What Happens to the Price of Gold During a Recession?

There’s talk that the U.S. will enter a recession in 2020, bringing up the question: what does that mean for gold? It means troubling news for the stock market, but good news for gold. No one wants to go through a recession, but it’s best to be prepared. The best way some advisors say is investing in bullion. 

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How Has Gold Performed During Recessions?

The last recession was 2007 – 2009. It was a rough time for most Americans, driven by the housing crisis. For investors, it was equally as brutal. The S&P 500 Index was down 37%. Gold saw the opposite reaction; gold’s value rose by 24%. Gold did see drops during this period, but it never fell as low as stocks. 

Jan 2007 to Jan 2010 – S&P 500 & Gold

Chart of the S&P 500 Index from Jan 2007 - Jan 2010

It’s clear from historical data that gold’s price increases during recessions. This is a reason consumers flock to gold before a predicted recession. 

The Trade War’s Effect on Stocks

Another sign that gold will continue its rise in the current market: the escalating trade war with China. The trade war that continues to rage on has investors flocking to gold due to likelihood of more tariffs destabilizing the stock market. China responded to U.S. tariffs with its own tariffs on 75 billion dollars worth of U.S. goods starting in September, with a second round in December. This news has left the stock market in a vulnerable state. The trade war is another sign that the economic market could weaken, leading to the 2020 recession. 

Should You Buy Gold to Prepare for a Recession? 

The main question to ask yourself in preparation for a recession is: how can I protect myself against a weak U.S. dollar and economy? The answer according to some investors is gold. Because of gold’s stability during past recessions, as we discussed, this isn’t a bad suggestion. Gold has proven to be a reliable asset in the past which is the reason it has already reached a value of over $1500! 

If you decide to go this route, Nationwide offers gold and silver bullion. We also have product specialists that can answer any questions. Want to discuss what bullion would be the best for investment? Contact us! Our staff has combined 150 years of experience and enjoy helping customers find an investment piece they love. The best thing to do in a time of uncertainty is to be prepared!

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