When severe economic conditions have had a profound effect on stocks and other assets, gold has stood firm, prompting many portfolio holders to add the precious metal to their portfolio as a form of wealth insurance — a “rainy-day” asset ready to add an important layer of protection to their portfolios.
For example, on September 15, 2008, Lehman Brothers, the fourth-largest investment bank in the U.S., declared bankruptcy, partially because of its exposure to risky mortgage-related investments. The same day, the Dow Jones Industrial Average shed more than 500 points, its largest single-day drop since the September 11, 2001, terrorist attacks, according to a Financial Crisis Inquiry Commission report.
As the fallout from the housing market’s decline continued to unfold, two weeks later, on September 29, 2008, the U.S. House of Representatives voted against the Troubled Asset Relief Program proposal to provide support to financial markets and firms — and financial stocks fell 16%.
Between August 28, 2008, and March 9, 2009 — a period of just over six months — the S&P 500 Index declined 48%, hitting a low it hadn’t seen since September 1996, according to the Federal Reserve Bank of Atlanta.
By March 5, 2009, the Dow had fallen 51.1% below its 2007 peak, reaching its lowest point in 12 years.
Gold, meanwhile, maintained its record of performing well — even in hard times. After dipping to a low of $714.65/oz. on October 23, 2008, gold prices climbed to the then-all-time high of $1,825/oz. in August 2011. In the years since, gold has continued to soar, reaching over $2,500/oz. in August 2024.
In fact, during six of the past eight recessions that have occurred in the United States, gold outperformed the S&P 500 index by 37%, according to a CME Group analysis.
“This has been repeated over and over again over the last half century,” says U.S. Money Reserve President Philip N. Diehl, who served as the 35th Director of the U.S. Mint. “When stocks, bonds, and other assets are falling, gold tends to hold its own or rally.”
A Safe-Haven Asset
Gold’s track record during times of economic uncertainty is one reason many portfolio holders consider it a way to proactively prepare for any metaphorical “rainy days” for financial markets.
In addition to economic uncertainty, political turmoil can also prompt portfolio holders to gravitate toward gold assets.
In October 2023, Hamas militants attacked Israeli towns, killing hundreds of civilians. Israel then launched retaliatory airstrikes that killed thousands of Palestinians.
As Diehl commented in a blog post on U.S. Money Reserve’s website, gold prices began to rally within hours of Hamas’ initial October 7, 2023, attack on Israel.
On November 16, 2023, the Brookings Institute reported that as uncertainty mounted in the Middle East, gold prices had risen approximately 7%.
Precious metals like gold can act as an anchoring, stabilizing influence in a portfolio, potentially producing returns even if other assets like stocks decline, according to Diehl.
“Gold often performs well during periods of strong economies,” he says. “But it’s a standout asset in hard times, during recessions and periods of political instability. For that reason, gold is often used as wealth insurance to offset losses in other parts of a portfolio.”
Uncertainty was a factor in Robert E.’s decision to reach out to U.S. Money Reserve about incorporating physical precious metal assets into his portfolio, according to one of the U.S. Money Reserve reviews shared on the Better Business Bureau website.
“Having someone watch over what is going on and helping me to diversify my portfolio is priceless,” he says. “The help I received in setting up my precious metals [IRA] was handled well, and [it] makes me sleep comfortably knowing I was able to lock in my life savings.”
Rich D. says that when he decided to obtain gold, he researched multiple precious metals providers before choosing to work with U.S. Money Reserve.
“As our country and the world [seem] to be in such turmoil, I knew I had to make a different choice with my savings,” Rich says in another of the U.S. Money Reserve reviews on the Better Business Bureau site. “Gold, I found, is the way to protect it.”
Some portfolio holders, like Cynthia S., have specifically mentioned how the state of the economy contributed to their decision to pursue precious metals ownership.
“Dealing with your hard-earned money can be stressful in this economy,” Cynthia says in another Better Business Bureau U.S. Money Reserve review. “But [my Account Executive] made it easy. I know I made the right decision.”
The specific asset allocation you select for your portfolio can depend on several factors, such as how risk-averse you are and when you hope to retire.
While including physical precious metals can help you establish a balanced mix of assets, Diehl says people aren’t always aware of precious metals as an option.
“Gold has a 2,500-year-old track record; it’s one of the few assets that has not only held value but has also been a medium of exchange facilitating commerce,” he says. “Gold is security in the face of economic and political storms — and it has been for generations. I’ve been surprised by how many well-informed investors have no idea how easy it is to roll over part of an IRA into a self-directed precious metals IRA.”
If you would like to find out more about adding physical gold, silver, or other precious metals to your portfolio, U.S. Money Reserve can help.
U.S.-based Account Executives are available to answer your questions — and provide information about the coins and other items currently available in U.S. Money Reserve’s extensive precious metals inventory — at 833-845-1748.
