Disclaimer: Many or all of the companies listed here may provide compensation to us. This is how we maintain our free service for consumers. Compensation, along with hours of in-depth editorial research, determines where & how companies appear below.
If you're wondering whether or not you should invest in gold during a recession, the answer is yes. Gold has historically been one of the most effective assets to own. If the recession persists and U.S. stocks recoil further, then investing in gold will only be a smarter strategy because it's relatively safe compared to other investments, such as stocks, bonds and real estate.
Gold is an asset consistently used to store value and economic stability, making the metal one of the most reliable investment options. During a recession, gold keeps its value at a predictable pace, ensuring profits during economic instability. The only time it may decline in value is when investors sell their gold holdings, or prices fall below the cost of production.
If you are looking to get started investing in precious metals right away checkout our top companies list. We did hundreds of hours of research and testing to find the top companies for this year...
What Is a Recession?
A recession is a decline in production, higher unemployment and a decline in national income levels. A recession is different from a depression, which is a severe economic downturn that lasts for several years. The basis of a recession begins with an initial decline in growth occurring over six to eighteen months.
After the conclusion of World War II, there have been several recessions worldwide, including 1975, 1982 and 1991. More recently, the Financial Crash of 2008/09 was brought on by the 2006 U.S. subprime mortgage crisis and stock exchange crash. And due to the Covid-19 pandemic, numerous recessions were experienced in 2020 and 2021.
Recessions that endure for more than a year are referred to as depressions. Notable worldwide depressions were the 1640 event, 1837, the long depression from 1873 to 1896 and the Great Depression from 1929 to 1939, which was perhaps the most serious and ultimately led to World War II.
The S&P 500 is an excellent source of information to understand how markets are faring during a recession. This index reflects the collective performance of various corporations across multiple industries.
How Does the Price of Gold React to Various Economic Conditions?
Now that you know gold is a haven, you may be curious about how market forces affect its price. Here is what you should anticipate.
Gold Price Correlation to Inflation
While gold produces a consistent rate of return during times of inflation, the metal doesn't necessarily rise in value when the economy is booming. Gold prices increase more during economic dips because investors recognize it as a safe investment choice. Unlike stocks and bonds, gold is relatively stable and not affected by short-term market trends such as inflation or falling interest rates.
Gold Price Correlation to Recessions
Historically, gold tends to rise during economic downturns such as recessions and depressions. As a rule of thumb, you should view gold as a haven in periods when stock values are declining, and people are growing fearful. Gold prices rose while S&P 500 values fell in the last three recessions (2020, 2007 and 2001).
Gold Price Correlation to the Dollar
Gold is a form of security against the U.S. dollar. Gold values usually increase whenever the dollar value drops, and the other way around. This is because gold is priced in U.S. dollars, and a weaker dollar makes it more affordable for foreign purchasers.
The issue is that gold and the U.S. dollar do not have a perfect inverse association. There are times when the prices of both assets will decrease, as they did in 2020.
The price of gold can also go up while the dollar strengthens, which happened in 2019; even though the dollar was gaining strength, investors were scared of a potential economic downturn and purchased gold as a safe asset.
Gold Price Correlation to the Stock Market
The stock market and gold prices are inversely related. When the stock market is doing well, gold prices typically decrease, as expected. It is possible, however, for the two to move in accord, such as in the early 2000s. When considering the whole economic landscape, it is necessary to look at numerous factors, not just one or two elements.
Is Recession a Good Time to Invest in Gold?
During a recession, the value of U.S. stocks can take a nosedive, especially if the recession lingers for an extended period. Suppose you invest in gold coins during a recession. In that case, you'll notice that the value will be relatively flat because investors don't want to sell their supplies of gold during times of economic uncertainty.
As opposed to stocks, gold doesn't sink as much as other assets during a recession and is more resistant to decline. If people begin to lose faith in the economy, they'll tend to sell or liquidate their stocks at the lowest point in the market and will be less likely to sell gold.
In addition, gold tends to rise during economic uncertainty because investors will demand more of the metal when they recognize how important it is for securing wealth and maintaining price stability. Historically, gold has demonstrated its ability to retain value at a pace that's in line with inflation, which makes it an ideal long-term investment.
How Do I Invest in Gold?
If you're interested in investing in gold, you have several options. This depends mainly on your financial goals and what you want to accomplish with your investment.
Gold bullion is available in many forms, such as coins, bars and ingots. Coins are typically minted and issued by governments, while private mints produce bars and ingots. The size and shape of each type of gold bullion vary, as does its purity.
Gold bullion can be purchased from various sources, including banks, online dealers and precious metals dealers. Prices for gold bullion can fluctuate daily depending on factors such as current market conditions, political events and supply and demand.
When buying gold bullion, it is important to research the product and understand the different types of gold available and their purity and weight. It is also important to compare prices and find the best deal. Once purchased, gold bullion should be stored in a secure location, such as a safe deposit box or a home safe.
Gold ETFs (Exchange Traded Funds) are a type of investment fund that tracks the price of gold and allows investors to buy and sell shares to gain exposure to the gold market. Gold ETFs are traded on exchanges like stocks, typically representing a certain amount of gold or other precious metal.
The underlying asset of gold ETFs is usually physical gold bullion held in vaults, though some ETFs hold different forms of gold, such as futures contracts or options.
Gold ETFs are appealing to investors for a variety of reasons. They are easy to buy and sell since they can be traded on the stock market. Gold ETFs also offer a more convenient way to hold gold than buying physical bullion, as the ETFs are more liquid and require less storage.
