Disclaimer: Bluehillresearch.com is a reader-supported site. We may earn a commission if you click on links and make a purchase. 

Gold can be a beneficial investment during recessions and times of high inflation, but not always. This is because its value depends on many factors like interest rates and other economic data.

It is essential to consider how much real return you expect from savings accounts and government bonds. After that, decide how much of your money you want to allocate toward gold investments.

Gold’s Performance During Recessions

Augusta Precious Metals
9.8/10Our Score

Want to Purchase Gold with Your IRA or 401k?

Here's Why We Recommend Augusta Precious Metals:

  • A+ Rating and Zero Complaints Registered with Better Business Bureau 
  • No High-Pressure Sales Tactics
  • Welcome Webinar from Harvard-Trained Economist
  • Simple 3-Step Process to Get Started

"I diversified my retirement with precious metals from Augusta. You can count on them."

-Joe Montana, Hall of Fame Quarterback

Gold is often seen as a secure investment during recessions and times of high inflation, due to its tendency to perform better than other commodities in times of economic uncertainty.

When asset prices decline, it is wise to diversify your portfolio in order to reduce risk. A 5-20% allocation to precious metals such as gold can provide you with maximum returns without increasing the potential for losing too much money.

A recession typically leads to the price of stocks declining as companies lose money and begin making less profit. This can affect your stock portfolio, but buying gold during a downturn helps preserve its value and minimize losses.

During recessions, the price of gold increases due to increased demand. Investors view gold as a secure haven during tough economic times and are willing to pay more for the metal.

Gold is not only safe, but it also provides some other advantages that make it a good investment during times of economic downturn. These include its resistance to extreme temperatures and corrosion, as well as its malleability.

Gold’s value can increase during a recession due to the decrease in interest rates. When countries experience economic downturn, central banks typically lower their repo rates – meaning you’ll get paid less interest on savings and deposits, making gold an even more appealing investment than saving in banks.

However, it’s essential to remember that gold can decrease in value during a recession due to negative real interest rates. When interest rates fall below inflation, this can have an adverse effect on savings accounts.

That is why having an investment plan for times of recessions and high inflation is so important. Doing this ensures you are ready to weather any potential pitfalls and can protect your portfolio. A sound strategy should include investments in bonds, equities, and precious metals such as gold.

During Periods of High Inflation

an inflation chart

Inflation reduces the purchasing power of money and can cause savings and debt to decrease in value. Controlling inflation is essential for maintaining your standard of living as well as having enough funds to purchase desirable items in the future.

Gold is often seen as a secure investment option during times of high inflation. It offers many advantages to both investors and non-investors alike, such as the capacity to store value over an extended period.

Although there is no assurance that your investments will yield a positive return, gold can serve as an excellent way to protect against inflation and diversify your portfolio.

Generally, it’s wise to invest at least 10% of your money in gold. However, consult a financial advisor for guidance on how much is suitable for this asset class.

As a general rule, the longer you wait before investing in gold, the greater the risk. You may be better off investing your money in other assets that will increase in value faster than gold, such as bonds or stocks.

Gold has historically increased in value when inflation is expected to accelerate. This is likely because central banks and governments tend to purchase precious metals when they anticipate inflation increasing.

Maintaining low prices helps to keep the economy growing. This is especially advantageous to consumers who can enjoy lower costs on goods and services.

Inflation can have a detrimental effect on businesses and raise interest costs for those who borrow money. This has an immense impact on both consumers and businesses alike, so it is essential to comprehend how inflation works.

In times of high inflation, the price of gold tends to rise as interest rates are raised by the Federal Reserve. This can present higher opportunity costs for those investing in this asset class and negatively affect physical gold’s value.

During Periods of Economic Uncertainty

Gold can be a reliable investment during times of uncertainty, serving as a safety net. It tends to remain stable in value over time and prices often increase in response to news of economic hardships.

In times of rising inflation, investors often turn to gold as a safeguard against paper money’s declining value. It is no wonder then that gold has earned itself the nickname “safe haven” asset. However, it should be remembered that the price of gold may also decrease during times of high inflation.

Gold has long been seen as a safe haven during times of uncertainty and remains an attractive investment for many investors. It offers high diversification with low correlations to stocks, bonds and other asset classes.

Gold investing has become a highly sought-after method to build wealth, offering an alternative to traditional retirement investments. You can purchase physical gold or ETFs (exchange traded funds).

Gold is not only a secure haven, but it is also seen as a valuable store of value and great diversifier. This metal is commonly employed in jewellery, alloys and solar panels.

MarketWatch predicts the recent coronavirus outbreak in Iran could push gold prices higher. This has caused concern among investors that global economic conditions could remain fragile, prompting some people to seek refugee in safe havens like gold.

Other reasons why gold may be a wise investment during times of uncertainty include its liquidity, which allows investors to quickly convert their gold for cash if necessary. Furthermore, this provides them with security knowing their asset will be backed by the government – making gold an attractive alternative to bonds during political turmoil.

There are a variety of factors that can affect the price of gold, such as political events, economic trends, technical and fundamental analysis and expert commentary. It’s essential to comprehend these influences and take time to do your own research before investing in gold. As with any financial instrument – including gold – investing carries risks; thus it is wise never to trade more than you can afford to lose.

Gold for Diversification

If you’re seeking to build a well-diversified portfolio, adding gold can help reduce your exposure to risk. Just as with any other asset, there are various factors that influence its price – including market fluctuations, economic conditions and physical gold availability.

It’s essential to remember that gold isn’t a guarantee against inflation. When inflation rates exceed average, gold investors typically lose money; however, when inflation rates remain below average, the metal has outperformed other assets (see Chart 2; Arnott, 2010).

Investors using gold as a hedge against inflation should expect the metal’s price to decline during market declines, particularly during times of low interest rates.

McClary warns that gold’s value may decrease more than other investments if you expect savings accounts or safe bonds to provide real returns above inflation; rather, gold’s worth will be driven up by demand as both an asset store and investment vehicle.

Gold has historically outperformed other investments and assets, boasting an average return of around 10% over five decades – comparable to stocks but higher than bonds or commodities.


Over the long run, gold has proven a reliable diversifier of a broad-based portfolio, improving its risk-adjusted returns and providing liquidity during times of market stress (see 2020 Gold Outlook). Furthermore, it serves as protection against systemic risk and currency depreciation, providing stability during global economic or political crises when governments are unwilling to print their own money.

Factors such as the Fed’s inflation target and monetary policy have all played a role in this trend. Gold’s inherent resilience, dual appeal as both an investment and consumer good, and unique supply characteristics make it a valuable asset that can be counted on to deliver positive returns in both good and bad economic climates.

Gold has long been seen as a safe haven in times of unrest or geopolitical upheaval. Its value tends to increase during these situations, serving as insurance against catastrophic financial market failure, severe economic issues or war.

If you’re interested in adding gold to your retirement portfolio, we recommend connecting with professionals at Augusta Precious Metals – learn more by getting their free gold investing kit below: