When the market is on its way up, it can be easy to forget that what goes up will also eventually come down. The fact is that economic slowdowns are cyclical, which means that after a period of economic growth, there will be a recession. Whether a market downturn is fast approaching or nowhere close to happening, it is important to prepare for it by putting your money in safe assets like gold that don’t lose value too soon. Below, we’ve shared a few tips to purchase gold to protect yourself from the effects of a recession.
Buy physical gold
Anyone who invests in gold needs to understand that the precious metal basically functions like money. Gold was, in fact, used as currency for more than 5,000 years. It was only in 1971 that the world began to adopt the Fiat system of using paper currency that was not backed by gold.
Over the years, the paper market for gold has grown tremendously. The leverage for this system is massive because so many people believe that they own real gold despite buying its paper form. If you were to, however, try to claim it, you would find out that there isn’t enough actual physical gold available. That’s why if you want to purchase gold as protection against recession, make sure to purchase it in its physical form.
It must be under your direct ownership
If you don’t have physical possession of your gold, you don’t actually own it. This is important to understand since the average person does not have tons of money to invest in gold. If this is your situation, make sure to purchase gold coins directly and store them near where you reside so you have quick access to them in a crisis.
When you select a company to store your gold in, make sure you’re not giving part of your ownership rights to the firm. The gold should always belong to you, and the company you’re dealing with should not be able to pledge it, lease it out, or hedge it.
Invest in gold coins
You want to get as much gold as possible for your cash. One way you can do this is by investing in legal tender coins. The key reason for this is that you can’t move around comfortably with pounds of gold during a crisis. Just make sure there is a legal tender in place and that you are charged a moderate to low fabrication fee.
Ensure that you don’t make your purchases on eBay. If you see a deal that allows you to purchase below the spot price of gold, you should think twice because it’s likely too good to be true.
Put some money in liquid gold stocks
Gold is insurance in addition to serving as a means to build your savings over a long period of time. For instance, a person who bought physical gold worth $100,000 in 1970 would have gold worth around $2 million today.
As with anything related to gold, you, of course, need to know what you are doing. In this case, it means you’ve got to have an investment horizon. Don’t purchase gold stocks to trade. Instead, purchase gold stocks, and put them away as insurance.
Use your savings to purchase gold
If you want to purchase gold, avoid using credit. Instead, use your savings — that is the backbone of a growing economy. You want to rely less on credit and debt. No matter how little you can purchase with your savings, it’s worth it because the gold will be entirely yours.
Taking out credit to purchase gold is not a great idea because you never know where the market is going. If the price of gold drops, you’ll be left with a loan on which you have to pay interest while holding an asset that is not worth as much as it was when you purchased it.