Markets were rocked at the beginning of the week as fears of recession finally began to impact markets. The Dow Jones Industrial Average lost over 1,000 points, while the S&P 500 and Nasdaq indices also saw major losses.

While they subsequently recouped some of those losses the following day, they fell again on Wednesday. And increasingly bearish sentiment seems to be creeping into the market.

Could this be the harbinger of the coming recession? Could we finally be seeing an end to the exuberance that has pervaded markets?

More importantly for those who see a stock market crash on the horizon, how can you protect yourself? And will traditional safe havens like gold and silver provide any protection?

What Gold and Silver Did

Most people might expect that when stock markets start to fall, gold and silver will climb. That’s because gold and silver are safe-haven assets, and normally when financial markets falter, investors rush into gold and silver to help protect their assets.

But both gold and silver sustained losses on Monday, along with stock markets. At first glance that seems unusual, but if you know anything about gold and silver price history, it shouldn’t have been shocking.

The nearest analogous situation we have to the present day is the 2008 financial crisis and the lead-up to it. While gold grew steadily in the early days of the recession, it began to decline through mid-2008 along with stock markets.

By the time markets seemed like they were on the verge of collapse in September 2008, gold had fallen nearly 20%. And it continued to fall, falling nearly 30% from its 2008 highs by mid-November 2008.

But then gold began to rebound, decoupling from markets. And while stock markets continued to fall, reaching their nadir on March 9, 2009, gold continued to climb.

By that date, gold had gained nearly 25% from the time stock markets had peaked in October 2007, while markets had fallen more than 50%. And from there gold continued to climb, reaching new highs in 2011 while markets struggled to regain their footing.

Silver had similar performance, although its rise from its 2008 lows to its 2011 highs was even more significant. While gold nearly tripled, silver more than quintupled.

But why did gold and silver drop during key periods of the crisis?

If gold and silver are safe havens, why would they fall in value just when it seems people need them most?

The Role of Gold and Silver

Aside from being safe havens, gold and silver also serve as hedges. They can be hedges against inflation, against currency risk, and against economic collapse.

As hedges, they can provide useful liquidity to people who need it. And liquidity is needed most in the middle of a full-blown crisis.

Investors who own gold as a hedge may liquidate their gold and silver holdings when stock markets start to slide. If they’re heavily leveraged, they may fear margin calls, and thus need to drum up quick cash to cover their positions.

Gold and silver can provide that easy cash, as gold and silver markets operate nearly around the clock all over the world and are highly liquid.

That’s why you shouldn’t be surprised to see gold and silver fall in price in the short term at the same time stock prices are falling. That means that gold and silver are functioning as they should, as hedges against risk.

Over the long term, you would expect gold and silver prices to rise again once gold demand from increased safe haven buying outweighs gold selling by hedgers.

What Will Gold and Silver Do Now?

What we’re likely to see in the short term with gold and silver prices is increased volatility, especially if stock markets become more volatile. With the latest jobs report having demonstrated that the labor market is slowing, we’re finally entering a period in which markets have to face the reality of a slowing US economy.

Persistent inflation and high GDP numbers can’t mask the underlying weakness that pervades the economy right now. And many institutional investors are hoping that what’s happening right now will force the Federal Reserve to start cutting interest rates earlier than expected.

While gold and silver are often believed to respond positively to lower interest rates, remember that we could be in the early stages of another recession or financial crisis. Established relationships could go out the window if markets begin to panic.

That’s why, if you’re looking to protect your financial well-being with gold and silver right now, you need to be prepared for gold and silver to go down in price before they go back up again.

If we face another situation just like 2008, we could very well see gold and silver declining in price as stock markets weaken and fall. And if that happens, we would expect for gold and silver to decouple at some point and start rising again as safe haven demand picks up.

Remember, for most people buying gold and silver isn’t about making short-term gains, it’s about holding onto tangible physical assets whose value grows over the long term.

It isn’t about what gold will do within the next six months or the next year. It’s about what gold will do over the next 5-10 years, or even longer if that’s your time horizon.

If you had bought gold in 2008 expecting it to be more valuable in 10 years, you would have been right. If you had bought gold in 2011 expecting it to be more valuable in 10 years, you would also have been right.

And hopefully people who buy gold today expecting it to be more valuable in 10 years will also be right. But you have to be prepared to see some ups and downs in the interim, and be willing to ride those out.

The long-term nature of gold ownership makes it particularly appealing to people looking to own gold in an IRA. Gold IRAs offer you the ability to own physical gold coins and gold bars while still enjoying the same tax advantages as an IRA account.

If you prefer silver, silver IRAs are an option too. And you can fund these gold IRAs and silver IRAs, with a tax-free rollover from your existing 401(k), 403(b), TSP, IRA, or similar retirement accounts.

If you’re worried about where markets are headed after this week’s drama, and you want to get ahead of the curve, maybe it’s time to start thinking about how gold and silver can play a role in protecting your portfolio.

Call Goldco today to learn more about how gold and silver can help you safeguard your financial future.

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Trevor Gerszt is the founder and CEO of Goldco, a precious metals dealer in Los Angeles. For more than 20 years, Trevor has sought out ways to help people build long-term wealth through the security and stability of precious metals and other alternative assets. Goldco is A+ Rated by the Better Business Bureau, a 5-Time INC 500 Winner and has countless 5-Star Reviews for its quality customer service, dependability and strong reputation.