Second, right after the financial crisis, gold trading can be quite choppy (see the chart above once again), but focusing on gold's performance in 2020. This is because cash is king during crises, and gold is often a source of much-needed liquidity. Therefore, when the next financial crisis hits, gold prices may initially fall before starting to rise. Investing in gold is a good way to diversify your portfolio.
By doing this, you'll always have an asset to turn to in times of emergency. Because gold offers high liquidity, it helps you meet your financial needs in a short period of time. It is recommended to allocate between 10 and 15% of your portfolio to gold. A rise in gold prices is not unusual during a recession.
Gold prices are actually a good indication of the current state of economic health in the United States. When the economy is healthy, options such as stocks, real estate and bonds are considered more profitable investments because they keep gold prices low. The first thing investors need to understand is that the price of gold is in U.S. dollars.
This means that as the dollar rises, the price of gold falls, all else being equal. The dollar is rising rapidly because it is a safe haven (United States Treasury bonds are a safe haven that must be purchased in US dollars) and because asset liquidations around the world are gaining speed, causing a growing shortage of dollars. In fact, unlike gold, both indices are currently significantly below pre-crisis levels (therefore, they were more affected by the recovery of the world economy than by gold itself, since the fall in gold prices reduced their profit margins). We encourage you to learn more about the gold market, not only about the link between the financial crisis and gold, but also about how to successfully use gold as an investment and how to trade it profitably.
Gold is considered to be one of the safest investment options, as the chances of gold losing all its value are almost non-existent. To begin with, although it is the uncertainty of the country's economic stability that makes gold an attractive investment option, gold prices can still be volatile. The price of gold in euros and Canadian dollars fell less and recovered faster than gold quoted in US dollars. Gold had served as money for thousands of years until 1971, when the gold standard was abandoned for a fiat currency system.
This automatically raises the price of gold, and is evident in the past, since gold prices have skyrocketed during times of economic crisis or recession. If you want to learn more about the performance of gold and how to invest in it, you can find all the information you need at Oxford Gold Group. For example, a rally in gold could be a rally in gold that lasts for a week or a month, while a rally that lasts for a decade would be called a bull market.