Gold Prices During Stock Market Crashes

August 24, 2023
gold prices during stock market crashes infographic

How does gold perform during stock market crashes [Infographic]

Gold has long been viewed as the “safe-haven asset” - one that can protect investors against the ravages of stock market crashes.

But does gold’s safe-haven reputation still hold up? Can gold actually protect your portfolio from a tumbling stock market? We turned to the data for an answer.

The above infographic shows the 10 biggest declines in the S&P 500 since 1970 and compares them with gold price movements during the same time. We used nominal data from Macrotrends and the World Gold Council.

Gold Prices vs S&P 500 Declines

Stock market crashes, unfortunately, are inevitable and many market analysts today are predicting severe, perhaps historic, market declines in the months and years ahead.

Is diversifying your portfolio with gold, as some suggest, a smart strategy to bolster your portfolio against the economic turmoil of a stock market crash?

The data clearly shows that gold has significantly gained in value during most of the crashes since 1970. In fact, during the worst crash of the past 50 years, October 2007 - March 2009, gold gained 28 percent while the S&P 500 declined by 57 percent!  This alone is a shining example of the potential of gold as a hedge against significant market declines.

Gold’s best performances occurred during the two large S&P 500 market declines of the 1970s, with huge price increases of 137% and 55%.

chart comparing gold prices during stock market declines

There were 3 instances where the price of gold declined along with the S&P 500.  Even here, however, gold significantly outperformed the S&P 500 in 2 out of the 3 stock market crashes.

The anomaly was the 1980 - 1982 bear market where gold prices declined 46% versus S&P 500’s decline of 27%. This occurred just after the largest gold bull market in modern history where the yellow metal skyrocketed 2,300 percent from its low in 1970.

Looking at the averages of the 10 market declines, however, further affirms gold’s status as a safe-haven asset that can protect your investment portfolio from the perils of a falling stock market. While the S&P 500 declined an average of 33%, gold increased an average of 19%.


Diversifying with gold?

As outlined in the above analysis, holding gold in your portfolio may be a wise investment diversification decision especially if you are concerned about the state of the markets and the economy. In terms of how to diversify into gold there are many options.

One increasingly popular strategy is to open a Gold IRA. Gold IRA’s offer some of the same tax advantages as regular IRA’s but you hold physical gold, rather than paper gold, in an FDIC insured depository. There are many companies that offer Gold IRA’s to choose from so finding a reputable one is paramount.  A good place to start is this list of Top 5 Best Gold IRA’s.

Other ways to invest in gold include gold futures and stocks, gold ETF’s (exchange traded funds) and gold mining stocks. To better understand all of these options download this FREE 36 page Gold Investing Guide.

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