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3 times a gold investment really shines

Gold is a smart investment in any economy, but it's especially valuable when times are tough.  Getty Images

If you're seeking a safe and reliable way to invest your money, gold is worth looking into. One of the oldest forms of currency, gold has held its value across thousands of years, performing solidly when other investments fail and protecting investors from potentially catastrophic losses.

Gold's steady value, reliable returns and high liquidity make it a valuable part of an investment portfolio in any economy. But when times are tough, it can prove especially profitable. Below, we explore three times this is especially true.

Thinking of adding gold to your portfolio? Explore your options by requesting a free information kit today.

3 times a gold investment really shines

Here are three times when a gold investment can be particularly lucrative.

When stocks are falling

Stock prices can fall suddenly for many reasons, from economic conditions to bad press for a particular company. When your stock values plummet, it's essential to have a well-diversified portfolio with lower-risk assets to offset your losses.

Gold has historically held its value despite market fluctuations and turmoil. In fact, it often tends to be worth more when stocks are faltering.

GoldSilver reports that gold prices went up during six of the eight biggest stock market crashes in the last 40 years. During the 2007 to 2009 recession, for instance, the S&P 500 dropped by 56.8%, while gold prices rose by 25.5%.

To get the most out of its stabilizing properties, experts recommend keeping 5% to 10% of your portfolio in gold.

During times of inflation

Rising interest rates and inflation shrink the dollar's purchasing power. Gold can protect your money during inflation because it tends to be worth more when the dollar is weak.

Consider the 1970s, when interest rates soared into the double digits. In January 1970, the federal funds rate averaged 8.98%, according to the Federal Reserve Bank of St. Louis. By January 1980, it had reached 13.82%. Over that same period, gold prices skyrocketed from $35 per share to $850 per share, according to NASDAQ data.

Compare this to other investments, such as stocks, which often suffer in inflationary periods. Between October 2007 and March 2009, for example, the S&P 500 index dropped around 57%, according to GoldSilver. By contrast, gold rose by 25.5%.

Request a free investors kit here to learn more about how you can invest in gold.

In a recession

The price of gold tends to rise in a recession as investors seek safe places to store their money. We saw this earlier this year when the Fed predicted a recession for later in 2023. After its March minutes were released, gold spot prices went up to $2,042.49 per ounce, approaching the record price set in 2020.

Higher gold values can help combat the decreased purchasing power a recession brings. They can also provide a valuable cash reserve if you lose your job, which becomes more likely in a recession.

Gold is a liquid asset, which means you can exchange it for cash more easily than other investments. And since its value rises in a recession, you may be able to cash it in for a higher price precisely when you need it the most.

The bottom line

There are many ways to invest in gold, from IRAs and ETFs to futures and physical gold. To determine if it's right for you, do your homework and ask yourself these important questions. You can get started by requesting a free investment guide here.

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