Throughout modern history, economic trends and patterns have been incorporated into expectations of gold's performance during a recession. During a recession, the value of gold tends to rise. Because of the economic uncertainty caused by a recession, more and more people are turning to gold as a “safe” investment option. The main reason why gold is more resilient during stock market crashes is the negative correlation.
One goes up when the other goes down. To help answer the questions posed above, I looked at past stock market declines and measured the performance of gold and silver during each of them to see if there were any historical trends. If the stock market falls, the fear is generally great and investors are generally looking for security in gold. In other words, the largest gold bull market in modern history occurred while the stock market remained essentially flat.
But regardless of what stocks may do, is it wise not to have a significant amount of physical gold and silver in light of all the risks we face today? I don't think so. Although countries like India and China treat gold as a store of value, people who buy it there do not trade it regularly (few pay for a washing machine by handing over a gold bracelet). Given the inverse connection between gold and the US dollar, lower interest rates and increased money supply make the greenback less attractive and lower the opportunity cost of investing in unprofitable assets, such as precious metals. If so, one would expect the price of gold to plummet over time, as there are more and more of it.
The lesson here is that, even if gold initially declines during a stock market crash, one should not assume that it has gone down for the account. It is not binding, since it is not a treaty; rather, it is more of a gentleman's agreement, but one that is in the interest of central banks, since dumping too much gold into the market at once would negatively affect their portfolios. To begin with, although it is the uncertainty of the country's economic stability that makes gold an attractive investment option, gold prices can remain volatile. Gold also provides a significant way to diversify your portfolio and reduce overall financial risk at all times.
As the son of an award-winning gold digger, with family-owned mining claims in California, Arizona and Nevada, Jeff has deep roots in the industry.