How Much Gold Will You Need in A Crisis?
Let’s look back at a recent crisis. During the 2008 financial crisis, many, if not most, equities lost much of their value – sometimes as much as 50% or more.
In times like these, liquidating your investments of stocks and bonds to pay for groceries, a mortgage, or rent will certainly yield very little money. What’s more, selling when the market bottoms out will result in a massive loss on your hard-earned savings.
Smart Money Diversifies Risk with Precious Metals
In such a scenario as the 2008 GFC, selling a little of your gold at a time of crisis can help you weather the storm in the market, until hopefully, the economy recovers, and markets rally. However, this scenario is a market risk. There are other risks to protect yourself from by holding gold. In the case of a complete currency crisis,s gold can protect your purchasing power as the currency collapses with hyperinflation.
How much gold you need is therefore complicated and will depend on many factors, including the severity of the crisis, the amount of cash you have on hand, and your immediate needs. For example, a family fleeing the war in Germany needed much more gold than a family without food during the Great Depression, or say, a Venezuelan family in the middle of the country’s current economic meltdown.
How Much Gold Should You Own?
While 10% of your wealth is usually proposed by many, even this statement is way too general in some cases, as a 30% to 55% of metals holding may be what you need. This is why building your own personal precious metals portfolio is vital. It is best to remember that no strategy is perfect. What is certain is that investing nothing in gold exposes you to serious financial risks.
A very important thing to consider is that as the economic climate becomes more volatile and geopolitical risks increase, you should raise your allocation of gold and silver as much as necessary to effectively protect your wealth.
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