How Gold Sparkles in Economic Downturns

Gold Has Historically Performed Well During Recessions

Yes, throughout history, economic downturns or recessions have frequently benefited gold’s performance. Investors frequently look to the relative safety of gold when they grow worried about the reliability of financial markets or the value of conventional currencies. The price of gold may rise because of this increased demand. According to research, gold did well during three US recessions since 1973: 1973–1975, 1979–1980, and 2020.

Gold Gains in Value During Economic Crises

In May, gold prices peaked at almost record levels ($2,778.38 CAD). The anticipated trajectory of interest rates has been one of the key drivers of gold in 2023. Furthermore, it’s fueled by the simultaneous rise in demand for gold caused by worries about the US debt ceiling and signals from the Fed that the tightening cycle may be coming to an end.

A historically negative association exists between gold and the US currency. The price of gold has increased by more than 10%, while the U.S. Dollar Index (DXY) is down 1.3% year to date. The dollar may come under even more pressure if the Fed starts to relax its monetary stance in the latter portion of the year.

How can Canadians get gold?

For Canadians, there are various options to invest in gold.

       Exchange-traded funds (ETFs) can be purchased and sold like stocks and track the price of gold.

  •         Investors can also purchase gold futures contracts, which are arrangements to purchase or sell gold at a specified price at a future date.
  •         Stocks in firms that mine gold are another investment option for Canadians.
  •         Like gold ETFs, gold mutual funds are professionally managed money pools that invest in a variety of gold-related securities, including gold mining equities and actual gold.
  •         Canadians can invest in physical gold through retirement plans that permit the purchase of actual gold bullion bars and coins. These accounts include RRSPs and TFSAs.
  •         Local dealers can be an option for buying small or large amounts of gold. These companies can also be found online.

 As the economy continues to recover from the epidemic and, more crucially, braces for a potential recession, higher global interest rates are predicted in 2023. When a recession is imminent, the Treasury will raise interest rates as a protective measure, which usually drives up the price of gold. The ongoing turbulence of economic and geopolitical events continues to affect and shape commodity markets. Therefore, do research before investing.

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