It could be that no one is worried about the global financial system, or even major parts of it, blowing up. Personally, I doubt it. I’m concerned about major disruptions in the global financial system, and every day I read research from others who share those fears. So the current slow-bleed in gold must be for a different reason, and I think I know what it is.

Recently the Chinese government reported how much gold it holds in official reserves. The last report was in 2009, when it held 1,054 metric tons.

Given that the Chinese collect a lot of foreign currency through their trade surplus, and that they’re desperate to have their currency included in the IMF’s special drawing rights, many people expected their gold holdings would have at least doubled over the last six years.

Instead, the Chinese government reported current holdings of only 1,658 metric tons, an increase of just 600. Analysts were expecting it would announce holdings of 2,000 to 4,000.

As a frame of reference, the U.S. holds about 8,000.

Granted, gold’s been sliding for some time, but the drop following the announcement by China points out an interesting characteristic: Holding gold simply hasn’t been profitable for almost four years. At the end of the day, profits are all traders and investors are after.

And since 2004, there have been a lot more people involved in buying and selling gold because of one thing – the SPDR Gold Shares ETF (GLD) and similar securities.

This ETF invests in gold or gold derivatives (futures, swaps, etc.), and gives everyday investors a simple way to profit from the changing price of gold without the hassles of the futures market or dealing with physical gold.

Notice that I said “profit from.” That’s key. Hoping to earn a profit on a paper asset is very different from taking delivery of physical gold bars and holding them as a hedge against economic calamity. No one can expect the Gold Shares ETF, itself a paper asset, to protect them in a crisis. It’s just one more entry in a digital ledger, which is awfully hard to trade for food.

The incredible run in the price of gold from 2003 through 2011 drew investors to ETFs like Gold Shares, creating a virtuous cycle of higher prices.

The more people that bought the ETF, the more physical gold or gold derivatives it had to buy. That drove up the price of gold, and hooked in more investors.

But it wasn’t a straight shot up.

The price of gold, and the Gold Shares ETF, fell in the darkest days of the financial crisis. People flocked instead to the U.S. dollar.

When the markets calmed a bit and it became evident that central banks would print their way out of the mess, investors returned to gold as a hedge against inflation.

But inflation never appeared. Instead, we’ve been fighting deflation, which favors cash over precious metals.

Without a clear path for profits, the price of gold has been sliding lower for four years, taking the Gold Shares ETF and millions of investors with it, who then embarked on the vicious cycle of selling as the price dropped. Central bank printing in the U.S., Japan, and now the euro zone sure didn’t save it. The recent unrest in Greece and China hasn’t given it much reprieve, either.

It’s hard to see how gold as a short-term investment will make any positive move in the months to come. Instead, we’ll likely see this precious metal slide even lower.

While this will frustrate investors, it will give others a great opportunity.

Those who purchase gold as a true hedge against financial ruin will be able to buy it at a lower price. Of course, they’ll have to find a safe place to store it all, but that’s a topic for a different day!

Rodney