What happened to the gold price during the COVID market downturn and GFC?

Gold has long been a trusted medium for storing wealth.

In recent times, it's been viewed as a safe haven, particularly when stock markets are volatile.

But has gold always been a reliable hedge against falling share prices?

COVID-19 pandemic

In early 2020, global markets started to plummet amid fear and uncertainty as a new coronavirus started to spread around the world.

It was January 2020, and the S&P/ASX 200 Index (ASX: XJO) had exceeded 7,000 points for the first time in history.

By the end of March, it had sunk to around 5,000 points, representing a decline of about 28% in a couple of months. 

Meanwhile, in January 2020, gold was trading at about US$1620 an ounce.

As markets around the world went into freefall, gold was heading for the moon.

In less than a year, gold was up more than 20%.

In August 2020, gold hit another high and was trading at around US$2040 per ounce.

Then things turned.

The price of gold started to sink, wiping off almost all the gains of the previous couple of years.

By October 2022, it had dropped below US$1650 per ounce, having lost about 20% of its value since August 2020.

Global Financial Crisis (GFC)

The GFC was one of the biggest financial downturns in modern history.

Markets and banking systems were severely battered between 2007 and early 2009.

On October 31, 2007, the ASX 200 Index hit 6,754 points.

By February 27, 2009, the index had dropped to 3,344 points.

That's a decline of more than 50% in less than 2 years.

Meanwhile, in October 2007, gold was trading at about US$1100 an ounce.

As global markets plummeted, the gold price steadily increased to US$1430 by February 2009.

Over the duration of the GFC, the price of gold had risen by about 30%.

But that only tells part of the story.

At one point during the GFC, in October 2008, gold was trading at around US$1070 per ounce.

Today, gold is trading at above US$3000 per ounce, while the ASX 200 Index is still above 7,000 points despite the latest downturn.

Over the long term, it seems investors in both shares and gold who stayed the course are better off.