Why Investors Buy Gold During a Recession

18 Feb
gold price during recession

Why Investors Buy Gold During a Recession

For millennia, gold has been one of the most prized possessions around the globe because of its scarcity and beauty. However, smart investors covet gold because of its stability. It’s a strong commodity that is always in high demand for three reasons:

  1. There’s a fixed quantity of gold
  2. It’s the most sought-after precious metal for jewelry
  3. Its purchasing power remains largely the same over time, according to a report by Duke University

Gold is a safeguard against bad economic times. Its value often increases during recessions as the value of currency, like the American dollar, decreases. With the imminent threat of a 2020 recession, here’s why investors decide to purchase gold during tough economic times.

Reasons Why Gold’s Value Goes Up in a Recession

  • Gold is less affected by recessions. Because gold is in demand around the world, a recession here in the United States would not affect its global value. Gold would still viewed as precious throughout the world.
  • Gold is a liquid commodity that can be turned into cash in most countries, unlike the fluctuating values of other investments like stocks or bonds. When markets are untrustworthy, gold is still an easy asset to cash in on. 
  • Gold never decays or loses its structure. Unlike money that can be destroyed or stolen by hackers and cyber criminals online, gold in storage will always be there as a safe investment.

Is It a Good Time to Buy Gold?

When a recession is looming, it’s a good time to buy gold. Gold prices tend to increase when stock markets tank. But if you buy gold before that happens, you can purchase it at a lower price for a solid return on investment.

Gold also provides a meaningful way to diversify your portfolio and lower your overall financial risk at all times. It stabilizes portfolios, since gold prices tend to counteract stock prices.

So, how likely is a recession?

  • CNBC reports economist predictions of a recession for late 2019 or early 2020, in conjunction with declining home sales
  • Bankrate’s Third-Quarter Economic Indicator survey revealed 90% of economy experts predict factors like slow business investment, geopolitical trade wars and slowing global growth are pointing to an economic downturn
  • Former U.S. Treasury secretary Larry Summers predicts a chance of a recession in 2020 is at almost 50%, according to Forbes

Several economic experts are predicting downturning markets in 2020. Now is the time to invest in gold to protect your portfolio, no matter where the economy turns. 

Look out for our free ebook, “The Future of Gold 2020: An Investor’s Survival Guide.” To learn more about gold and other precious metals, visit our resource center.