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All signs point toward a recession on the horizon as interest rates rise rapidly, energy costs spiral out of control, and inflation raises the cost of living for just about everyone. The ongoing war in Ukraine continues to cause supply chain constraints around the world, and the S&P 500 has struggled through broad sell-offs throughout early and mid-June.
That has left investors wondering what to do with their money. On the one hand, market volatility makes investing in stocks a big risk, while high inflation rapidly eats away at the value of funds held in cash.
Is Gold a Good Investment During Recessions?
Demand for gold often increases during market slowdowns. It’s also widely seen as an inflation hedge, and while its performance against day-to-day inflation may be uneven, it tends to maintain its value over years and decades.
Every asset comes with a degree of risk, and there is never a guarantee that prices will rise or fall. But gold has a long reputation as a defensive asset that can help investors get through periods of economic turmoil.
How to Buy Gold Bullion
The most straightforward way to invest in gold is to buy bullion in the form of coins or bars. Gold coins are made by national mints, such as the U.S. Mint, the Royal Canadian Mint, and others around the globe.
One of the most secure products you can invest in is Canadian bullion coins. The Canadian Gold Maple Leaf uses Bullion DNA, a unique security feature involving micro-engraved security marks that can be laser scanned to prove the authenticity of the coin.
It’s straightforward to buy bullion as well. Just head to a gold dealer and look for any gold products with a purity of .9999. These are investment-grade products that can even be included in tax-advantaged retirement funds.
Gold vs. Bitcoin
The collapse of cryptocurrency has also been in the news lately, as the crypto industry effectively lost $2 trillion in capitalization since November 2021, with Bitcoin losing about 70% of its value.
That has left investors who had their money in alternative assets shaken. If cryptocurrency is hemorrhaging value and the stock market is struggling, where should you put your funds?
The good thing is that while many drew comparisons between gold and cryptocurrency, cryptocurrency is considerably more volatile than the market.
Gold can also be a volatile asset, but it has a low correlation with the stock market, meaning gold prices tend to have little to do with the direction stocks are going.
Gold as a Defensive Asset
Between high inflation and an unpredictable, volatile stock market, investors are left with few good options. It’s in times of uncertainty that many investors opt to take a defensive investment strategy, investing in assets that tend to perform well during tough times. These include reliable dividend stocks, real estate, and precious metals, including gold and silver.
Gold has an important role to play in any defensive investment strategy. Consider branching out your investments when growth in the stock market stagnates.
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