How Do Precious Metals Perform in a Recession?

How Do Precious Metals Perform in a Recession?

There are many reasons to invest in precious metals these days. The entire economy and the marketplace are constantly changing and shifting, with some spikes higher than others. That said, precious metals such as silver, gold and platinum have taken quite a hit recently.

Let's examine why precious metals should be at the top of your investment list. But before that, let's look at the background and applications of precious metals.

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About Precious Metals and Their Uses

How Do Precious Metals Perform in a Recession?

To fully understand why investors should invest in precious metals, we need to look deeper into the history of these metals. Precious metals have been in use for centuries, with some of the earliest known examples found in ancient Egypt.

They have been used for many purposes including jewelry, currency and as a medium of exchange. Precious metals have been used throughout history because of their durability, aesthetic appeal and scarcity.

Precious metals include gold, silver, platinum and palladium. Gold has been used as a currency since antiquity and is also popular in jewelry. Silver has also been a form of currency, as well as being used in jewelry and as a medium of exchange. Platinum and palladium are rarer and more expensive than gold and silver and are used primarily in jewelry and high-end electronics.

Ancient civilizations used them for trade and as a store of value. They were also used to make coins and jewelry. During the Middle Ages, precious metals were used to mint coins, which helped facilitate trade throughout Europe.

In modern times, precious metals are still used to create jewelry and coins. Still, they also play an essential role in the electronics industry due to their high corrosion resistance and ability to conduct electricity.

In addition to their economic and practical uses, precious metals have been used for religious and cultural purposes. Ancient Egyptians believed gold was a divine metal, often used in the burial of Pharaohs.

Silver was also seen as a symbol of purity and was used to make objects associated with religious ceremonies. Gold and silver remain popular in jewelry today, often representing status and wealth.

What Is a Recession?

How Do Precious Metals Perform in a Recession?

A recession is a period of economic decline in which a country experiences a drop in its Gross Domestic Product (GDP) for two or more consecutive quarters. This often results in decreased consumer spending, increased unemployment and declining stock market values. A recession is a normal part of the business cycle and can often be expected as the economy slows down.

During a recession, businesses may experience decreased sales, reduced profits and decreased wages, while households may experience decreased income and increased debt. In extreme cases, a recession can lead to a depression characterized by a severe and prolonged economic downturn and stagnation of economic activity.

A variety of economic and political factors can cause recessions. These can include changes in government policies, changes in consumer confidence, increases in taxation and decreases in government spending. Other causes of recession include natural disasters, financial crises and stock market crashes.

The effects of a recession can be felt across various industries, including manufacturing, retail and services. During a recession, businesses may be forced to lay off employees, reduce hours and decrease wages, while consumers may be unable to purchase goods and services. This can lead to a decrease in GDP, which is a crucial indicator of the overall health of an economy.

Recessions can last anywhere from a few months to several years and their effects can linger even after the recession. The best way to prepare for a recession is to save money and practice fiscal responsibility. Businesses should also plan for a potential recession by diversifying their revenue streams and developing strategies to weather the economic downturn.

Precious Metals and Recession

How Do Precious Metals Perform in a Recession?

During a recession, the value of precious metals may decrease because precious metals are often used as a hedge against future inflation. In an economic downturn, consumers usually save their money instead of spending it, leading to decreased demand for goods and services. This can cause deflation and further reduce the overall value of precious metals.

However, some instances in which investing in precious metals can increase during a recession. During a recession, the U.S. government may increase taxes and decrease government spending to reduce the country's debt.

Those wealthy with a large percentage of their assets in cash may choose to invest those assets in precious metals rather than risk losing them in the decrease of inflation. This can lead to an increase in the value of precious metals, even during times of recession.

History of Precious Metals Performance in Times of Recession

Historically, precious metals have been viewed as safe-haven assets and have often maintained their value during a recession and market volatility. During a recession, investors generally seek out safe investments to maintain their value, while other markets may be experiencing a downturn.

As such, precious metals such as gold and silver, have been popular for investors looking to stay safe during volatile economic times.

In the past, when there have been times of economic recession, the prices of precious metals have generally risen or remained stable. This is because investors consider them a hedge against inflation and economic downturns.

