Should you invest in gold ahead of a recession? (2024)

While there's no certain way to predict the future, there's a chance that the U.S. will enter a recession as we get further into 2023. At least, that's what experts say.

In fact, according to business think tank The Conference Board, there's a 99% chance of a recession within the next 12 months. The Federal Reserve has also predicted a recession later this year, albeit a "mild one."

With this data in mind, it may be a good time to reevaluate your investments and focus on safeguarding your wealth. Gold, for example, has long been known as a safe haven investment. It tends to be a smart hedge against inflation, and many experts recommend buying it ahead of recessions, too.

Should you follow that advice? Below, we will break down what you should know about gold investing ahead of a possible recession. Start exploring your gold options by requesting a free investors kit now.

Why you may want to invest in gold before a recession

Many experts say that just before a recession is the best time to invest in gold. There are several reasons for this. For one, its value tends to hold steady or, often, even increase during these down periods. That's because investors flock to the safety of gold, which drives up its price — and your returns.

"When economic uncertainty looms, gold can provide stability and maintain value as it typically has an inverse relationship with traditional assets like stocks and bonds," says Andrew Latham, a certified financial planner and editor at Super Money. "This means that when the market struggles, gold's value often rises."

Gold is also a good way to diversify your portfolio and spread out your exposure across many asset classes. Think of it like an insurance policy: If your investments in the stock market plummet but gold holds steady or increases in value, it can mitigate your losses or even offset them entirely. Case in point: According to global wealth management firm Schroders, gold outperforms the S&P 500 by 37% during recessionary times.

"If we crunch historical data for the gold and silver moves, we find that gold and silver always rally before the recession kicks in," says Sankar Sharma, an investing educator and founder of Risk Reward Return. "Gold kickstarts the rally, and silver follows."

Finally, gold is largely considered a liquid investment. It's always in demand and is a scarce resource, so it's typically easy to sell when needed. This can be helpful if you lose your job or are hit with sudden, unplanned expenses.

Learn more about your gold investing options with a free information kit.

Why you may not want to invest in gold before a recession

Gold might outperform other investments during recessions, but in the long run, it doesn't usually deliver as many returns as higher-risk assets. So if you're looking to maximize your earnings and really be aggressive with your investment portfolio, gold may not be the right choice.

As Latham explains, "Gold doesn't generate income or dividends, so its returns rely solely on price appreciation."

Another downside is that you'll need to handle storage — at least if you choose to buy physical gold. While storing it at home is one option (as long as you're not buying it in a gold IRA), it could make you vulnerable to theft.

And if you are using a gold IRA to purchase the metals? You can only choose IRA-approved depositories for storage — plus, you must purchase only IRS-approved coins and bars.

Other ways to prepare for a recession

Buying gold is just one way to prepare for a possible oncoming recession. You should also work on building up your emergency savings funds in case you lose income or face some other financial struggle.

Sharma recommends paying off or consolidating any variable-rate debts, too, as these can be hard to budget for — particularly during volatile periods. You might consider using a long-term, fixed-rate loan to consolidate them, which would give you a consistent monthly payment you can always be prepared for.

Finally, if you're not up for buying gold, make other moves to diversify your portfolio.

"Preparing your finances for a possible recession involves building an emergency fund, paying down high-interest debts, and diversifying your investment portfolio," Latham says. "A well-balanced portfolio can help protect your wealth during economic downturns and ensure you're well-positioned for recovery."

If you think gold could help then learn more with a free investment guide.