Investors may also benefit from gold ETFs due to their low fees and taxes and their ability to be used as a hedge against stock market volatility.
Gold futures are financial contracts between two parties that obligate the buyer to purchase a certain amount of gold from the seller at a predetermined price on a specified date in the future. The contract is a standardized agreement between the two parties, and the terms are determined by an exchange such as the COMEX or the London Bullion Market Association (LBMA).
The value of a gold futures contract is based on the price of the underlying asset – in this case, gold. As the price of gold fluctuates, so too does the value of the futures contract.
When investing in gold futures, you can buy or sell a contract. If you believe that gold will increase, you may purchase a contract at the current price. This means you're betting that the price of gold will rise, and you'll be able to sell your contract for a profit when it comes time to settle.
On the other hand, if you believe that gold will decrease, you may choose to sell a contract at the current price. This means you're betting that the price of gold will fall, and you'll be able to buy a contract at a lower price when it comes time to settle.
Gold mining stocks are shares of ownership in a gold mining company. When you purchase gold mining stocks, you invest in the company's ability to mine and sell gold. Gold miners make money by digging up gold-bearing ore and processing it so the gold can be sold for its market value.
The price of gold mining stocks is determined by several factors, including the amount of gold produced by the company and the price of gold on the open market. As the price of gold rises, so will the stock prices of companies that mine and sell it. On the other hand, if gold prices fall, so will gold mining companies' stock prices.
Consider the company's operating costs and management team when buying gold mining stocks. Operating costs are important because they determine how much profit the company can make from its operations. The management team should have expertise in the gold mining industry and a solid track record of making successful investments.
Best Precious Metal Companies
There are many precious metal companies around the world offering a variety of products and services in the precious metals industry. Below are some of the best precious metal companies we recommend you check out.
Goldco is a leading precious metals company that has been in business for over 10 years and is dedicated to helping investors protect their wealth through gold and other investments. With Goldco's expertise, investors can diversify their portfolios and hedge against the stock market's volatility during economic uncertainty and recession.
Goldco offers various services to suit any investor's needs, from secure storage in their vaults to personalized portfolio advice. It also provides tax-advantaged retirement accounts, such as IRAs and 401(k)s, which can help protect your savings from market downturns and inflation.
The company offers competitive rates on gold purchases and sales, so you can easily invest in gold without worrying about high markups or hidden fees. With their unparalleled customer service and knowledgeable staff, Goldco is one of the best companies to help you invest in gold during a recession.
Augusta Precious Metals is an excellent choice for those looking to invest in gold during a recession. With many years of experience in the gold and silver industries, Augusta Precious Metals is one of the most trusted names in precious metal investing.
They offer a wide range of products and services, from storing physical gold and silver in their vaults to providing financial advice on investing in precious metals during a recession.
Their experienced team of experts can provide tailored investment advice, helping you make the right decisions when investing in gold or silver during a recession. They provide a secure and convenient way to purchase precious metals, offering online and in-person transactions.
American Hartford Gold is an excellent precious metal company to help you invest in gold during a recession. They are dedicated to providing their customers with the highest quality service and products, ensuring they have the best investment experience possible.
Their team is highly knowledgeable about the gold market, allowing them to provide accurate advice about the best way to invest during a recession.
American Hartford Gold also offers a wide range of gold products, from coins and bars to jewelry, meaning that there is something to suit every investor's budget and needs. They also offer secure storage services, so investors can rest assured that their gold is being kept safely.
With competitive pricing, excellent customer service and secure storage, American Hartford Gold is a perfect choice for those looking to invest in gold during a recession.
#4. Birch Gold Group
Birch Gold Group is an excellent choice if you are looking for a precious metal company to help you invest in gold during a recession. With over 15 years of experience, Birch Gold Group is one of the largest and most respected precious metals companies in the United States. They specialize in helping people diversify their investments with physical gold and silver.
When investing in gold during a recession, selecting a reputable company like Birch Gold Group is important. They offer a variety of gold investment options that are safe and secure. Their customer service is top-notch and dedicated to helping their clients achieve financial success.
Birch Gold Group offers a wide selection of gold coins, bars, rounds and other forms of gold bullion. They also provide IRA accounts and other retirement services to help customers protect their investing assets. Additionally, they offer free market updates, charts and resources so customers can stay updated on the latest trends and prices in the gold market.
When investing with Birch Gold Group, customers benefit from the safety and security of their storage services. All their gold is stored in a secure vault facility in a non-bank depository. This means you can rest assured that your investments are safe and secure.
#4. Noble Gold
Noble gold is an excellent choice for those looking to invest in precious metals during a recession. They offer various services, including gold and silver IRA accounts, gold coins, bullion bars and other precious metals investments. Their IRA accounts are incredibly beneficial, allowing customers to diversify their retirement savings across multiple asset classes.
The company also offers various services to help customers protect their investments, including secure vault storage, insurance coverage and private consultations with financial advisors. It provides educational resources on the website, such as articles and videos, to help customers stay informed about investing in precious metals.
Their competitive pricing, a wide range of services and customer-oriented approach make them one of the best companies to consider when investing in gold during a recession.
The benefits of owning gold are numerous and far-reaching. For investors who want to diversify, it's one of the most powerful ways to protect the value of their portfolio by shielding it from risk and loss. During a recession, gold is one of the best investments to help you protect your financial future. The gold investment companies we've suggested here will help you choose the right product to meet your needs and offer secure storage options.