The Role of Gold During the Financial Crisis of 2008 (Part 2)
The 2008 financial crisis is one of the worse economic setbacks since the Great Depression. However, while the prices of multiple products declined after the 2008 crisis, the cost of gold continued to increase.
Gold proved to be a haven during a financial downturn, extremely volatile market situations, depreciating exchange rates, and economic vulnerabilities.
Here is a list of reasons why gold was highly preferred during 2008 financial crisis and will continue to be the first choice of investors.
1. Intrinsic Value of Gold
Gold has an inherent worth which is the primary reason why it is considered a safe haven. Currencies are dependent on a country’s economy. They can depreciate if the economy of the country is unstable. Excessive inflation can wipe away the worth of your reserve funds. Therefore, during such emergencies, gold is a sensible investment option.
2. Crashing Stocks
During a downturn, stocks will fall when businesses make less profit. It took only 18 months for the stock market to collapse during the 2008 financial turmoil. In 2008, the Dow Jones Industrial Average was trading below 11,000 for the first time in over two years.
On the other hand, gold is a safe investment that does not lose its worth and is highly preferred. This sustenance pushes investors to purchase more gold investments to diversify their portfolios.
3. Negative Interest Rates
Gold automatically gets more attractive than depositing your cash in the bank when we have negative interest rates. The extra amount charged, instead of interest that is to be on the deposits that banks hold, is one of the reasons why masses shift towards investing in precious metals.
4. Negative Correlation with Stock Market
History has it that gold prices have always increased during the times of the prominent stock market crashes. Whether the collapse is for long or is short-lived, gold has always performed better in those times and is a secure financing option.
While the rest of the world flounders, gold is usually the only commodity that flourishes. With the widespread effect of the pandemic, the price of gold has been stimulated by various investors. Investors and private banks have been converting cash into gold on a large scale.
At Orion Metal Exchange, we have the best precious metal investment dealers onboard. We ensure to secure your retirement with gold and silver. With over 50 years of experience, we help you acquire, liquidate, and receive financial market updates to invest in gold products. We offer highly competitive pricing and have been voted by Retirement Living as the best service provider.