Is Gold a Good Safe Haven During a Market Crash?Gold is widely perceived as the best safe haven for your capital as the stock market goes through a bear market correction or crash.
But is this really true?
For gold to be a good hedge it would need to move in the opposite direction (have a negative correlation) to the broad market index, in this case, the S&P500.
Looking back 15 years we can see this is not the case for Gold (GLD) versus the market.
2005 to 2007
Gold out-performs the S&P500 with 52% gains compared to 25% for the S&P500
2007 to 2009
During the Financial Crisis, Gold provided a good safe haven for 7 months until it lost all of its gains.
2009 to Present
The S&P 500 goes on a staggering bull run making 481% to January 2020
Gold makes 138% from 2009 to 2012 moving in correlation with the market, then suffers a serious crash wiping out 42% of its value. The crash and stagnation lasts 8 years.
Gold is still 13% lower than its previous all-time high.
My Observation
1. Gold might provide a very temporary solution as a safe haven during the early part of a stock market correction.
2. During the Credit Crisis, Gold should have been a perfect store of value because as it seemed the Fiat Currency system was failing gold would have been a great replacement currency along with silver. But that did not work out.
3. Gold is only a safe haven is people think it is.
4. Since the 2009 market bottom, Gold has increased by 65% and the SP500 232%
Would I use Gold as a safe haven?
Personally no.
Not based on this evidence.
But in the short-term it may provide relief until people stop believing.
What is a good alternative? Holding cash and dollar-cost averaging into the market again as we near the bottom.
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Thanks for reading, Barry
