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How Gold Behaves in A Recession

I said at the start of this year that 2020 could be a fantastic year for gold. Looks like I was right even if it was for a reason I wasn’t expecting, namely a global pandemic and a massively incompetent response by most governments all over the planet. 

As of now the price for an ounce of gold is at around $1700. It’s been as high as $1,750 per ounce several times over the last week or so. If you don’t follow gold, to give you an idea of how fantastic this is, its all-time historic high was $1,895, and even then it was only there for a day or two.  

As I’ve been talking about for many years, I have been quietly buying as much gold as I could while getting ready for this recession. On top of that, as I’ve been recommending to my readers for a very long time, everyone with any cash savings should have 30-50% of those savings in gold to insure your cash against inflation. As always, I follow my own advice. 

Most of the gold I’ve purchased I got for under $1,100 per ounce. Now that gold is $1,700 I’m a very, very happy boy, exactly as I planned would happen in a recession just like this. 

And I expect gold to go even higher. I shall explain. 

A lot of guys were surprised when gold dropped a few weeks ago along with the stock market and everything else. I wasn’t. This is normal. Gold dropped in the crash of 2008 also. It dropped 31% when everything else dropped. But then, while the stock market was still down 10%, gold skyrocketed to 163% to its all time high.

That’s what happens with gold in a recession, at least usually. It suddenly drops like everything else, but while everything stays low, gold quickly spikes upwards. So far this year, gold is up 17% but the S&P is still down 13%, even with the government’s trillions bailing it out. (Now do you see why I don’t own any stocks?) 

Gold drops initially mostly because of margin traders who have to sell their gold to cover their margin calls. But as more people lose money in stocks and as the government floods the market with more dollars conjured out of thin air, bailing out cruise lines, tourist industries, airlines, shale oil, and sending everyone in the land checks for $1,000, the price of gold quickly starts going up again, and it doesn’t stop going up for quite a while. 

The only reason gold isn’t higher is that the elites, mostly in politics and in banking, utterly hate gold because it’s difficult to track, manipulate, and tax. As Ron Paul once said, “Gold is honest money disliked by dishonest men.” The elites have done their damnedest to suppress the price of gold for a long time. Over the years there have been stories about how big banks will load entire caravans of trucks full of gold and just have them drive around in circles for a few days in order to manipulate the price when needed.

The good news is that now and over the next few months the following things are likely to occur: 

  1. Our ridiculous and incompetent governments will bail out more big companies, rich people, and normal people, in that order, and do so without raising any taxes (and perhaps even cutting taxes), meaning they will print or loan more money, causing an increase in the money supply which will cause a rise in gold prices.
  2. Irrational, panicking, end-of-the-world type guys (many of whom like to post on my blogs) will try to buy as much gold as they can, further putting upward pressure on gold prices.
  3. Likely, very few people are going to sell their gold. Those who need cash and have a lot of gold usually have other assets they’re willing to sell first and faster (like cash and stocks).
  4. Gold mining companies are and will likely take a hit due to the coronavirus, meaning less mining, meaning less gold to be mined out of the ground.
  5. Big nations directly competing against the Collapsing USA, namely Russia, China, and India will likely increase their already insane amount of gold buying and hoarding, likely creating more gold shortages.

It will be increasingly difficult for the elites to keep suppressing the price of gold as they have in the past for all of these reasons.

Gold’s at $1,700 now, but I’ve heard some experts say it can easily go to $5,000. It’s possible. Hell, even if they’re only half right, and it “only” goes to $2,500 an ounce, I’m going to be throwing a very big party. 

I was talking to Pink Firefly the other day; I said that if three things happen by the end of 2020 it could very well be the best financial year of my entire life: 

  1. I make the same amount of money I normally make or more.
  2. The price of gold spikes upwards.
  3. The price of real estate crashes.

It’s only early May, but so far it actually looks like all three of those things are going to happen. The coronavirus could indeed be one of the biggest blessings of my adult life. What a wonderful thing to happen in my final year living in the Collapsing USA. 

As always, just because something is terrible for society doesn’t mean it’s bad for the Alpha Male 2.0. Often, the very things that terrify others are those things we Alpha 2.0s can profit from the most.  

Here’s to hoping that I’ll be happily posting about $2,000, $3,000, or $5,000 gold prices at this blog in December. We’ll see…

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22 Comments

  1. David

    Per your recommendation mentioned above, I made sure years ago to allocate 50% of my savings into gold, so I’m very happy to see the price moving up as well.

    I’m curious about your thoughts concerning silver in relation to gold.

