Tuesday , 28 June 2022

Gold & Recessions: What You Need To Know

Ever wondered what happens to the gold market during a recession?  In this blog post, we are focusing on some of the commonly asked questions…about gold and recessions so you can understand more about this safe-haven investment in these economically turbulent times.

This version of the original article from thepuregoldcompany.co.uk has been edited [ ] and abridged (…) to provide you with a faster and easier read. Also note that this complete paragraph must be included in any re-posting to avoid copyright infringement.

1. Does gold rise because of recessions?

…The price of gold has consistently risen in response to major financial upsets in the present and recent past…From late 2007 to early 2013 – at the start of and during the global financial crisis and the great recession – the average price of gold rose 218% in just four years. In January of 1980 – during the early 1980s recession – the price of gold rose 52% in 19 days.

2. Should I invest in gold before the next recession hits?

#$$4$ Predicting global economic recessions, however, is notoriously difficult…Long-term financial forecasting – including predicting recessions – is not an exact science, and, as with any investment, past performance is not a sure indicator of future results. It is for investors to judge whether the factors that raise the price of gold – political and financial instability, global upheaval, private and industrial demand – are likely to recur in the near future, recession or not…

3. Does the price of gold always go up during a recession?

Gold has been a safe-haven asset for centuries, and this trait is a good indicator of its resilience in a recession. When other assets that are tied to the health of the economy come under pressure during the lean years, the immutability and innate value of gold comes into its own [BUT] that doesn’t mean gold only ever goes up during a recession.

Depending on the length of the recession and the factors affecting the gold price, including inflation, currency value, demand and supply, there can be some fluctuations within the recessionary period but, in general, in recent history, the price of gold has maintained its value or outperformed other asset classes during times of economic instability…

Caveat

As with any investment, past performance is not a definitive indicator of future results. It is for investors to judge whether the fundamental forces that drove the price of gold up during past recessions will continue to do so in the next.

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One comment

  1. Sounds like the price of gold inflates along with prices on everything else.