A diversified mix of tangible assets has traditionally been viewed as one way to support financial security during inflation and economic disruption. Precious metals and coins may be sensible investments, but economic swings and financial crises can influence their values in either direction. This article examines ways a financial crisis may affect precious metals and coins.
Gold
Among precious metals, gold has long been considered the most proven and dependable hard asset. Gold is less connected to industrial demand and the business cycle than other metals, making it counter-cyclical: it often performs well when the economy is struggling. Investors have treated gold as an alternative to less certain choices, including stocks. Gold prices rose through nearly all recessions during the preceding fifty years, including 2008, when it was among the few alternative assets that grew.
Silver
Silver, unlike gold, has much greater industrial use, so it can initially fare poorly in challenging economic conditions. When a recession reduces industrial output, demand for silver falls and its price can decline. Still, silver prices commonly move with gold, sometimes after a slight lag, and can rise as currency loses value following central-bank intervention. At the time this article was published, the Federal Reserve had injected more than $3 trillion in liquidity over the preceding months, and silver prices had risen by more than 50%.
Platinum and Palladium
In contrast with gold and silver, platinum and palladium lack a lengthy history as bullion- or coin-based investment vehicles. Their demand is mainly industrial, so their prices generally decline during financial crises and industrial recessions; they may be better suited to strong, confident economies. Even so, every precious metal can function as an inflation hedge when industrial demand weakens.
Precious metals and coins can be useful holdings within a diversified portfolio, although it remains important to follow the economy, business cycle, and central-bank monetary policy when considering positioning. When this article was originally published, Atlanta Gold & Coin Buyers reported buying, selling, trading, and appraising gold, silver, platinum, and old or rare coins. Readers were invited to request an appraisal appointment at that time by using contact us or calling 404-236-9744.