    I know you’ve always mentioned it’s a more speculative asset, so I know your holdings are probably a smaller percentage of your overall portfolio.  However, with the gold/silver ratio being at all time highs, do you think it’s a safer trade to take in this current environment?

    In a similar vein, is bitcoin on your speculative radar as well, seeing as it’s an “anti-fiat” asset?

  2. Pseudonymous User

    If you’re going to buy real estate, by what methods will you determine in what part of the world to do so?

  3. Yoylo

    I bought real estate in Philippines. By what methods? I don’t know. It was a gut feel. Was it a good investment? No idea. Time will tell.

  4. CrabRangoon

    I’m hoping for that real estate crash since I don’t currently own property (dumped my investment property last year).    i missed that boat back in 2008 when there were tons of steals from all the foreclosures.

    My thought also is you’ll see an additional increase of supply from all the Airbnb and VRBO owners who have no bookings now and probably for awhile.  They’ll have to dump the property since they can’t absorb the costs (unless they own it outright which is rare).  I’m betting that starts this summer when they see their calendars mostly empty.  I’ve already seen some article about that where they said they can’t continue much longer.  I could be wrong but I don’t see Americans traveling much this year-that could change the longer these lockdowns continue.

    This is also part of my larger plan to leave my very blue and collapsing state.  Your work here has been very helpful in planning out this more Alpha 2.0 lifestyle so many thanks again!

    Side note, I suspected I had the “thing” going around back in March based on my symptoms so I got the antibody test they just started offering and I tested positive.  I basically had a bad cold (not even the worst cold I’ve ever had).  I’m not super young, in my 40’s, but have a healthy lifestyle and big shock, I was fine.  I know the media thrives on the fear and panic so I don’t see that changing but this shit needs to calm down.

  5. Caleb Jones

    I know you’ve always mentioned it’s a more speculative asset, so I know your holdings are probably a smaller percentage of your overall portfolio. However, with the gold/silver ratio being at all time highs, do you think it’s a safer trade to take in this current environment?

    I think silver a very good investment, better than gold. As to whether or not gold or silver is “safer” in the long-term, I’m really not sure. Perhaps.

    In a similar vein, is bitcoin on your speculative radar as well, seeing as it’s an “anti-fiat” asset?

    Of course and I’ve talked about bitcoin many times. I’ve still kept about 10% of my massive bitcoin profits I made back in 2017 and I ain’t selling it.

    If you’re going to buy real estate, by what methods will you determine in what part of the world to do so?

    A country that is growing but hasn’t “arrived” yet, in the capital city of that country. And keep your emotions out of it.

    I bought real estate in Philippines. By what methods? I don’t know. It was a gut feel. Was it a good investment? No idea.

    Not a sound investment strategy.

    My thought also is you’ll see an additional increase of supply from all the Airbnb and VRBO owners who have no bookings now and probably for awhile. They’ll have to dump the property since they can’t absorb the costs

    It’s funny; I seriously looked into investing in AirBnB properties a few years ago because it seemed like easy money and knew a lot of other guys doing it and doing very well. It looked great, but there was always something indefinable about doing it that made me uncomfortable with it, so I passed. Man, thank god I did.

  6. CrabRangoon

    @Caleb

    “It’s funny; I seriously looked into investing in AirBnB properties a few years ago because it seemed like easy money and knew a lot of other guys doing it and doing very well. It looked great, but there was always something indefinable about doing it that made me uncomfortable with it, so I passed.”

    Same for me-I considered it as well for awhile but I feel anything related to tourism is risky since that’s the first thing to take a hit when the economy is bad.  People cut back on vacations and luxury stuff the most.  Probably best to make investment property a true rental so at least you can lock people in for a year and get a security deposit. Still a risk of non payment but proper vetting of tenants(and requiring certain credit scores and income level) usually mitigates that risk.

    Of course this is some crazy unprecedented shit going on that no one alive has ever experienced.   I remember post 9/11 very well and it was nowhere near this level.  People were scared for a hot minute then started flying again.  I remember being in Vegas not long after and it was back to normal crowds.

  7. harry

    got 2 oz from APMEX when it dipped to $1500, cost me $1750 per oz since I used CC. UPS for that package didn’t even let my frontdesk people to sign for it. I think I’m better off buying AAAU etf (Perth Mint) or PHYS etf. I don’t have a car and so doesn’t make sense to find a private physical vault.

    BTC performs much better than gold so far. There is way too much fake/paper gold.

  8. Pickle Rick

    I’d like to see a blog on the dynamics of real estate in the US and where you think they are headed. I’m not interested in the US much but my uncle wants to buy an investment property. I’ve  been watching and reading–what else can you do–and if you listen to people in the real estate industry they tend to paint a rosy picture. Where as if you follow up on other news it doesn’t look good for sellers. It looks as if a seller’s market is about to turn into a buyers market–especially in the southwestern states.

