What Will Happen to Gold If Stock Market Crashes? Investing in Gold
What will happen to gold if the stock market crashes? That question is one of the most frequently asked questions, especially when it comes to investing in gold. Lots of investors cannot resist the persona of gold as an investment instrument. Although the returns are not as big as other assets, gold remains stable when inflation comes over.
However, investing in precious metals like gold and silver could be overwhelming for newbies. Other than that, as new yet younger investors, newbies tend to play with stocks and bonds. As well all know, stocks and bonds market could crash and collapse without any warning in the first place. The market swingers are quite extreme too.
So, what will happen to gold when the stock market collapses?
1. The price of gold rises
According to history, the gold price rises steadily when a stock plunge takes place, or at least this condition is what it’s like in recent times. Whether the crash was quite long or short-lived, gold was never affected by the stock market condition. Oppositely, gold prices climbed dramatically when the biggest crash in the early 2000s occurred. So, what will happen to gold if stock market crashes? Gold will remain stable.
2. No panic over a drop
If you think that the gold price never falls since the ancestors’ era, you are wrong. The economic value of gold has gotten through its ups and downs many times. However, the changes are not as significant as what happens with the stock market.
Meanwhile, as an investor, there is no need to panic over an initial drop in the price of gold. For instance, in 2008, several investors worried about the collapse, considering the financial crisis was huge. However, at the end of the year, the gold price went up about 6 percent. In the next 18 months, the price rose over 25 percent. The history taught us that worrying over the initial drop in gold prices is no need. Buying gold is a smart move, as long as you know how much to buy and when to stop.
3. Gold is the Yin
Why does the gold price remain resilient even though the stock market crashes? Gold and stock market represent yin and yang, with gold as the yin. These two instruments are negatively correlated, so one will go up when the other is falling.
The yin and yang relation between gold and the stock market is the reason why many investors diversify their assets with gold. Gold is a good investment when inflation and financial crisis ruin the entire economic structure of a country. How could it be? Gold is valuable all over the world. Every country uses gold for various purposes, which makes this commodity always surge in demand.
What will happen to gold if stock market crashes now?
If you want an investment that will remain resilient when other assets fall, gold is the answer. It doesn’t mean that you have to switch all your investment to gold, but letting 3 percent of your investment in gold is a good idea. And this is anything you need to know about what will happen to gold if stock market crashes.