Gold is an excellent option for investors looking to hedge potential losses in the stock market. Since the price of gold tends to rise during economic uncertainty, it can help protect your wealth. Just consider the larger economic picture, not just one or two economic indicators. The main reason why gold is more resilient during stock market crashes is due to negative correlation.
One goes up when the other goes down. However, there is no guarantee that the value of gold will rise. And stocks and bonds are generally considered better investments for retirement, as they have historically outpaced the rise in the price of gold over the long term. However, gold can be a safe investment when the economic outlook is not good, Cramer says.
Despite President Roosevelt setting the price of gold in the 1930s, the shares of Homestake Mining, the largest gold producer in the United States at the time, rose more than 100%. The only major sale of gold (-46 percent in the early 1980s) occurred just after the biggest bull market for gold in history. If farmers get a low-yield crop after a bad monsoon season, their collective failure to buy gold affects gold investments across the country. In this case, investors will most likely forgo gold as interest rates on loans rise, as they would get a higher guaranteed return compared to gold.
The first is the VanEck Vectors Gold Miners ETF, known as GDX, a security that tracks the overall performance of gold mining companies.