How Gold and Silver Really Behave in Crises: Five Decades of Data

Across the past half-century, gold and silver have served as a hedge during periods of economic crisis. Their record through inflation spikes, market crashes, and monetary policy experiments shows bursts of extraordinary gains punctuated by drawdowns, and one clear lesson: precious metals respond less to fear itself than to how policymakers react to it, particularly with long-term stability in mind.

Gold surged more than 2,300% during the stagflation of the 1970s, climbed 25% during the COVID-19 shock, and delivered a record-breaking rally in 2025 amid geopolitical uncertainty and a declining dollar. In many cases, silver has followed close behind, in some cases outperforming during recoveries.

A historical analysis of major economic episodes since 1970 can help reveal how these metals actually behave when stress tests the financial system.

Stagflation Turns $35 Gold Into $850

Perhaps no historical period better illustrates gold's power as an inflation hedge than the inflationary spiral of the 1970s, often referred to as the Great Inflation. When President Richard Nixon closed the gold window on August 15, 1971, ending the dollar's convertibility into gold under Bretton Woods, the price of gold was fixed at $35 an ounce. By January 1980, it touched $850.

Inflation surged throughout the rest of the decade, peaking at 14.8% year-over-year between March 1979 and March 1980. Unemployment climbed twice: first to 9% in 1975, then to 10.8% in late 1982 as Federal Reserve Chair Paul Volcker imposed steep rate hikes to restore price stability.

The real catalyst was not inflation alone, but years of deeply negative real interest rates, compounded by two oil shocks and mounting doubts about monetary control.

Silver ran even hotter than gold during this period. Trading below $2 an ounce in the early 1970s, it exploded to $49.45 by January 1980, a roughly 2,400% gain, before collapsing 78% in just over two months during the infamous "Silver Thursday."

The Dot-Com Bubble

Among modern downturns, the early-2000s technology collapse stands out for one reason: gold fell. However, its fall was relatively short-lived and minor compared to dramatic stock market declines. 

During the initial phase of the dot-com crash, gold declined about 8%, marking the only major crisis in recent decades where the metal failed to rally immediately. By the late 1990s, prices had already been pushed to multi-decade lows amid heavy central-bank selling. The United Kingdom alone sold 400 tonnes between 1999 and 2002 at prices later dubbed "Brown's Bottom."

Gold touched its 21st-century low of $255.95 in April 2001. But stocks fared far worse. The NASDAQ plunged 78% from its March 2000 peak, while the S&P 500 lost nearly half its value. Unemployment climbed from 4.0% to 6.3%.

The turn came later in the Spring of 2001, accelerating after the September 11 attacks, when gold jumped 3% in a single session. As the Federal Reserve slashed rates from 6.5% to 1.0% over two years, the groundwork was laid for a decade-long bull market.

The gold-to-silver ratio widened as investors favored monetary insurance over industrial exposure historically tied to silver.

The 2008 Global Financial Crisis

The global financial crisis established a pattern that would repeat in 2020: gold initially fell alongside stocks during the most acute phase before surging to new highs. Federal Reserve Chair Ben Bernanke later explained the phenomenon: “The reason people hold gold is as a protection against what we call tail risk, really, really bad outcomes. And to the extent that the last few years have made people more worried about the potential of a major crisis, then they have gold as a protection."

Gold reached $1,011 in March 2008, the day Bear Stearns collapsed, then fell roughly 25-30% as institutions liquidated assets to meet margin calls. Despite that drawdown, gold still finished the year up 4.3%, one of only two major asset classes to post gains.

Once central banks intervened, both silver and gold reversed sharply. Gold peaked near $1,918 in 2011. Silver followed with a 444% rally from its 2008 low, briefly returning to levels last seen in 1980.

COVID-19: The Fastest Run to New Highs

The pandemic delivered gold's quickest ascent to record territory. Prices began in 2020 near $1,515, dipped briefly during March's liquidity scramble, then climbed to $2,067 by August.

The World Gold Council attributed the early drop to forced liquidations rather than loss of confidence. Gold's deep liquidity, over $260 billion traded daily, made it an immediate source of cash.

Silver's ride was more turbulent. After plunging nearly 40% in March, it rebounded above $29 by August. The gold-to-silver ratio spiked to an unprecedented 125:1 before snapping back within months.

Economic damage during an unprecedented global pandemic arrived at historic speed. Unemployment hit 14.7% in April 2020. U.S. GDP contracted at an annualized 31.4% in the second quarter of that year. The Federal Reserve responded with massive quantitative easing, expanding its balance sheet by trillions in weeks. This level of economic uncertainty led to continued investment in gold and price increases over the course of the pandemic. 

2025: The Strongest Year in Nearly Half a Century

Gold's 2025 rally eclipsed every annual gain since 1979. Prices rose more than 60%, reaching an all-time high above $4,370 in October before settling into a higher trading range.

Trade disruptions, geopolitical tensions, and a prolonged U.S. government shutdown reinforced demand. Central banks continued buying at record levels, with China adding reserves for seven consecutive months. ETF inflows surged as confidence in sovereign debt eroded.

Chris Temple, founder of the National Investor, captured the sentiment shift in June: “The bond market understands that Washington is so broken and the debt situation is so bad. That’s why gold all of a sudden is the safe haven now, even more than treasuries."

Silver outpaced gold dramatically, soaring more than 120% to new highs above $64. Like gold, silver appealed to those looking for a hedge against inflation and a store of value in a period of economic uncertainty. At the same time, Industrial demand for silver-from electric vehicles to data centers tied to AI-accelerated, while structural deficits persisted.

By year-end, the gold-to-silver ratio had compressed toward long-term averages, reflecting renewed risk appetite and silver's dual role as both monetary and industrial metal.

The Long-Term History of an Inflation Hedge

Gold thrives when real rates are negative and monetary credibility erodes, not simply when inflation rises. It often falls during the initial shock, then rallies once policy easing begins.

Silver can exaggerate those moves, though not always, as it has industrial ties that gold lacks. Regardless, the gold-to-silver ratio remains one of the clearest signals of market stress.

Across five decades and six crises, the trajectory metals tell the same story: timing matters, policy matters, and patient investors who held through the volatility captured the largest gains.