Expert: Precious metals are ‘go-to assets’ during economic downturn

Amid persistent inflationary pressures and the worst year for stocks since 2008, precious metals like silver and gold are positioning themselves as a safe haven for traders in the coming year.

Often considered recession or inflation-proof, gold and silver registered gains, outpacing the three major U.S. stock averages. The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite finished lower last year.

In an interview, David Russell, VP of market intelligence at the TradeStation, said “Gold and silver are go-to assets when traders are bearish on stocks and the economy.”

“The commodities are also classic hedges against the kind of inflation we’ve seen in the last year,” he continued. “Right now, precious metals have a certain appeal because a lot of investors think stocks are overvalued and they view gold and silver as alternate assets.”

“Both metals could also benefit from a recession and the Fed halting interest-rate hikes,” he added.

The Potential Growth of Gold and Silver in 2023?

Investors could see silver jump more than 50% in 2023 to reach $38 an ounce, while gold could top out at a record $2,100 an ounce, according to a Kitco News’ online survey.

Russell said, “Silver often follows gold, so it can go up when times are bad.”

Comex silver for January delivery gained 0.83% to $24.059 per troy ounce. Comex gold rose 1.10%, to $1839.70 per troy ounce. 

“However, it has industrial uses and can be extremely volatile, and a broadly bearish environment could be difficult for silver, as its status as an industrial metal is a mixed bag for investors,” he continued. “Gold will remain the key product to watch because silver is unlikely to rally without help from the big kid on the block.”

“The white metal often outperforms gold during bullish cycles, but the yellow metal would also advance,” he finished.

How did Gold and Silver perform last year?

As inflationary pressures continued pushing the U.S. Federal Reserve into additional rate hikes and stocks tanked on Wall Street, both gold and silver found breathing room in 2022, rising 3.46% and 6.52%, respectively. In comparison, the Dow lost 8.8%, the S&P 500 dropped 19.4% and the tech-heavy Nasdaq composite shed 33.1%. Over the last quarter of the year, silver ballooned roughly 17.61% while gold went up around 9.15%.

Why are Gold and Silver great investments?

Gold and silver are often considered great investments because they have unique properties that make them valuable and useful in various industries. Here are some reasons why:

Limited supply: Gold and silver are rare metals that cannot be produced artificially. Their supply is limited, and it takes a lot of time and effort to extract them from the earth. This limited supply makes them valuable and helps protect their value over time.

Tangible assets: Gold and silver are tangible assets that you can hold in your hand. They are not like stocks or bonds, which are just pieces of paper representing ownership in a company. This tangibility makes gold and silver more attractive to some investors who prefer to hold physical assets.

Store of value: Gold and silver have been used as a store of value for thousands of years. They are not subject to the same inflationary pressures that paper currencies are, and they tend to retain their value over time.

Hedge against economic uncertainty: Gold and silver are often seen as a hedge against economic uncertainty and political instability. During times of crisis or uncertainty, investors may flock to gold and silver as a safe haven investment.

Industrial uses: Gold and silver are used in various industries, including electronics, jewelry, and medicine. This creates a constant demand for these metals, which helps support their value.