What Happens to Gold if We Enter a Recession or a Depression?

“Mayan prophecies aside, many of the senior Casey Research staff believe that economic, monetary, and fiscal pressures could come to a head this year. The massive buildup of global debt, continued reckless deficit spending, and the lack of sound political leadership to reverse either trend point to a potentially ugly tipping point. What happens to our investments if we enter another recession or – gulp – a depression?

A look at the gold price during each recession since 1955 shows that we should not assume gold will perform poorly during a recession. Even in the crash of 2008, gold still ended the year with a 5% gain. And with the amount of currency dilution that has occurred since that time, it seems more likely gold will rise in any economic contraction than fall. Indeed, if government’s response to a recession is more money printing, precious metals will be a critical asset for investors to have in their possession.

Even if the gold price ends up flat or down this year, the CPI won’t. Gold’s enduring purchasing power is why we hold the metal.

How about gold stocks? In spite of the debilitating 1970s that endured stagflation, price controls, three recessions and the Vietnam war, gold producers rose over 600% while the S&P was basically flat. And that includes a roughly 65% fire-sale correction, much like we saw in 2008. Gold and silver stocks won’t be immune to selloffs if a recession or worse temporarily affects the industry. But in the end, they will prevail.

“Don’t lose patience with, or confidence in, your gold holdings. What happens to the price over any short period of time is only one chapter in the book of this bull market, and we think you’ll be happy by the time that last chapter is written.”

To read Jeff Clark article: What Happens to Gold if We Enter a Recession or a Depression?