Recession periods can be found in many different nations and economies, going back to the Great Depression of the 1930s in the United States. Other notable global recession periods include the dot-com bust of the early 2000s, the global financial crisis of 2008 and more recently, the 2020 COVID-19 recession.

During the Great Depression, gold prices rose rapidly, peaking in January 1933 at $20.67 per troy ounce. Silver also experienced a surge in price, reaching a peak of $1.29 per troy ounce in December 1929. During this economic downturn, gold and silver emerged as safe-haven assets, protecting investors against the volatility of other investments.

The dot-com bust saw a greater focus on technology companies and a corresponding decrease in precious metals prices. Gold prices fell from $291 per troy ounce in January 2001 to $254 in October 2001. Silver followed a similar pattern, dropping prices from $4.92 per troy ounce in January 2001 to $4.13 in October 2001.

The global financial crisis of 2008 saw a significant increase in demand for gold and silver. Gold prices rose from $829 per troy ounce in January 2008 to $1,056 in December 2008. Silver also experienced a surge in price, increasing from $13.51 per troy ounce in January 2008 to $18.36 per troy ounce in December 2008.

The price of gold and silver rose again as investors looked to safe-haven assets during the market volatility triggered by the global financial crisis.

During the 2020 COVID-19 recession, a period of an economic downturn that occurred in 2020 and lasted until late 2022, silver prices increased from $13.28 per troy ounce in January 2019 to $26.00 per troy ounce in August 2020, while gold prices rose from $1,278 per troy ounce in January 2019 to $2,094 per troy ounce in August 2020. Investors again looked to precious metals as safe-haven assets during the economic downturn.

What Factors Affect the Performance of Precious Metals During Recession?

How Do Precious Metals Perform in a Recession?

Many variables affect the value of precious metals when the economy is in a downturn:

Interest Rates

Central banks tend to lower interest rates during a recession to stimulate the economy. This leads to a decrease in the cost of borrowing, encouraging investors to invest in riskier assets like precious metals. Lower interest rates also make holding cash and other investments less attractive, making precious metals more attractive.


In the past, investors have viewed precious metals as a hedge against inflation, a general increase in the prices of goods and services that occurs when economic growth outpaces economic production. As the economy slows and becomes more volatile due to rising unemployment rates, there is less demand for goods, leading to decreased prices. This increases inflation.

Stock Market Performance

Stock market performance can affect how investors view investment opportunities. Investors tend to invest in riskier assets like precious metals when the stock market performs well and has a bullish outlook. However, investors tend to focus more on safer investment opportunities with higher returns when the stock market is down and performing poorly.


Demand for precious metals can also affect the value of certain metals. In some cases, an increase in demand may lead to a decrease in price by causing an imbalance between supply and demand. However, the demand for precious metals as a safe-haven investment increases in an economic downturn. This can cause an increase in the price of precious metals.

Currency Devaluation

The value of a currency may also affect the price of precious metals. This is especially true when a country's national currency has experienced significant devaluation due to economic recession. In such times, investors generally want to invest in safe assets that can maintain their value.

Precious metals have historically maintained their value during times of economic downturn. They can be an attractive investment opportunity for those looking to make long-term investments that remain stable during volatile market conditions.

How Do You Invest in Precious Metals During Recession?

How Do Precious Metals Perform in a Recession?

There are many ways to invest in precious metals during recession periods. These include long-term investments such as buying and holding and short-term trades such as stocks focusing on the precious metals market.

Physical Bullion

Investing in physical bullion such as gold and silver, is one of the most common ways to invest in precious metals during a recession. This involves purchasing coins, bars and other forms of physical bullion from a trusted dealer.

Generally, physical bullion can be purchased relatively cheaply and stored in a safe or safety deposit box for safekeeping. Additionally, the value of physical bullion tends to increase during economic uncertainty, making it an attractive asset during a recession.

Before investing in physical bullion, it is essential to understand the different options available. Coins are often the most popular form of physical bullion, as they are small enough to be easily stored and transported yet large enough to have a significant value.

Popular coins include gold and silver Maple Leafs, American Eagles and Krugerrands. Bars are the second-most popular form of physical bullion and they are generally larger and more expensive than coins. Bars can range in weight from a few ounces to several hundred ounces.

Precious Metals ETFs

Exchange-traded funds (ETFs) are another way to invest in precious metals during an economic downturn. ETFs allow investors to purchase shares that reflect the value of an underlying asset, which may be stocks, bonds or other types of assets.

