Why you should invest in gold ahead of a recession
It's official: the Fed sees a recession on the horizon.
Recently released Federal Reserve minutes predict a "mild recession" later this year, confirming what many have suspected for some time. The announcement is just the latest in a series of bad economic news, including persistently high inflation, interest rate hikes and bank failures. And it's one more thing to cause investors concern.
In a recession, unemployment soars, purchasing power decreases and the stock market plummets. Finding a safe place to store your money becomes particularly important. One way to weather an economic storm is by investing in gold.
Gold's reliable returns, stable value and liquidity provide much-needed security when the economy is weak. In this article, we'll explore why you should consider gold when a recession looms.
To learn more about investing in gold, request a free information kit today.
Why you should invest in gold ahead of a recession
Gold is a good investment to make in preparation for a recession. Here are three reasons why.
The price will likely go up
While most of the effects of a recession are negative, one positive is that gold prices tend to increase.
For example, according to Reuters, gold spot prices climbed to $2,042.49 per ounce after the Fed's minutes were released. That's almost as high as the record in the 2020 recession. Gold futures went up as well, hitting $2,056.90. If we enter a full-blown recession, these prices could climb even higher. By investing in gold now, you can capitalize on these higher returns.
If you think gold might be a wise investment for you, learn more about your options here.
It protects your portfolio
The economy will always have ups and downs. One way to ensure your investment portfolio survives these oscillations is by diversifying. When you diversify your portfolio, you invest in a variety of asset classes with different risk/reward ratios. The aim is to earn high returns with riskier assets, such as stocks, while offsetting any potential losses with more conservative assets, such as gold.
In a recession, stocks are particularly precarious. Even warnings of a recession can send them into a downward spiral. For example, the S&P, Dow and Nasdaq composition all fell after the Fed's minutes came out. Gold, however, has historically held its value despite market fluctuations, making it a good way to preserve value in your portfolio when other assets falter.
It can be a quick source of cash
Interest rates tend to fall in a recession, which means banks earn less by lending out money. They also expect higher loan defaults due to job losses and other financial hardships brought about by a down economy. As a result, lending criteria tighten, making it harder for the average person to get credit.
We're already beginning to see this in action. A recent Federal Reserve Bank of Dallas Banking Conditions Survey reports, "Loan volumes fell [in March 2023], driven largely by a sharp contraction in consumer loans… Credit standards and terms continued to tighten sharply, and marked rises in loan pricing were also noted over the reporting period."
In times like this, gold can provide a quick cash injection if you need help paying for a large expense or making ends meet. Rather than taking on high-interest debt like a credit card or personal loan — if you even qualify for one — you can trade in your gold for cash. And since gold prices tend to rise in a recession, you stand to receive more cash than you might at other times.
Ready to start investing in gold? Get a free information kit here to learn more!
The bottom line
Talks of recession can be worrisome, but if you take steps to protect your money now, you can better ride out whatever happens. There are many ways to invest in gold, giving you plenty of options to choose from. Just be sure to weigh the pros and cons against your overall investment goals, and take the time to compare your options. If you need additional guidance, a financial advisor can help.
