Performance Of Gold During Recession

I was reading Robert Prechter's editorials on Elloitwave.com when I came upon this page: Deflation gold relationship.

The ending passage caught my attention.

• The research in Prechter's March 2008 Theorist (contact customer service for reprints) shows that even after Congress created the central bank, no one made money holding gold in a recession or depression for two generations (see data below).

No one made money holding gold in a recession or depression for two generations???

WOW!

• In 1970, things changed dramatically. Investors lost interest in stocks and for a decade preferred to own gold instead. The same change occurred again in 2001. But, as we will see, recession had nothing to do with either of these periods of explosive price gain in precious metals.
  
  To understand the deflation gold relationship, the time period one studies can make a huge difference. If we were to show the entire record from 1792, gold would show almost no movement on average during economic contractions or deflation. If we only showed 1969 to the present, it would show much more fluctuation. To give a balanced picture of the entire modern, wild-gold era, we compiled statistics that begin at the end of World War II. This is what most economists do, because they believe "modern finance" began at that time and that things have been "normal" since then. It's also when many data series begin. So our study fits the norm that most economists use. It also provides results entirely from the Fed era, making it relevant to current structural conditions.
  
  To see if there really is a reliable deflation gold relationship, we created a table that shows the performance of gold during the 11 officially recognized recessions since 1945. One could make a case for different start times, so we took the 15th of the starting month and the 15th of the ending month as times to record the price of gold. The results speak for themselves.
  
  

WOW!

I then searched the net.

• What does a US recession imply for the gold price?
  
  Posted on April 17th, 2008
  The World Gold Council’s new research on Gold In US Recession looks at the performance of gold during recessionary periods in the US. Macro economic data, and the US Federal Reserve Bank’s swift loosening in monetary policy, underline the risk that the US economy is on the brink of, or already in, recession. There are obvious winners in terms of asset performance in a recession, like fixed-income assets, and obvious losers, like cyclical stocks. But how is gold likely to fare? Regression and correlation analysis suggest there is no relationship between changes in US GDP growth and changes in the gold price. Consequently, a US recession would not have negative implications for the gold price. This reflects the unique drivers of the gold price and underpins gold’s role as a diversifying asset, even in times of recession.
  
  The brewing recession has so far been positive for gold on both fronts. The dollar has continued its downward trajectory, while inflation has (unusually) headed higher. US consumerprices increased at an annual rate of 4.0% in February this year, up from 2.4% just a year earlier. If these trends continue, investment demand for gold as an inflation and dollar hedge is likely to remain strong. And if the recession deepens concerns over the health of the US banking sector, demand for gold as a safe haven asset is also likely to remain robust.
  
  In summary, statistical analysis suggests there is no relationship between changes in US GDP growth and changes in the gold price. This reflects gold’s unique and diverse demand and supply base, which as for any freely-traded good ultimately determine the price. Consequently, a US recession does not have negative implications for the gold price. The only element of demand likely to be affected by a recession is investment demand, but that in turn will depend on the “type” of recession. So far, the brewing recession has been positive for gold, as it has been accompanied by a rise in inflation and a falling dollar, which has boosted demand for gold as a dollar and inflation hedge.
  
  For a full copy of the report please use the link : http://www.gold.org/deliver.php?file=/rs_archive/gold_in_us_recession.pdf

Buying gold now ah?

oO