With the U.S. economy seemingly inching ever closer to recession, more and more Americans are looking for ways to protect their wealth. And with the US government’s long-term debt rating having been recently downgraded, even some supposed safe havens no longer seem to be as safe.
But there’s one safe haven that has stood the test of time and which remains in demand around the world. That’s gold, which is bought and sold 24/7 around the globe and is trusted by millions of people to protect their wealth.
Everyone who buys gold hopes to buy low and sell high, which is of course easier said than done. But if you’re wondering which direction gold may be headed, here are three reasons the gold price could end up rising over the next few years.
1. Economy in Recession
One of the biggest reasons the gold price rises is due to its status as a safe haven asset. When the economy begins to show signs of weakness, panicked investors flock to gold to safeguard their wealth.
We saw that during the 2008 financial crisis, as the gold price rocketed upward in early 2008 as fears surrounding Bear Stearns grew on Wall Street. And even though the gold price began to drop through the summer and early fall while stock markets were collapsing, gold decoupled and began to rise again.
During the same period of time that markets lost more than 50% of their value, the gold price increased by 25%. And gold went on to set all-time highs in the aftermath of the financial crisis.
It’s no wonder that many people believe that gold will perform similarly during the next crisis. And that crisis may be coming sooner than many people expect.
2. Rising Gold Demand
Part of the reason for the rise in gold price is due to the fact that demand for gold rises. That increased demand results in higher prices for gold.
Gold demand in the form of physical gold coins and gold bars has risen sharply in recent years, and is the strongest it has been in over a decade. That demand should remain strong if the economy falls into recession.
The flip side to higher gold prices is that demand for gold from other industries falls, such as from the jewelry industry. But even though gold demand from the jewelry industry tends to decline when gold prices are high, the current high demand for physical gold for investment has helped keep gold demand strong.
3. Return to QE
The other potential reason that the gold price might continue to rise is if the Federal Reserve returns to quantitative easing. This is still quite speculative, but most people expect that if the economy worsens, the Fed will reinstitute QE.
The first rounds of QE were launched in late 2008 in response to the financial crisis, and the next few years saw more and more money injected into the financial system through this method. This time period also happened to see the gold price shoot up to all-time highs. Was that just a coincidence?
If you remember back to the immediate post-2008 era, markets remained unsettled for years. In fact, it wasn’t until 2013 that the Dow Jones Industrial Average finally eclipsed its previous all-time high from 2007. That meant that for years people were unsure what to do with their money.
With gold having gone on a tear from 2008 onward, more money piled into the gold market. And because so much money was flowing into the financial system through quantitative easing, it allowed a lot more money to flow into gold.
If the economy falls into recession and the Fed turns to QE once again, it wouldn’t be at all surprising to see the gold price surge in reaction to that. On the one hand, the increase in money being created could help drive the gold price higher.
But on the other hand, a return to QE would mean that the Fed was acknowledging the economy’s weakness and that a recession was occurring that would require the Fed’s intervention. And that realization setting in could help push the gold price upward as well.
Protecting Your Future With Gold
There’s a reason that so many people have trusted gold to protect their wealth. Its reputation as a safe haven asset and store of wealth goes back centuries. Whereas numerous paper currencies have come and gone over the years, empires have risen and fallen, and companies have grown large and gone bankrupt, gold still remains.
Gold’s long-term stability makes it a popular hedge against inflation and financial turmoil. And during times of turmoil the gold price can actually make some pretty significant gains.
We’ve already mentioned how gold gained 25% from 2007 to 2009 when markets lost over 50% of their value. During the stagflation of the 1970s gold made annualized gains of over 30% per year over the course of the decade, at a time when inflation was high and the economy stagnated.
That’s why so many Americans are turning to gold today to try to protect their financial well-being against inflation and whatever other economic calamity may yet befall us. And there are more options than ever to buy gold.
One popular option is a gold IRA, which is an IRA account that holds physical gold coins and gold bars. You can fund a gold IRA with a tax-free rollover or transfer from your existing retirement accounts, allowing you to protect the savings you’ve already accrued with physical gold. With a gold IRA, your gold is managed by an IRA custodian and stored in a secure bullion depository, giving you peace of mind knowing that your gold is there when you need it.
Goldco has worked with established and respected IRA custodians and bullion depositories to ensure that our customers are able to make the most of their gold holdings. With more than $2 billion in precious metals placements and thousands of 5-star reviews, Goldco is dedicated to customer satisfaction. Call Goldco today to learn more about how gold can help you safeguard your financial future.
Trevor Gerszt is the founder and CEO of Goldco, a precious metals dealer in Los Angeles. For more than 20 years, Trevor has sought out ways to help people build long-term wealth through the security and stability of precious metals and other alternative assets. Goldco is A+ Rated by the Better Business Bureau, a 5-Time INC 500 Winner and has countless 5-Star Reviews for its quality customer service, dependability and strong reputation.
© 2024 Newsmax Finance. All rights reserved.