Several types of ETFs focus on investing in gold and silver. These include GLD-Gold Shares, SLV-Silver Shares and PHYS-Physical Silver Shares.

The main advantage of an ETF is that it is a relatively easy and cost-effective way to invest in precious metals. However, it is essential to note that ETFs are subject to the same risks as other investments, including the possibility of loss.

Precious Metals Stocks

Investing in stocks can also be an effective way to invest in precious metals and other assets during recession periods. Stocks are an investment that can be purchased relatively cheaply and traded on the same commodities exchanges where other precious metals are traded.

Investing in stock generally involves purchasing a share of the company, which entitles the investor to a certain percentage of the company's profits.

Stocks can be purchased in a range of different ways. There are shares for individuals and shares for institutions, as well as a range of different types, including common stocks and preferred stocks.

If you are considering investing in stocks, it is essential to understand the risks associated with this form of investment. Much like other investments, there is always a chance that the value of a stock will decrease.

However, there is also a chance that the value of a stock will increase and that the amount one has invested could increase as well. To minimize risks, investing small amounts of money in many different types of investments is always advised so that if one does go down, the chances of losing everything decrease dramatically.

Precious Metals Futures

While investing in futures may be a more complex method of investing in precious metals, it can be an effective way to make money during a recession. Futures allow you to invest an agreed-upon amount of an underlying asset such as gold or silver, at a future date. This type of investment is much like the options market and involves buying or selling various futures contracts.

Investing in futures allows you to participate in price movements during economic downturns. While investing in futures may be a good strategy to protect your assets, it is vital to understand the risks associated with this investment method.

Investing in derivatives such as futures can be extremely risky and should only be undertaken after significant research and understanding of how this type of investment works.

Precious Metals Mutual Funds

Mutual fund investments can be effective if you look for a more passive way to invest in precious metals during a recession. Mutual funds are generally professionally managed investment funds that allow investors to buy shares in the companies that manage them.

In addition to allowing you to purchase shares of a portfolio of different companies, mutual funds typically come with low annual fees and an ongoing expense ratio.

However, many different types of mutual funds are available and determining which type is most appropriate can be confusing. Investors should always understand the risks involved with each type of fund before investing.

Precious Metals Certificates of Deposit

Investing in precious metals via certificates of deposit (CDs) is another way to invest in precious metals during a recession. CDs can effectively generate a passive income stream while protecting your original investment against inflation or deflation.

Banks and financial institutions offer CDs and usually require you to lock up your money for a certain period. While CDs may offer high interest rates, they come with associated risks.

Precious Metals IRAs

Investing in an individual retirement account (IRA) allows you to contribute money that can be used to purchase a wide range of different investments for retirement. Precious metal IRAs are an ideal investment because they can be purchased with after-tax dollars and will allow you to generate passive income throughout the life of the IRA.

Precious metals IRAs work by having a custodian open a self-directed account where you can hold gold, silver or platinum bullion. In addition to holding bullion, your precious metals IRA can hold other investments such as physical coins and bars, gold, silver and platinum coins and bars, silver futures contracts and gold futures contracts.

While many different types of precious metal IRAs work similarly, some differences depend on your IRA type. With a traditional IRA, there are no income limitations to avoid early withdrawals, but taxes will be deducted when money is withdrawn during retirement. With a Roth IRA, there are no income limitations but taxes will be paid in full when you wish to withdraw cash at retirement.

Final Thoughts

Investing in precious metals as an investment can be a strategic tool to protect your assets and make money during economic downturns. Because precious metals are tangible assets that can be stored and traded, they can be a relatively safe investment option to protect against economic recessions.

Although there are many different types of precious metals and precious metal investments, the strategies outlined above are just some of the many options available to investors.

Working with a reputable company ensures you take full advantage of your assets' growth potential during a recession. Our recommended precious metal companies are all industry leaders with a proven track record of providing valuable services to their investors.

The current state of the U.S. economy is unknown, but many factors indicate we may see an economic recession in the near future. By learning about precious metals as an investment option and investing wisely throughout your life, you can be prepared to take full advantage of economic downturns and any opportunities they present.

Don't forget to take advantage of our research if you are going to be making an investment of your hard earned money!

Make sure you are investing your money with a trusted company!

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