In times like these, it isn’t easy to build your portfolio, not to mention maintain the value of wealth you’ve already created. Inflation is running rampant, bond yields can’t keep up despite rising interest rates, and aggressive rate hikes appear to be steering the economy toward a recession in many of the world’s major economies.
It’s a struggle to find investments that can perform in times of uncertainty and looming recession. But when mainstream assets can’t deliver the kind of returns you need to build and maintain your wealth against rising inflation, you may need to look into alternative assets like bullion.
Physical gold and silver are assets that can help your portfolio make it through challenging economic circumstances, and they’re easy to incorporate into your portfolio. Investors who want direct ownership of gold and silver can buy bullion online or in person with a local bullion dealership.
Here’s how bullion can help you build and preserve your savings in the coming years.
#1 Hedge Against Inflation
Gold has historically been used as a way to protect savings from inflation. Gold is a scarce, finite resource that has a long history of use as a means of exchange. Its historical relationship to money means many investors see it as a safe alternative when currency is rapidly losing its purchasing power.
When investors are looking for a defensive asset, many turn to bonds first. The market can be a good alternative to stocks when a recession is looming, but today’s inflation rates are contributing to one of the worst bond markets in years.
#2 Low Correlation to Stock Markets
The outlook for the stock market is not a great one. A recession is expected from late 2022 through early 2023, and investor sentiment on the stock market is skeptical. Company earnings remain strong at the moment, but everyone can see a recession on the horizon.
Since the stock market has historically been one of the main engines of wealth generation, investors looking to build (or at least maintain their savings) are looking for other assets.
Gold has a low correlation to stock markets, meaning a stock market crash rarely affects the price of gold. It’s a safe place to keep money when you’re waiting for the crash and one that will hold up against inflation better than bonds or simply keeping it in liquid currency.
#3 High Demand During Recessions
As company earnings plunge and stock prices take a nosedive, demand for gold often rises as a way to escape the volatility of the stock market.
In the wake of the 2008 financial crisis, anemic economic growth and struggling stock markets contributed to historically high gold prices that peaked in 2011.
It’s one of the few assets that tend to benefit from recessions or maintain value during them. It often pays to have a position in gold before the recession strikes. The lead-up to worsening economic news can often put upward pressure on gold demand, so to make the most of the opportunity, it helps to buy early.