Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

Buckle Up! Oil and Gold Flashing Recession Warning Signs

  by    0   2

Oil and gold are marching in opposite directions. If history is any indication, that’s not good news for the US economy.

Oil prices fell sharply starting late last week and through the early part of this week. On Monday, West Texas Intermediate crude touched $53.25, the lowest level since February. Meanwhile, the price of gold surged, blasting through the $1,300 mark to reach prices not seen in more than a year.

Some of the same factors are driving gold’s climb and oil’s fall – heightened concern about a slowing global economy and fears about the impact of Trump tariffs.

A MarketWatch article called this combination of rising gold prices and falling oil prices “rare as to the extent of its divergence” and pointed out that in the past “has delivered to some nasty consequences for the broader market.”

This chart was created by Crescat Capital’s Tavi Costa.

 In a tweet, Costa said:

Only three other times in history precious metals surged while oil plunged! All of them happened during severe bear markets and recessions. Buckle up, folks.”

Costa told MarketWatch that the setup is starting to look a lot like the beginning of the stock market selloff in the fourth quarter of last year.

Gold-to-oil ratio surging, copper prices getting annihilated, corporate spreads widening, and credit markets screaming recession ahead. The Fed’s utterly dovish comments just add to this list. Rate-cuts when late in the business cycle have never been a bullish sign. It reaffirms the many bearish macro signals we have been pointing out. Economic conditions are weakening in the face of asset bubbles everywhere.”

As you’ll recall, the Fed rescued the markets earlier this year – at least temporarily – with the “Powell Pause” in interest rates hikes. At the time, Peter Schiff said it wasn’t going to be enough in the long-run. Now it’s looking increasingly like the temporary high brought on when Powell and company ended the tightening cycle is wearing off. The Fed can’t pause again, so the next step will likely be a rate cut.

In fact, Powell made comments yesterday that the markets widely interpreted as dovish. The Fed chair dropped the word “patient” from his vocabulary, saying the central bank would respond as “as appropriate” to the perceived economic impacts of tariffs.

Oil and gold aren’t the only markets signaling trouble ahead for the economy. As we reported last week, bond prices spiked and yields fell over several weeks. Investors are beginning to see a recession on the horizon and they are pouring into Treasurys believing they will provide a safe haven. Peter said they are right about the looming recession, but they are making the wrong bet.

Costa echoed Peter’s sentiment that the market still hasn’t fully recognized the extent of the problem. Investors want to try to ride the bull just a little longer.

There is a speculative force typical of late-cycle markets that is willing to shrug off deteriorating economic data and a dashed trade deal with China. Too many want to drive that momentum train just a little bit longer. They are not deterred by arguments of excessive valuations.”

Download SchiffGold's Gold vs GLD EFT's Guide Today

Get Peter Schiff’s most important Gold headlines once per week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!


Related Posts

Silver Joins Gold at the Party

Silver has finally joined gold at the party. In the last week, the price of the white metal has moved up from $15.51 to $17.35. (as I type this on Tuesday morning May 19) That’s an 11.9% increase. With the jump in the price of silver, the silver-gold ratio has dropped from over 113-1 earlier […]

READ MORE →

QE Infinity: Money Supply Grew at Record Rate in April

The money supply growth rate surged to an all-time high in April as the Federal Reserve created cash at an unprecedented rate through quantitative easing and other money-creating monetary policies. According to Ryan McMaken at the Mises Institute, the only time the Fed has come close to this level of money creation was in the […]

READ MORE →

Staggering April Budget Deficit Just the Tip of the Iceberg

The April federal budget deficit came in at a staggering $738 billion as government coronavirus stimulus began flowing through the pipelines and revenue dipped due to the government lockdowns.

READ MORE →

ETF Gold Holdings Set Yet Another Record

Gold continued to flow into gold-backed ETFs, setting another all-time record in April. Globally, funds added another 170 tons of gold last month amounting to $3.9 billion, according to the latest data from the World Golf Council. It was the sixth straight month of net inflows.

READ MORE →

Household Debt Was $1.6 Trillion Higher Than ’08 Peak Before COVID-19

Total household debt was over $1.6 trillion higher than the previous peak in 2008 even before the full force of the coronavirus pandemic government shutdowns hit the economy. Household debt increased by $155 billion (1.1%) in Q1 to a total of $14.3 trillion, according to the latest data released by the New York Fed. The […]

READ MORE →

Comments are closed.

Call Now