What happens to the value of PMs in the event of a recession?

[ARehmat]

Hi there, with the news this morning that the IMF reccons that their will be the recession of the century this year. Whether it happens or not, I would like to find out what happens the price and value of PMs if a recession was to occur. I presume that the value of PMs (Gold and Silver especially) would increase as the buying-power of fiat currency (£, $) would decrease. Now, would it be a good idea to purchase PMs with the intent that if the value of Gold/SIlver reaches high levels during a recession to sell and make a profit, or that if the recession does not occur then one would not have lost out and could retain their investment  until they see a profit or use it as a hedge fund of sorts?

Would be interesting to see your take on this.

Thanks!

[Shep]

People buying PMs “to make a profit“ often end up getting burned. You have no idea what the market is going to do tomorrow let alone months & years into the future. Who knows what manipulation will be forced upon PMs.

PMs, particularly gold, act as a long term store of wealth rather than an “investment”. Silver is perhaps more speculative but I don’t play that game so won’t comment further.

If you’re looking to make a quick buck rather than store your wealth for the long term, PMs are probably not the right buy.

[ARehmat]

8 minutes ago, Shep said:

People buying PMs “to make a profit“ often end up getting burned. You have no idea what the market is going to do tomorrow let alone months & years into the future. Who knows what manipulation will be forced upon PMs.

PMs, particularly gold, act as a long term store of wealth rather than an “investment”. Silver is perhaps more speculative but I don’t play that game so won’t comment further.

If you’re looking to make a quick buck rather than store your wealth for the long term, PMs are probably not the right buy.

Your absolutly right. The PMs game is long term, just curious as to what would happen if the value of the £ and $ crashed tomorrow. I suppose that even if I purchased a quantity of gold for arguments sake today and the value of fiat currency crashed tomorrow, I could cash out for a profit, and if the crash did not happen I could hold on to my PMs for the long term without loosing out. Have played the silver game for a while and the market is alot more speculative for sure.

[Pete]

The way I look at it is to use a different currency like a can of Coke, Mars bar or Big Mac.
Forget about the numbers printed on your fiat.
Quantitive Easing is the bankers code for printing monopoly money.
Each unit of fiat is being devalued by printing more paper, inflation and foreign exchange - which is the favoured most stable currency for the trillions out there ?

Have a look at the Zimbabwean dollar to see how many zeros you can print on a note that is only useful for wiping your ar's'e.

As the numbers rise printed on your paper then yes the items cost more but at the same time most ( but not all ! ) consumers are being paid through employment or pensions ( again not all ). So if a Mars bar cost 10 pence when your monthly income was say £500 and now costs 50 pence and your income is £2,500 nothing really has changed.

Same goes for PMs, HOWEVER ..
The difference is the person who cashed in their redundancy or lump sum pension for fiat and put their money in the bank will be screwed in time.
They have a numerical fixed amount of notes that is loosing value and not being replaced by inflation proof notes.
If they had swapped their fiat for PMs then at least the purchasing value would be retained ' IF and only IF '  PM prices don't crash.
Of course there is always the upside potential as well but PMs are in the eyes of most investors fairly high risk.

[Shep]

56 minutes ago, ARehmat said:

just curious as to what would happen if the value of the £ and $ crashed tomorrow. I suppose that even if I purchased a quantity of gold for arguments sake today and the value of fiat currency crashed tomorrow, I could cash out for a profit, and if the crash did not happen I could hold on to my PMs for the long term without loosing out.

I think that’s easier said than done but i agree in principle.

Waiting until you’ve reached a point you’re happy to sell at without getting greedy and missing the boat, coupled with the logistics of selling large amounts of physical quickly for the best price (I.e. to private buyers and not to a dealer), make it risky. Even more so if buying in a period of complete uncertainty, where prices are at relative highs.

I suppose it’s an acceptable risk if you have sufficient disposable funds to buy high and leave it tied up in PM if things don’t go your way.