    And I attribute this to unintended consequences and so many cross currents happening. I can bank on the fact with the utmost of certainty that a significant percentage of homes will be short sold or foreclosed on in Nevada due to spousal abuse and inevitable separation and divorce–which in turn is due to the huge amount of people staying home due to the casino closures.

    And everyday I discover another thing that leads to people losing homes that doesn’t directly affect things. The list goes on.

    Unintended consequences.

  9. Burns Vaughan

    Interesting. I read an article where you were talking about gold looking like it was going to rally. So, I looked at the chart and it was near the all-time highs, to me, it looked like there was a lot of downside risk. But anything can happen.

    I saw an interview with Jim Rogers within the last two years and he was talking about how he’s planning to sell US dollars at the top and buy gold at the bottom (I think that window may have just passed), and that Crude and Sugar were good investments. Not sure if his opinion has changed but oil and sugar prices are way down, as well as silver.

    • Caleb Jones

      I saw an interview with Jim Rogers within the last two years and he was talking about how he’s planning to sell US dollars at the top and buy gold at the bottom (I think that window may have just passed), and that Crude and Sugar were good investments. Not sure if his opinion has changed but oil and sugar prices are way down, as well as silver.

      I think Jim is going to be right on crude and sugar but not for a much longer time window. Where he could be wrong is that one thing no one ever accounts for: unforseen technological changes.

      Who predicted fracking?

  10. Ditto

    How do you trust buying gold or silver online for a total newbie? There’s a fair bit of choice in bars too which is confusing. Are you buying property outright with no mortgage?

    Out of interest if you had 50k cash what would you do? Wait for property crash or buy gold or both? Would have to get a mortgage on property with that amount – think that would be risky with banks possibly crashing?

  11. Michael Spears

    I, too, think silver has a way better upside than gold. Right now, the ratio is like 110:1, which is near historical highs. However, premiums on physical silver are as much as 50%(!!!), which makes the real ratio closer to 90:1 or so. I work at a coin & bullion shop and we sell a ton of metal online. There are plenty of reputable dealers out there.
    Personally, I like the lowest premium metal, usually generic bars & rounds.

    • Caleb Jones

      I’ve been watching and reading–what else can you do–

      Start your Alpha 2.0 business and get your ass to work.

      It looks as if a seller’s market is about to turn into a buyers market–especially in the southwestern states.

      That is correct. And I couldn’t be more excited!

      How do you trust buying gold or silver online for a total newbie?

      Don’t buy it online. I never have. Purchase real gold/silver coins at a local coin dealer in your area that has been in business for a very long time, at least 15 years or longer.

      There’s a fair bit of choice in bars too which is confusing.

      Don’t buy bars if you’re a beginner. Buy nonnumesmatic coins.

      Are you buying property outright with no mortgage?

      I can’t tell you exactly what I’m doing.

      Out of interest if you had 50k cash what would you do?

      Keep it as a 6-12 month emergency fund, turn at least 30% of it into gold coins, keep the rest as cash.

      If you already have an emergency fund and have another $50K on top of that, I would it into my Alpha 2.0 business. Read this.

      Would have to get a mortgage on property with that amount – think that would be risky with banks possibly crashing?

      Getting a mortgage isn’t risky if you have solid income and put a lot down. Banks aren’t going to crash because your insane government is going to keep bailing them out with your money.

      I, too, think silver has a way better upside than gold.

      Silver is fucking awesome right now, oh yes. It’s at $14.82 right now! Insane! Buy it!

  12. Redbaron

    Don’t buy it online. I never have. Purchase real gold/silver coins at a local coin dealer in your area that has been in business for a very long time, at least 15 years or longer.

    Why not buy it online? Is it because the government can track the transactions since you can’t pay cash? Because you can’t see what you’re getting? Both? I’m a noob at buying precious metals by the way. Have a bit of gold and silver. The gold I brought through JM Bullion and the silver I brought at a local coin dealer.

    I think silver a very good investment, better than gold. As to whether or not gold or silver is “safer” in the long-term, I’m really not sure. Perhaps.

    I’ve heard Aaron Clarey say in one of his videos that silver is better to buy than gold because people won’t kill you for it in the event of a financial/banking system collapse. Not sure what the chance of that happening is in the hyperinflation/hyperdeflation scenario you predicted back in that article. I’m guessing we might go to using gold/silver as some sort of makeshift currency if/when the US Dollar collapses?

  13. Investor

    How do you trust buying gold or silver online for a total newbie?

