Over and over, Americans have seen banks fail, markets plunge and paper fortunes vanish practically in a flash. But one investment always came to the fore during all the big economic crises – gold. Investors have flocked to the precious metal during times of economic fear or unease since the great depression until the 2008 financial crisis. But critics say it is obsolete and fruitless while supporters consider it as the last line of defense against government errors and inflation. This is the debate that escalates with each decade passed and in history, gold finds itself a moment more to make its proof. Hence, it is one of the most controversial survivors of American economic history.
Great Depression Shield
Many Americans had their savings wiped out with a single stroke when banks went out of business in the 1930s. Gold rapidly gained a negative connotation as something stable and doesn’t rely on failing institutions, so people began to trust gold more than paper money.
Inflation Fighter
Gold prices rose dramatically during the times of runaway inflation in the 1970s. Due to the devaluation of the dollar, investors saw gold as a hedge against decreasing buying power and rising cost of living.
Fear Drives Demand
Gold does best in crisis situations. Economic crises in the USA invariably generate uncertainty, and uncertainty induces investors to seek the safety of more secure investments.
Distrust in Government
The unveiling of policy failures often occurs at economic crises. When confidence in the government’s economic management seems to drop precipitously, Americans often seek refuge in gold, whether due to money printing or debt issues.
No Corporate Risk
Gold is different from stocks, it can’t go bankrupt. Businesses go under, CEOs get it wrong and businesses cease to exist. While managers, earnings reports and quarterly profits are what keep everything alive for other stocks, gold keeps moving in its wake.
The 2008 Boom
In 2008 the housing market catastrophic collapse and banking crisis led to the enormous wealth gain of the gold market price. Investors feared that they would put the economy in years of turmoil as a result of the size of the stimulus programs as well as financial instability.
Dollar Weakness
During times of a weakening U.S. dollar, gold tends to appreciate. Many crises engage smaller amounts of money, and gold can actually profit from the financial difficulties that come in America.
Central Bank Support
Surprisingly, during times of uncertainty governments will purchase gold. Central banks around the world continue to purchase gold, further strengthening the idea that gold retains its long-term strategic importance.
Digital Age Survival
Various analysts forecasted that cryptocurrencies and digital finance would fulfill the role of gold completely. Cryptocurrencies and digital finance were believed to completely dethrone gold. But in a modern day crash, surge back into gold, and as did old habits die hard even in imbued economies.
Emotional Security
But the survival of gold is not entirely due to how much money it costs. It has a psychological value that comes from its centuries old roots. In times of crisis, individuals tend to become more conservative when holding on to traditional assets with enduring value, through generations and economic downfalls.
