Daily Gold Market Report

Does Physical Gold Provide a Hedge Against Recessions?
Horstmeyer Ran The Numbers, Fed Policy Update This Week

(USAGOLD – 9/18/2023) Gold and Silver opened up flat this morning, with Gold at $1,923.87, down 3 cents, and Silver at $23.03, with no change. Gold’s stubborn range bound trading continues to persist due to the ongoing battle between the Federal Reserve’s hawkish monetary policy stance and the looming threat of a potential recession, competing forces that remain the central focus in the broader market. This week, while the Federal Reserve commands the majority of the spotlight, investors will also closely monitor monetary policy announcements from the Bank of England, the Bank of Japan, and the Swiss National Bank. Investors have been closely monitoring gold demand in Japan due to a weakening yen, which has led to a surge in domestic interest in the precious metal. Currently, gold is trading at nearly historic levels against the yen, surpassing ¥284,000, and premiums for physical bullion are also maintaining their all-time highs.

Derek Horstmeyer, a professor of finance at George Mason University, recently compiled the data on all commodity mutual funds and ETFs going back 25 years.  He noted: “Gold is the only commodity (of the eight categories we tested) that had a positive average return during recessions, both in terms of the fund tracking the commodity and the actual commodity itself. For all other types of commodities tested, returns for both types of investment were negative during economic downturns,” he stated in a WSJ article.
USAGOLD Comment: The data displays that over the past 25 years, gold has performed better than all commodities during a recession (with continued performance in the time periods that follow).  Of added note is that physical gold also outperformed the gold ETF during the same episodes, which is likely attributed to premium spikes on physical metals during periods of heightened demand (as is currently being observed in Japan, for example).
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