Is gold worth more during a recession?

During a recession, the value of gold tends to increase. That's why, due to economic uncertainty caused by a recession, more people are turning to gold as a “safe” investment option.

Is gold worth more during a recession?

During a recession, the value of gold tends to increase. That's why, due to economic uncertainty caused by a recession, more people are turning to gold as a “safe” investment option. Recession and Gold In fact, the yellow metal does not flourish in prosperity, when there is excessive optimism and confidence in the Fed and the US. UU.

However, gold thrives when economies are struggling. Gold is a good investment during recessions because of its role as a safe haven. As can be seen in the chart below, gold rose during most of the past recessions, including the Great Recession (the timing of recessions is only roughly reflected in the rectangles). Whatever lies ahead for these two unique assets, in terms of market capitalization size, returns and volatility, the digital gold that is bitcoin has a long way to go before it reaches the real thing.

While most people have held gold in the form of jewelry or in various electronic devices, bitcoin remains a physically intangible asset that is stored in digital ledgers and secured with cryptographic keys. And stocks and bonds are generally considered better investments for retirement, as they have historically outpaced the long-term rise in the price of gold. Gold also has a bearish to negative correlation with the stock market, suggesting that changes in the price of gold are largely independent of the evolution of stocks. Investors buy gold as a way to protect themselves from inflation and the threat of an economic crisis.

Traditionally, gold has been considered a safe haven asset, and many investors turn to the yellow metal during recessions and times of crisis. In its short 13 years of life, bitcoin has grown tremendously to almost half a trillion in market capitalization today, but compared to gold it is still small. At the end of the day, gold is a commodity that, in small doses, promises to be an excellent diversification element for your portfolio. Recession and Gold In fact, the yellow metal does not flourish in prosperity, when there is excessive optimism and confidence in the Federal Reserve and the United States.

Brexit caused investors to panic, many of them turning to gold to protect themselves from the fall of the British pound and the euro. The first is the VanEck Vectors Gold Miners ETF, known as GDX, a security that tracks the overall performance of gold mining companies. It's one of the most liquid ways to own gold, which means it's relatively easy to sell, compared to other options. As a result, it's important for investors to consider the overall macroeconomic and geopolitical environment when analyzing gold.

However, investors should keep in mind that gold prices don't work the same way during different declines.

Sara Sidorowicz
Sara Sidorowicz

Professional investing expert. Infuriatingly humble zombie nerd. Evil social media scholar. Avid twitter scholar. Infuriatingly humble web fanatic.