RECESSION? TIME TO GET GOLD
The spread of COVID-19 worldwide and fear of yet another impending Recession has made people worry all across the world about their future return on investment. In this time when every industry is suffering stability is the key factor here. Today investment gurus say to have solid stability it is best to go for GOLD.
In times of recession, GOLD, cannot default, go bankrupt or fail to carry out its end of the deal. Its value is retained in spite of the recession as it is backed up not by paper promises but by inherent value.
Unlike equities, gold does not require a business to keep it afloat. Gold’s value isn’t dependent on revenues and profits. This makes holding Gold imperative during an economic downturn when stocks are hit by losses due to a deteriorating economy.
As central banks cut rates to facilitate the flow of credit into the system and reignite economic activity, your fixed-income instruments will yield lower or reprise at a lower rate of interest. This reduces the opportunity cost of holding gold, further increasing its attractiveness as an asset class in a low-yielding recessionary environment.
Central banks are injecting liquidity with their bond-buying programs to dodge a system-wide collapse and boost economic activity. With too much of this easy money floating around, there is a probability of higher inflation over the next few years, lowering the purchasing power of the currency you hold. In contrast, gold is a reliable store of value as it cannot be printed or created at the discretion of the central banks.
Gold benefits from economic distress and crisis as people shun risk assets and flee to gold’s safety. The asset class thus attracts more flows and this momentum, in turn, ensures further gains.
Gold is thus an ideal asset class to help your portfolio get through a recession. Go ahead and buy the glowing metal, if you haven’t bought it yet.
Given the nationwide lockdown, there are restrictions on the movement of people as well as non-essential goods. This could make it difficult for you to go about sourcing physical gold coins and bars for your investment needs. But you can always choose to increase your much-needed allocation to Gold via the Gold Fund route or by Gold ETF.
