To say that this year has been one of ups and downs, twists and turns, elation and disappointment is perhaps an understatement. And perhaps nowhere has that been more keenly felt than in markets. Investors of all stripes have struggled to make heads or tails of what’s going on in markets, and even safe havens haven’t seemed all that safe this year.
A Year to Forget?
Gold investors have gone through a range of emotions this year, as gold shot over $2,000 early in the year before dropping back to $1,600 late in the year. And now the yellow metal is trading roughly $10 per ounce below its level at the beginning of the year, a mild loss and especially so when compared to other assets.
The Dow Jones Industrial Average is down nearly 9% year to date, the S&P 500 is down over 19%, and the NASDAQ is down over 30%. Bond funds haven’t done well either, as rising interest rates have hammered them too. In comparison to these losses, gold’s minor loss doesn’t look that bad.
Nonetheless, this isn’t the year that gold investors expected. Heck, it’s not the year anyone expected.
Most people probably expected markets to keep on climbing. After hitting all-time highs at the beginning of the year, who would have though that markets would eventually end up in bear market territory? Yet that’s just where the Dow found itself at one point, although it eventually recouped some of those losses.
Gold investors likely thought gold would continue to climb after its strong performance at the beginning of the year. And with the economy looking increasingly like it was facing recession, it seemed like 2022 should have been gold’s time to shine.
But even though the economy contracted in the first part of the year, economic growth rebounded, even if mildly. And the recession that many feared never materialized, although many now expect it to occur in 2023.
Of course, dating a recession is always retroactive, and given how the jobs reports may actually be rosier than they should be, it’s possible that the economy was in worse shape than we were initially led to believe. There’s a good chance, then, that 2023 could really be gold’s time to shine.
But lest you think that 2022 was a wasted year, there’s a silver lining.
Gold in the Coming Year
For one thing, gold falling to near $1,600 was a gift to anyone wanting to boost their gold holdings. If recession takes hold in 2023 and gold takes off, it could be a long time before gold falls back to $1,600 again, if at all.
Do you remember how gold fell to around $700 in 2008, as stock markets began to tank late in the year? That was a buying opportunity that hasn’t come back since, as gold hasn’t been anywhere close to that low since then.
These retrenchments in the gold price are a prime buying opportunity, as we’ve mentioned before. Anytime the conditions seem to be right for gold to rise in price, such as during a stock market plunge or when recession seems imminent, but the gold price is stagnant or falling, you have to ask yourself why.
In 2008 we saw gold lose over 30% at one point during the year as panicked investors looked to drum up cash, fearful of a potential collapse in the financial system. Certainly you could be forgiven for thinking that everything was going to come crashing down. But gold went on to surge after that, and set all-time highs just a few years later.
We’ve seen similar movements in gold prices in recent years, particularly with regard to hedge funds closing out positions in gold. Even though investor demand for gold coins, such as buying gold coins for a gold IRA, has increased significantly recently, that’s still only one facet of overall investor demand for gold. Increased demand from individual investors won’t necessarily overcome the actions of large institutional investors making billion-dollar transactions in gold markets.
Protecting Against Uncertainty With Gold
If you look at the parallels between 2008 and today, it seems more and more that we’re entering a situation similar to the one back then, although perhaps a little slower in developing. There are definitely some major differences, such as high inflation, excessively loose monetary policy, etc., but by and large the way that markets are acting seems to be similar.
The 2007-2009 collapse started off slowly before accelerating into late 2008. Similarly, we’ve seen some losses this year but nothing yet like the worst of 2008. If the same pattern holds, we might expect 2023 to be the year in which markets really start to tank. Gold could start down with it, but eventually decouple like it did in 2008. And in the aftermath of the recession gold could really shine.
Of course, all of this is just conjecture at this point. There are so many unknowns right now, especially with an activist Federal Reserve, that trying to predict what’s going to happen 9 months from now seems about as difficult as predicting what will happen 9 years from now.
One thing is certain, though. Many American investors are already starting to protect themselves against future calamity by buying gold and silver. These precious metals have served as safe havens for centuries, and their performance in the aftermath of the 2008 crisis is still fresh in many people’s minds.
Whether it’s through a gold IRA or purchases of gold and silver coins to store at home, the popularity of gold and silver as hedges against inflation and turmoil is just as strong as ever. If you want to learn more about how gold and silver can help safeguard your savings, contact the experts at Goldco today.