    Don’t buy it online. I never have. Purchase real gold/silver coins at a local coin dealer in your area that has been in business for a very long time, at least 15 years or longer.

    You can buy it from trusted dealers online. You can look at the website of the mint companies like the Perth Mint and they give a list of official trusted dealers. Then buy from those dealers.

  14. Investor

    There’s a fair bit of choice in bars too which is confusing.

    Don’t buy bars if you’re a beginner. Buy nonnumesmatic coins

    Yeah bars dont make sense for home storage they are harder to sell and authenticate. Bars are for offshore storage in some 3rd party vault.

    I, too, think silver has a way better upside than gold.

    Silver is fucking awesome right now, oh yes. It’s at $14.82 right now! Insane! Buy it!

    Yeah but where to buy it? All the shops sell it for 20-30 per ozt, thats insane.

    I wonder why the prices of different precious metals evolve so differently: https://www.jmbullion.com/investing-guide/pricing-payments/historic-gold-silver-platinum-palladium-price-spikes/

    Most of the metals other than gold are price driven mostly by industrial demand and shortage.

  15. IsoE

    Caleb whats your guess what happen to big american corporations and elites after economy collapse?

    • Caleb Jones

      I wonder why the prices of different precious metals evolve so differently

      Differences in manufacturing demand. Mining makes a difference sometimes too.

      Why not buy it online? Is it because the government can track the transactions since you can’t pay cash?

      Yes.

      Some exceptions to this are when you invest in foreign vaulted gold instead of taking possession of actual gold.

      I’ve heard Aaron Clarey say in one of his videos that silver is better to buy than gold because people won’t kill you for it in the event of a financial/banking system collapse.

      As I’ve said many times, I do not expect nor predict a Mad Max style collapse where bands of heavily-armed marauders are literally roaming normal middle-class neighborhoods murdering people left and right for food and gold and so forth. I’m not saying it’s impossible; I’m saying it’s within the 2% Rule so I don’t worry about it. I think those that do are engaging in irrationality and hysteria. (Though I don’t think Arron is in that category.)

      I’m guessing we might go to using gold/silver as some sort of makeshift currency if/when the US Dollar collapses?

      Gold perhaps. Not silver.

      Yeah but where to buy it? All the shops sell it for 20-30 per ozt, thats insane.

      I wouldn’t pay 30$ per ounce but pay a small markup, sure. Who cares?

      Caleb whats your guess what happen to big american corporations and elites after economy collapse?

      Some corporations will collapse, others will restructure. Depends on the industry and the size of the business.

      Most of the elites will be okay since they don’t exist in the same economic reality that you and I do.

  16. joelsuf

    Articles like this make me wish I had a whole lot more money. If I wasn’t stuck paying of student loans I’d be buying the crap out of gold and silver too.

    The way things are going now, I wouldn’t be surprised if an ounce of gold is worth $10k next year.

    At this point I’m just hoping I can pay off all my shit and move out of the US in time before it starts becoming a war zone. Because the unemployment rate is probably gonna be at least 33% next year, the chances of there being a draft is going to be very high (and they’re gonna take all genders over 18, just watch).

    Damn, all my “Anarchist doomsday” predictions I made as a joke 20 years ago when I was in high school are starting to come true, holy crap.

    Ehh, makes no difference to me. Now’s the time for me to build so I can come out of all this looking way better. Fortunately things aren’t too awful in my neck of the woods. Just can’t go to the gym or go on dates for awhile. No college girls too since school’s out until like 2022 lol.

  17. Investor

    I have some gold yes since a couple of years and I bought when it was something like 1200-1300 per ozt. I wonder when is a time to sell gold. Something strange about having gold is that it seems like its for holding forever which of course doesnt make sense. So when does one sell gold? Do I keep some? When do I buy it again?

    my ideas are that when it hits something crazy like 5k per ozt I sell. Then if gold makes 20-50% of cash at that time I decrease my gold hold to 5-20%.

    another idea is to always keep the same ration which means i need to sell gold when some becomes too valuable and buy when its cheap. However if my cash reserves simply increase through savings this could result in me buying gold when its expensive which doesnt make sense.

     

     

    probably the best idea is to have a cap on cash-gold total amount and in absolute numbers and the rest in other vectors such as real estate and stocks that makes the above more workable.

    • Caleb Jones

      So when does one sell gold? Do I keep some? When do I buy it again?

      That’s an individual decision everyone needs to make for themselves. I’m treating gold like bitcoin, in that when it really gets high, like around 3-4K (or so) I will sell 80-90% of it, keep 10-20% of my profits (just in case it takes off again), and roll everything I sell over into other undervalued investments at that time.