The price of gold dropped to its lowest since 2021 even as inflation persistently remains near 40-year highs and recession fears grow, according to Frank Holmes at US Global Investors.
At the time of publication, the yellow precious metal is trading 19% off its peak recorded in March 2022. Some investors may see this and jump to the conclusion that gold is no longer a valuable asset during times of financial and economic uncertainty. But, they would be greatly mistaken.
Although the price of gold is down for the year, it is nonetheless outperforming a majority of the major asset classes including the US corporate bonds, Treasury bonds, tech stocks, and the S&P 500. The yellow metal has thus helped investors mitigate losses in other segments of their portfolio.
The latest report by the World Gold Council (WGC) also makes a strong case that gold might be a powerful investment in the wake of a possible economic recession.
The London-based group compared the performance of several asset classes during the past seven US recessions dating back to 1971. In its analysis, it discovered that gold performed the best on average apart from government and corporate bonds.
With that said, experts and analysts recommend a 10% weighting in gold, with 5% in bullion while the other 5% in top-quality gold mining stocks and funds. Nonetheless, you always need to rebalance on a regular basis.
