Should You Buy Gold During a Recession?

January 26, 2023

Purchasing gold in recession periods is a sound strategy among investors looking to protect their wealth through diversification. Historically, gold has proven to be a safe-haven investment when fiat currencies and intangible assets falter. 

Gold’s demand as a rare, finite metal and stellar reputation as a true currency keep its value remarkably stable. In fact, the price of gold tends to rise during periods of economic downturn when people actively seek out physical investments with real intrinsic worth.

If you’re thinking about investing in gold (or other precious metals), naturally, you want to make sure you’re timing your purchase wisely. Should you buy gold during recession periods, or should you wait until the economic weather clears up? 

One Size Doesn’t Fit All

There’s no right or wrong approach to investing, as each and every investor has their own preferences, requirements, goals, and opinions. It’s up to you to make an informed decision based on a wide range of factors, many of which are unique to you and your financial situation.

For example, buying gold in recession periods is often attractive when people see their purchasing power diminishing and their intangible investments faltering. Gold is famously reliable. So buying gold during a recession can bring much-needed stability and diversification to one’s financial portfolio. It’s the classic “don’t put all your eggs in one basket” approach to investing.

However, because the price of gold tends to rise during periods of recession, some investors prefer to wait until they see economic improvement and a corresponding decrease in the price of gold. Nobody wants to invest in something at its all-time high price, after all. 

Speculating About the Future

A man speculating about finances with charts and graphs in the background

Whenever you’re considering any investment, it’s up to you to do your due diligence and analyze various market conditions to determine if you should buy, hold, sell, or wait. For instance, buying gold during a recession may be an attractive option for investors who anticipate increasing economic instability, as the price of gold would likely continue to rise.

On the other side of the coin, investors who foresee economic improvement in the near future may want to hold off on their purchase because if their prediction holds true, they’ll probably be able to buy their gold at a lower price down the line.

Of course, it’s impossible to predict the future, which is why some investors buy gold in recession periods, and others don’t. That said, gold has centuries of proof that it’s a dependable investment. So even if you buy gold during a recession and the price decreases after your purchase, there’s an extremely high chance that its value will recover (and most likely increase) with time.

Considering Quantities

The amount of gold you’re thinking of purchasing can also be an important factor to keep in mind. Say you’re purchasing a one tenth-ounce gold coin. Because that’s a relatively small investment, fluctuating gold prices aren’t going to make a major difference. Gold’s spot price doesn’t move dramatically, so even a relatively major shift in either direction is negligible.

On the other hand, if you’re planning on converting a substantial portion of your wealth into gold during a recession, you may want to wait for the right opportunity to jump in when the price is low. 

Dollar-cost averaging is a great way to reduce risk. Rather than purchasing a one-kilogram gold bar all at once, you could buy 32 one-ounce bars over a longer period of time. That way, you’re riding the ups and downs and minimizing the risk of buying at an all-time high. Even if you do invest when the spot price is up, you can average your overall spending by buying again when the price comes down.

Inflation vs. Recession

A spilled jar of change

Many of the same reasons why gold is an inflation hedge also apply to buying gold during a recession. If you’re considering investing in gold in recession periods, there’s a strong chance that you may also want to invest during times of inflation. 

  • A recession is a period of general economic downturn that lasts more than a few months. 
  • Inflation is when the cost of goods and services rise, causing purchasing power to decline.

So, while the two terms are different, they both bring some similarities to the table, and inflation can lead to a recession in some circumstances. Simply put, both economic conditions cause people to rethink their approach to finances, and gold is often the shining beacon of hope that offers stability in an otherwise unstable economy. 

Why Gold Is a Safe-Haven Investment

Why do people buy gold during a recession and/or times of inflation? The simple answer is that they trust it more than paper money and intangible investments. Since ancient times, gold has been the quintessential form of currency, and that’s not going to change anytime soon. Gold is beautiful, finite, rare, and highly coveted — all factors that make individuals and institutions want to own it.

Gold is also a crucial material for many industrial applications. The precious metal possesses unique characteristics that make it indispensable in electronics, dentistry, aeronautics, jewelry, and many other fields. Buying gold in recession periods is staking your claim on a resource that will always be in demand.

Besides its practical applications, people buy gold during a recession simply because of its track record. You can trace the price of gold back for many centuries and see that its purchasing power has remained incredibly consistent. One hundred years ago, one ounce of gold bought a tailored suit. Today, one ounce of gold still buys a tailored suit. The same cannot be said about fiat money.

How to Invest in Gold

A variety of gold bullion coins

What’s the best gold product to buy as an investment? Again, there’s no right or wrong answer. Some investors prefer buying gold coins because of their collectibility and beauty. Others buy gold bars because of their low markup. 

If you’re considering purchasing gold during a recession, it’s usually best to avoid gold numismatics unless you’re confident in your knowledge. Numismatics are rare, commemorative, and collectible coins that possess value beyond their intrinsic gold worth. Collecting rare coins can be incredibly profitable. But if you’re looking to buy gold for its stability, bullion bars or coins are the ideal choice.

If you’re researching the pros and cons of buying gold in recession periods, you’re probably thinking about buying physical gold. However, another option for those seeking long-term financial solutions is to open a precious metals IRA. It’s an excellent way to plan for the future, and you’ll be glad to own gold during a recession should one occur during your retirement years.

Choosing the Right Dealer

While gold is a famously safe and reliable investment vehicle, there’s still risk involved if you don’t take essential precautions. First and foremost, you should only buy gold from reputable dealers. Unfortunately, there are many unscrupulous dealers out there. If you’re not careful, you could fall victim.

Fortunately, there are ways to protect yourself. Before you spend a penny, research the dealer. If anything seems fishy, move along. If something looks too good to be true, it is. Whether you’re buying gold during a recession or adding numismatics to your coin collection, taking the time to vet your sources is an absolute must.

Tier 1 US Mint Bullion Dealer

Endeavor Metals is a Tier 1 US Mint bullion dealer with more than 50 years of in-house experience. We belong to numerous organizations, including the prestigious Silver Institute, the Industry Council for Tangible Assets, the American Numismatic Association, and the Certified Acceptance Corporation (CAC). 

We’ve assisted countless investors with buying gold in recession periods. Our commitment to excellence has earned us a 4.9 Google star rating and an A+ accredited grade on the Better Business Bureau. If you’re thinking about buying gold during a recession, work with a precious metals dealer trusted by the community.

Call for a Free Consultation

Investing in gold can seem like a daunting prospect, but our friendly specialists are happy to guide you every step of the way. Please don’t hesitate to contact us so we can answer your questions and assist you in selecting the right investment that aligns with your unique financial goals.

There are no guarantees in the financial world, but gold is as close as it gets. If you’re looking to diversify and stabilize your financial portfolio, gold is the way to go. Are you looking to invest in gold during a recession? We’re here to help. Protect your assets, preserve your wealth, and secure your financial future by investing in gold with Endeavor Metals.

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