While the economy has miraculously avoided a recession since the pandemic, the odds of a downturn only increase with every year. According to analysts with the Nasdaq, the probability of a recession happening in 2025 has increased to 45%. That’s no guarantee that a recession will happen, but down cycles in the economy are inevitable eventually, and despite technical economic growth, many individuals feel as though the economy is already in a recession as their wages stagnate and costs continue to rise.
As an investor, looking ahead to the possibility of a recession can help you prepare your portfolio for what’s to come. Taking steps now to rebalance your investments can put you in a position to survive – and even benefit from – the coming downturn.
There are several assets that can be more resilient to market crashes and recessions. One of the best in a time of crisis is bullion.
What Is Bullion: Gold and Silver
Bullion investments are high-purity precious metals. Gold and silver are the most common bullion metals, but platinum and palladium are occasionally traded as well. You can find these metals in the form of bars or coins. These products can vary in size, from 1/10 oz to 1 kilogram, although the standard is usually a 1 troy ounce coin or bar.
How Can You Invest in Bullion?
Bullion investments are readily available to everyday people and retail investors through local bullion dealers. They sell physical bullion products directly to investors. They also buy bullion products, giving investors much-needed liquidity to trade their assets freely.
When you buy physical bullion, you will need to consider certain measures to protect your bullion. These usually include a home safe and insurance for your bullion.
How Does Gold Perform in a Recession?
What makes gold a good asset in a recession? As a rule of thumb, when investor anxieties grow, so do gold prices.
Gold (and, to some extent, silver) has a historical reputation as a stable asset that provides security. Many institutional investors, including central banks, have more faith in gold than they do in fiat currency, using gold bullion reserves to hedge against currency devaluation.
Historically, gold has performed well during recessions, following a certain trend:
- Early in a recession, gold, like many assets, will show volatility as investors panic.
- As recessions settle in, gold tends to rebound and grow, often outperforming stock markets that will struggle as major companies start to post losses.
- Prices begin to plateau or decline as the economy recovers and stock markets rebound.
Recession-Proof Your Portfolio
Gold and silver have been widely regarded as safe haven assets for a good reason. For thousands of years, they were the backbone of the monetary system. In some of the earliest civilizations, gold and silver items were used as a way to store wealth. Eventually, gold and silver coins became currency, facilitating trade between different civilizations. The gold standard, which tied fiat currency to gold, lasted until the 1970s through the Bretton Woods system.
Bullion has a historical track record of providing investors with much-needed stability. Add it to your portfolio to reduce your risk-exposure in the event of a recession.
