Investors Should Be Holding More Than 5% In Gold As A Recession Is Inevitable – Adrian Day

The comments below are an edited and abridged synopsis of an article by Neils Christensen

The US economy has been resilient through the first half of 2023, which has some economists shifting their forecasts and pricing out a recession; however, one market strategist believes that the US is still on track to weaken by year-end.

Investors Should Be Holding More Than 5% In Gold As A Recession Is Inevitable – Adrian Day - BullionBuzz - Nick's Top Six
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Adrian Day of Adrian Day Asset Management said that some economists overestimate the current strength of the economy and the resilience of consumers.

“We always seem to forget that recessions don’t happen overnight,” he said. “Investors keep expecting things to happen immediately, but it takes time for economic conditions to change.”

While consumption has supported activity through most of this year, Day notes that consumers have burned through their Covid savings as credit card debt rose sharply in the second quarter.

The New York Fed reported that consumer debt increased to $1 trillion between April and June.

Day noted that consumers using debt to cover their expenses, and face higher interest rates because of the Fed’s aggressive tightening. These are not the signals one wants to see in a healthy economy.

It is only a matter of time before consumers, unable to service their debt, start to default on the $1 trillion, which poses a significant risk to the US economy.

Day said that it’s only a matter of time before investors turn to gold to protect their wealth as the economy slides into a recession. However, the trigger for gold remains the Fed’s monetary policy.

How much gold should investors hold? While the general recommendation is about 5% of a portfolio, Day said that with a recession looming, investors should look at increasing that amount.

Gold remains an important insurance policy to protect your portfolio, and when risks are high, your need for more insurance increases,” he said.