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Buying Gold and Silver During a Recession

Today that chatter about a possible recession has increased.  Some analysts mention the pattern of inverted yield curves across the developed world.  Others mention weakness in railcar activity, bank lending, or slower trade growth.  Whether a recession materializes is anyone's guess.  The question here is a simpler one than that.  The question is: If the world enters a recession, which precious metal will likely perform better over the recession period - gold or silver?

A look at the performance over the past two recession periods follows.

Gold and Silver Performance from 2000 to Today

First, a look at the performance of gold and silver from 2000 to today.  The left axis is the price of gold in US dollars.  The right axis is the price of silver in US dollars.  If there is one phrase to describe what gold has done in the 21st century, perhaps the word would be - amazing.

The price of gold has gone from a measly $282 per troy ounce on January 4, 2000 to a high of $1,895 on September 5, 2011.  The price of gold has come down somewhat since that September 5th peak to $1,537 as of writing, but the overall rise has to be viewed with some sense of amazement.  The price gain represent an appreciation of approaching 600%.  Simply amazing.

Shifting the silver, the story is less impressive, although still positive.  On January 4, 2000, silver was at $5.30.  As of writing, the price of silver is up to $18.37.  That represents a gain of about 246%.  Healthy, but not as good as the gain in gold’s price.



The background is now established.  Let us now look at what the price of gold and the price of silver did during the past two recessions.  

First up is the 2001 global recession.  Depicted below is the change in the price of gold and the change in the price of silver across the recession.  The recession is indicated by the gray bar.

The price of silver started the recession in March 2001 at $4.51.  It ended the recession at the close of October 2001 at $4.28.  That is a decline of about 5%.  Not too bad for a recession that wiped out trillions in paper equity wealth.

The price of gold started the recession in March 2001 at $266.35.  It ended the recession at the close of October 2001 at $278.75, representing a gain of almost 5%.  Definitely a much better return than what most stock holders experienced over the period.

Let us now shift to the 2008 recession.


The 2008 experience is depicted below.  On January 2, 2008, gold was trading at $846.75.  At the end of 2008, the price of gold had increased to $869.75.  That is a price gain of about 3%.  Decent, and definitely not ugly like the way some things got many stockholders.
The silver picture was much less positive.  From January 2, 2008 to the end of 2008, the price of silver went from $14.93 to $10.79, a decline of 28%.  Not real pretty.


In looking at the performance of the price of gold and the price of silver over the past two recessions, it is clear that if a recession materializes in 2020, gold is the asset to hold of the two choices.  The 2001 recession saw gold return 5%, while silver lost 5%.  The 2008 recession saw gold return 3%, while silver dropped 28% off of its value.