Been looking at historical data and gold seems to rally during most recessions but not always.
Saw some periods where it actually dropped or stayed flat even when markets were crashing. What patterns have you noticed trading gold during economic downturns?
Interest rates matter more than the recession itself. When rates spike gold usually gets hammered regardless of economic problems.
Gold held steady in some downturns but not all.
The relationship gets more complex when you factor in dollar strength and inflation timing.
Gold can get crushed early in a recession if the dollar rallies hard, even when everything else is falling apart. I’ve seen this happen when foreign investors pile into dollars as a safe haven.
Inflation expectations also shift during different phases of economic decline, which changes how gold performs compared to other assets.
Gold does not consistently rise during recessions. Its performance depends on various factors driving the economic decline.
For instance, during the 2008 crisis, gold briefly dropped as investors sought cash. It only increased later when central banks resorted to monetary easing. In contrast, during the early 1980s recession, gold fell sharply even with economic issues due to high interest rates.
Key influences include inflation expectations and real interest rates. Gold tends to perform well when there are fears of currency debasement or when negative real yields make cash holdings unattractive.
Recession by itself does not guarantee higher gold prices.