As Recession Fears Mount, Gold Price Could Offer Steady Gains

rising price of gold

If you’ve been reading mainstream media on the topic of recession, you’ve probably seen the pretty stark dichotomy between the differing views on recession. On the one hand, you have the bullish view, with writers claiming that because we’re not in recession yet, there won’t be one. On the other hand, you have the bearish view that sees the threat of recession looming larger than ever. So which one is right?

Bulls vs. Bears

Certainly the recent performance of stock markets has many people wondering “what recession?” After all, if the economy is headed for recession, shouldn’t stock markets be declining?

Well, stock markets are always lagging indicators, as they peaked in October 2007, only two months before the 2007-08 recession started. Are we seeing the same thing happening today with recent rallies?

It’s very easy to get caught up in the euphoria of rising markets. After last year’s less than stellar performance, the fact that markets are in the black this year has caused many to think that the risk of recession is over and that good times are here to stay.

Where have we heard that before? Oh yeah, Irving Fisher, who famously stated that stocks were at a permanently high plateau, just before they crashed in 1929.

The last few recessions have followed a relatively similar pattern, with the recession occurring after the Federal Reserve had begun cutting interest rates. With the Fed currently still in its hiking phase, you wouldn’t expect a recession to occur just yet, assuming the next recession follows the same general trend.

Meanwhile, the bears continue to trumpet the fact that we’re in a bubble and that the next recession could be a doozy. One of the noted bears this year has been JPMorgan’s Marko Kolanovic. Kolanovic, who has been savaged over the years for his relentless insistence on buying the dip, seems to have finally flipped and is now calling out the risk of a bursting bubble.

According to Kolanovic, the excess hype surrounding artificial intelligence is helping to fuel a stock market bubble, with both the S&P 500 and the Nasdaq 100 being dominated by tech companies. He believes that the headwinds facing stock markets are too strong to be optimistic, and recommends commodities instead.

Elsewhere at JPMorgan, its analysts are bullish on gold, expecting the gold price to push through the $2,000 barrier once again by year end and to nearly $2.100 by the end of 2024. This is of course in the expectation that the Federal Reserve will begin to cut rates in the future to combat a recession.

Since we’re still in the middle of the rate hike cycle, that prediction has yet to pan out. But if recession occurs and the Fed cuts rates, even $2,100 might seem like a conservative prediction. Remember that gold gained 25% from 2007 to 2009 during the same period that markets lost over 50%.

JPMorgan aren’t the only ones who expect the Fed to have to cut rates either. DoubleLine Capital expects the recession to be so severe, and for the Fed to be so delayed in responding, that it will have to cut rates by an entire percentage point. While that may seem radical, remember that the Fed’s interest rate hikes featured multiple 50-basis point jumps, something that also seemed extreme at the time.

And lest you think that expectations of a severe recession are overblown, there’s the fact that John Hussman, who predicted the 2000 and 2008 crashes, similarly expects a crash in the near future. He expects the S&P 500 to fall by 64%, a crash that would exceed the worst losses of the 2008 crisis. Are you prepared for that kind of crash?

Gold and Recessions

One of the biggest questions people had in 2008 was how to protect their wealth. It wasn’t easy, with stock markets losing so badly. And even after 2008, the recovery was anything but strong.

However there was one shining standout: gold. Gold gained 25% during the same period that markets lost more than 50%. And gold went on to set all-time highs in 2011.

Gold has been on a tear since 2020 too, gaining big during the 2020 recession and gaining again this year now that fears of another recession are increasing. Gold has a reputation for performing well when the rest of the economy isn’t, and it’s a well-earned reputation.

According to research from the World Gold Council, gold has outperformed the US dollar in 6 out of the last 8 recessions, and in most of those the outperformance has been quite substantial. Gold so far this year has outperformed commodities and oil, along with the US dollar, cash, and bonds.

WGC’s research has also demonstrated the positive effects that holding gold can have as part of a defensive positioning for a hypothetical portfolio. Overall the WGC expects gold to offer steady positive real returns over the long run, with short-run returns possibly being even higher.

The question then that many people have is, how can I buy gold? Well, it’s not that difficult.

Gold is in demand around the world, and gold markets operate 24/7. There are numerous gold sellers out there, including Goldco, and numerous gold products to choose from.

One popular option today is a gold IRA, which allows you to purchase gold within an IRA account and benefit from the tax advantages inherent in an IRA. Many people choose to fund their gold IRA with assets from their existing 401(k), 403(b), TSP, IRA, or similar retirement accounts.

Rollovers from these accounts to a gold IRA can be made tax-free, allowing you to protect your existing savings without having to take a tax hit. And then you can benefit from owning physical gold coins or gold bars in your very own gold IRA.

Of course, not everyone has oodles of 401(k) assets that they can roll over, or that they want to roll over. In that case, a direct cash purchase of gold coins or gold bars can help you achieve your goal of giving you physical gold that can help you weather an oncoming recession.

Whichever method of buying gold you prefer, Goldco can help you. With thousands of satisfied customers and over $2 billion of precious metals placements, we work hard to ensure that our customers are happy with their precious metals. If you’re looking to protect your hard-earned savings with gold, call the experts at Goldco today to learn more about how gold can help you.

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