An analyst has warned that gold and silver appear to be signaling an economic downturn based on historical trends.
According to Patrick Karim, the grim picture is highlighted on the Gold vs. Silver Weekly Chart Ratio, whose decline has coincided with or preceded recessions, he said in an X post on January 25.
“Gold and silver are possibly sending a VERY important message to those that are listening. Alongside all the other evidence, it is tough to see we are not heading into a recession. Sooner rather than later,” he said.
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The data indicates that the early 2000, 2008, and 2020 recessions were all preceded by notable downward movements in this ratio. Karim suggested that the current downward trend is setting the stage for another economic downturn that may occur “sooner rather than later.”
It is worth noting that gold and silver are often viewed as safe-haven assets during potential economic downturns, and both asset classes have witnessed a notable price rally in recent months.
Lack of recession catalyst
Interestingly, another X user, Gary Savage, presented a counterpoint, arguing that without a clear catalyst, such as a significant oil price spike leading to inflation, a recession is unlikely in the immediate future.
Karim, however, countered this perspective by focusing on market signals rather than catalysts, stating that recessions often follow peaks and corrections in indices like the S&P 500, which have not yet occurred.
His outlook aligns with a sentiment shared by economist Henrik Zeberg, who has maintained that investors should anticipate a possible massive rally in cryptocurrency and the stock market — a rally that he warns could precede one of the worst economic downturns in history.
Consesus on timing of recession
In recent months, analysts have increasingly sounded the alarm over a possible recession, citing several concerning indicators. However, there is a lack of consensus on when a recession might occur, with some market participants suggesting the downturn may already be underway.
According to a Finbold report, Wall Street analyst Gordon Johnson warned in late December that the U.S. economy is “likely already in, or on the brink of, a recession.” His assertion was based on trends in the labor market, specifically the U.S. unemployment rate’s moving average (MAV).
At the same time, the Federal Reserve had recently moved to cut rates, a decision seen as potentially altering the course of any impending recession. However, experts such as Zeberg have warned that the Fed might be too late to save the economy after aggressive rate hikes.
In this context, another outlook by prominent financial advisor Kurt S. Altrichter noted that following the rate hikes, the market should prepare for an “imminent recession.” He pointed out that the impact of the rate cuts was reflected in the iShares 20+ Year Treasury Bond ETF (TLT), which has plummeted from its peak.
Not all market participants, however, are anticipating an economic downturn. For instance, some investors are tempering their recession fears. For instance, a Bank of America Global Fund Manager Survey in October revealed that most global investors do not expect a hard landing within the next 12 months.
Stronger-than-expected September U.S. employment data also prompted Goldman Sachs to lower its recession forecast from 20% to 15%. Non-farm payrolls rose by 254,000, surpassing the 150,000 estimate, while unemployment fell to 4.1%.
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