"No warning can save people determined to grow suddently rich" - Lord Overstone

  • 4 hours Gold: The Religion Of Currency
  • 1 day Economists Polarized On Trump’s Tariff Plan
  • 2 days Why Are Investors Overlooking Gold Stocks?
  • 2 days The App That Democratized Trading Is Now Worth $5B
  • 2 days Super-Cycles: Why Gold Is Set For A Breakout
  • 2 days U.S. Sanctions Russia For Election Meddling And Cyberattacks
  • 2 days Snap Shares Tank Over ‘Slap Rihanna’ Campaign
  • 2 days How Low Can Bitcoin Go?
  • 2 days Amazon’s Japan HQ Raided In Anti-Monopoly Push
  • 3 days Is Barrick Gold Close To Finding A Bottom?
  • 3 days Morgan Stanley’s Top 10 Short-Term Stock Picks
  • 3 days China: The Land Of The Ultra-Rich
  • 3 days Alibaba Soars On Reports Of China Listing
  • 3 days What Killed Toys ‘R’ Us?
  • 3 days SEC And IRS Take An Aggressive Stance On Cryptocurrencies
  • 3 days Bears And Bulls Face Off In Gold Markets
  • 3 days Bitcoin Is Winning Over The Housing Market
  • 4 days Markets Slide Sideways As Trade War Fears Linger
  • 4 days Why Aren’t Millennials Investing?
  • 4 days Bitcoin And Banking: The Next Mobile Payment Revolution
Snap Shares Tank Over ‘Slap Rihanna’ Campaign

Snap Shares Tank Over ‘Slap Rihanna’ Campaign

Snapchat’s share prices tumbled after…

Consumer Confidence Fails To Boost Retail Sales

Consumer Confidence Fails To Boost Retail Sales

Consumer confidence measured by market…

Economists Polarized On Trump’s Tariff Plan

Economists Polarized On Trump’s Tariff Plan

Economists are polarized on Trump’s…

Gold: Best Supporting Role In Economic Downturns? Think Again

Gold's safe-haven status is based on hype, not history

As I sat down to watch the Oscar pre-show on Sunday night, March 7, one word was repeatedly used to describe the celebrity starlets and their designer duds: GOLD. Gold bustiers and gold lame skirts, shiny gun-metal dresses and glittery sequined gowns all basking in the golden shadow of the final golden statue.

Everywhere you look, from the Red Carpet to Wall Street, gold is definitely in "fashion." As for why, one word comes to mind: safe-haven. See, according to the mainstream financial experts, the more unstable the global economy, the greater the appeal for the precious metal.

And, with a staggering 17% unemployment rate in the United States, alongside slumping real estate sales, Eurozone weakness, the Greece debt debacle, and so on -- the only thing going up is gold's supposed disaster premium. Here, take these recent news items for example:

  • "Bullion Sales Hit Record In Stampede To Safety." (Financial Times)
  • "Gold Ticks Higher On Safe Haven Buying. The risk trade is resuming." (AP)
  • "Gold Rose to 6 ½ Week Highs as the metal benefits from fears over financial instability in general. The market is looking for some security with gold." (Reuters)
  • "Gold Rush: This is a new round of safe haven buying." (Bloomberg)

There's just one problem: The correlation between a falling economy AND rising gold prices is based solely on hype, NOT history.

Case in point: In the March 2008 Elliott Wave Theorist (republished in his 40-page Gold and Silver eBook), Elliott Wave International President Bob Prechter presents an indisputable case AGAINST the safe-haven status of gold.

The first piece of evidence: The following table showing gold's performance during the 11 officially recognized recessions beginning in 1945.

Prechter also plotted the Dow Jones Industrial Average into the same period and made this startling discovery: The average total return for the Dow during recessions since 1945 is 6.89%. Taking into account modern transaction costs, the Dow actually beats gold with a 6.87% return.

The most powerful myth-debunking punch of all, though, came via the second chart of gold's performance -- this time during periods of financial growth.

In Prechter's own words:

"All huge gains in gold have come while the economy was expanding... The idea that gold reliably rises during recessions and depressions is wrong. In fact, like most such passionately accepted lore, it's backwards."

Now, this doesn't mean that you shouldn't own gold in a financial crisis. On the contrary: In chapter 22 of his Wall Street Journal business bestseller, Conquer the Crash, Prechter lists 5 reasons why "you should buy gold and silver anyway." Gold is "real money," after all! It's just that, despite widespread beliefs to the contrary, you shouldn't expect "huge gains in gold" when the economy contracts.

Download Robert Prechter's FREE 40-Page Gold and Silver eBook. Is gold a simple buy-and-hold at today's prices? The independent insights in this valuable ebook deliver Prechter's complete analysis and help you decide how to - and how not to - incorporate gold and silver successfully into your own investment strategy. Learn more, and download your Gold and Silver eBook here.


Back to homepage

Leave a comment

Leave a comment

Sign Up For The Safehaven Newsletter