…If you are buying silver because you expect a recession will take its price higher, you are skating on thin ice….[Here’s why.]
This excerpt from the original article by Kelsey Williams has been edited ([ ]) and abridged (…) for the sake of clarity and brevity.
…A recession is an economic event; a slowdown in economic activity that is not associated with conditions that would lead to higher prices for the metals. [In fact,] if the conditions are bad enough, they could lead to a depression which would be accompanied by actual deflation…
Expecting higher prices for gold and silver under those conditions would be counter-intuitive. The argument is more negative for silver [than gold, however,]…because silver is primarily an industrial metal. Industrial production slows during recessions, so one should not expect higher silver prices.
How did silver fare in previous recessions? Let’s take a look. Below is a 100-year history of silver prices. Recessions are indicated by the shaded gray areas.
During the past 50 years there have been 7 recessions and below is how the price of silver performed on each occasion:…
- Recession #1…began in November, 1969…1 year later…[silver had declined by 20%]…within the context of a much bigger move from mid-1968 to October 1971 that shaved nearly 50% from silver’s price…
- Recession #2…began in February, 1974…14 months later…at the end of the recession…silver…[had declined by 36%]. Silver continued to decline after the recession ended [reaching] its low…in March 1976…[for a] total decline from peak to trough…[of] close to 45%…
- Recession #3…began in January 1980…and lasted only 6 months [during which time] silver dropped…70%…and continued to decline [further] after the recession ended.
- Recession #4…[began in] June 1981…[and] by the end of that recession a year later, silver [had dropped]…44%.
- Recession #5…[began] in June, 1990…[and] just before the recession ended, silver had declined…25%.
- Recession #6…began…in January 2001 [and] before it ended a year later silver had…declined…20%.
- Recession #7…began in January 2008…[and 10] months later silver…[had] declined more than…40%. After the recession ended, silver renewed its climb to the $50.00 summit where it then gave up the ghost and returned to the land of the dead…reaching a low point of $14.00 per [troy] ounce in December 2015, and again in August 2018.
- Every recession (a total of 7) in the past fifty years has seen declines in the price of silver varying from 20% to as much as 70%…
- In 5 of the 7 previous recessions, silver’s price continued to decline after the recession had ended.
…Were [a recession] to begin today and we [were to] use silver’s recent high of $18.60 per [troy] ounce as our point of reference….a 20% decline would take silver down to $14.88/ozt [while] a 50% decline would take it [down] to $9.80/ozt.
If you are buying silver because you expect a recession will take its price higher, you are skating on thin ice. The expectation is fundamentally flawed and there is nothing historically to support the expectation for higher silver prices during recessions.