Cold sores do not cause the symptoms you describe, but you most likely have one of two types of gum diseases, either periodontal disease or ANUG (Acute Necrotizing Ulcerative Gingivitis), an aggressive form of periodontal disease. If you feel there is a type of "cold sore" in your mouth associated with your condition, then the latter is probably what you have. I will describe both of them to you and then you let me know, if you think you have one or the other.
Bad breath and receding gums are symptoms of periodontal disease (gum disease) which is a chronic, low grade infection of the gums surrounding the teeth. It is caused by bacterial plaque which lives in your mouth and attaches to the surface of the teeth both above and below the gum. If enough plaque accumulates under the gum, and remains for enough time, an infection will start. This infection starts in the small spaces between your teeth and gums. The gums react to this process by swelling up and loosening their grip around the individual teeth. This loosening opens up deeper spaces between the gum and tooth allowing for more debris, plaque and food to work their way into the spaces. As the disease progresses, it slowly dissolves the bone around your teeth and, as it shrinks away, the gums follow. Many times, the patient is unaware of this disease because there is no pain involved until it gets to the advanced stage. Other symptoms of periodontal disease are bleeding gums (when brushing, or spontaneously), and loosening of the teeth. Many times, by the time an individual notices these symptoms, the disease has been active for quite some time, even years. Periodontal disease can be treated and many of the symptoms can be reversed. You need to go to a dentist that specializes in this disease, namely a Periodontist. He will diagnose the severity of your condition and recommend treatment. Many times this disease can be treated with a thorough dental cleaning and root debridement. Once the plaque, infection and inflammatory toxins are removed from between your teeth and gums, the bad breath should go away, your gums will tighten back up and the bleeding should stop. Keep in mind that periodontal disease can not be cured; only treated. After the initial treatment from the Periodontist, you will need to return a few times a year to him/her or to your regular dentist for regular dental cleanings. This will keep the disease at bay and prevent it from escalating to the degree that causes bone loss, further gum shrinkage and bad breath.
ANUG used to be called trench mouth, which is a progressive painful infection with ulceration, swelling and sloughing off of dead tissue from the mouth and throat due to the spread of infection from the gums. The ulcerations may mimic the look and feel of cold sores, but tend to specifically attack the gums between the teeth. ANUG has a characteristic foul smell.
ANUG also goes by many other names including acute membranous gingivitis, fusospirillary gingivitis, fusospirillosis, fusospirochetal gingivitis, necrotizing gingivitis, phagedenic gingivitis, ulcerative gingivitis, Vincent's gingivitis, Vincent's infection, and Vincent's stomatitis.
ANUG is often brought on by stress and/or smoking. Other causes of this disease include poor oral hygiene, poor nutrition and throat, tooth or mouth infections. ANUG is a rare condition, which typically affects people between the ages of 15 and 35.
Here is a link to a website that will tell you everything you ever wanted to know about ANUG complete with graphic pictures.
In either case, you need to have this treated by a dentist, preferably a Periodontist.
I hope this information was helpful. If I have not addressed any concerns you still might have regarding this matter, please let me know and I will answer them with another reply.