Precious metal investors like to buy gold or silver to hedge their wealth in times of financial crises. Nothing makes investors panic more than a recession. What is a recession and does it benefit you more to buy silver in a recession or not?
What is a recession?
A recession is a slowdown in economic activity not associated with condition that would lead to an increase in the price of precious metals. In fact, the conditions could be so bad they lead to a depression followed by deflation.
The question is: should you be thinking about diversifying your portfolio in a recession and buying some silver coins or bars?
Stock markets in general are cyclical. They move through periods of growth and periods of recession sometimes we can see the recession coming because a series of events would precede it andsometimes we can’t see it coming, it just hits from nowhere. Right now, the world economy is being pushed into the worst state it has ever been because of the Coronavirus pandemic. The cycle of growth and recession usually takes 10-15Years to move from one extreme to the nextand the last time the world was in an economic crises was in 2008, exactly 12 years ago. One can say we were headed for some kind of economic crises despite the Coronavirus pandemic. What the virus did was to speed thing up and blow things up 10 times over.
Recessions can be mild or they can be severe. The last recession we had in 2008 caused quite a stir. The banks, the very institutions we trust with our money,collapsed and governments had to step in and bail them out. It took years of austerity, especially for Europe to recover and now – this
Buying more silver now because you expect precious metal prices to soar in these bad economic times might be good idea. We already know that the price of gold is affected by economic turmoil and that people invest in gold as a hedge. However, we have seen how the increase in the price of gold has also affected the price of silver. People turn to silver as much as the turn to gold in a recession.
Silver is an industrial metal and industrial production tends to slow down in a recession, so the demand slows down and when that happens you can’t expect the price of silver to rally up.
What happened in previous recessions?
We’ve gone through a couple of recessions in the last 50 years. Let’s look at what happened in the last three recessions.
2008 Recession
The last recession we had in the 2000sbegan in January 2008 and by the time it ended, the price of silver had dropped by 40% only to regain its value and climb up to $50.
In the last three recessions we’ve seen silver declining from and then shoot up to incredible highs. Right now, the silver is priced at $24.10. it is expected to go higher. Some analysts are expecting that it could as high as $130.
Bottom line
If you want to buy silver now is the right time to do so. Things are still a long way from getting better as countries seem to be experiencing a second wave of the Corona virus wave that looks worse than the last. Governments may put more lockdown restrictions to curb the spread and if this happens, the price of precious metals like gold and silver is expected to soar. Now would be a good time to buy silver so you have something to fall back on when a recession actually happens.
