It's supposed to be the ultimate hedge against inflation, but gold's not so golden these days. The market has been brutal and bearish, yet the price of the precious metal has actually been falling. It's just more proof that as appealing and as tangible as gold might seem in these defensive times, it's just not right for average retail investors.

True, the dollar is strengthening and oil and other commodities are coming down, but gold is off more than 20% from its nominal all-time high of $1,030 an ounce set back in March. (Adjusted for inflation it actually topped $2,000 in 1980, but that's another story.) As of Friday's close the yellow metal had fallen for seven straight sessions. Gold-oriented exchange-traded funds, perhaps the easiest way for investors to get exposure, are in the red year to date. Indeed, they're getting beaten by Wal-Mart Stores (WMT) shares and absolutely trounced by the dollar-store stocks. (See chart below.)

Gold bugs, a tenacious lot, have to be wondering, What gives? After all, central banks around the world are injecting trillions of dollars of liquidity into global credit markets. That sort of easy money is supposed to lead to inflation, be it in some assets (cough, housing), or in goods and services. Meanwhile, the bear market -- and, no doubt, drive-time radio ads -- are creating frothy demand for gold coins. Yet gold, that great store of value throughout the millennia, that ultimate hedge against inflation, isn't working.

It turns out that gold futures are subject to the same sort of institutional trading pressure as anything else that can be sold quickly. As Ed Yardeni of Yardeni Research explained to clients Monday: "Undoubtedly, financial gold has been depressed by the same panic liquidation in the hedge fund community that has contributed significantly to the drop in commodity and stock prices across the board."

Granted, gold ETFs have done exceptionally well in recent years. SPDR Gold Shares (SPDR) and iShares Comex Gold Trust (IAU) have gained about 80% apiece since their inceptions nearly four years ago. Apart from the fact that we usually argue against allocating anything but the smallest fraction of a portfolio to sector ETFs, the easy money appears to have been made. Add the unlikely but real possibility of deflation hitting global prices and gold is even less attractive.

As for those radio come-ons pushing gold coins, well, that makes even less sense than ETFs or futures contracts. You need to take possession of physical gold, meaning you have to store it securely and insure it.

Long-term investors would do well to heed Warren Buffett. As the Oracle of Omaha once said of gold: "It gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head."

YTD data for GLD, WMT, DLTR, FDO.