In the 6 months leading up to the great financial crisis, the price of gold surged by 50%.
This run-up in gold’s price was a major warning for what came next.
Investors were flocking to safety right before an almost complete collapse of our financial system.
This isn’t the only time gold predicted an economic crisis though.
In 1973, gold prices surged by 50% right before a major recession.
And again, gold jumped 50% right before the 1980 recession.
Fast forward to today and we’ve seen gold prices rise by 50% over the last 12 months.
This move isn’t quite as aggressive as the one before the financial crisis… but gold’s current run isn’t showing signs of slowing down.
Many believe this melt-up in gold prices spells trouble for the future of the global economy.
After all, people wouldn’t be buying gold if it wasn’t in anticipation of some kind of economic or geopolitical trouble.
So what is gold signaling today? A financial crisis like 2008, a global conflict, or the return of inflation?
At Bravos Research, we’re been long on gold throughout its bull run since 2023.
We have a 2x leveraged ETF ($UGL) gold trade active for our members that we also booked partial profits on for a 25.6% return.
We also booked partial profits on 2 Gold Miners: $AEM (+31.2%) and $WPM (34.2%).
Our real-time Trade Alerts are concise and include all necessary details:
- Long/Short position
- Allocation weight
- Entry and Stop-loss levels
- Reasoning for the trade
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The Consumer Sentiment Connection
One of the reasons we’ve been positive on gold is because of the poor consumer sentiment in the United States.
Today, the University of Michigan consumer sentiment in the US is at one of the most depressed levels of the last 40 years.
Consumer sentiment today is as depressed as it was during:
- 2008 financial crisis
- 1990 recession
- Early 1980s recession
- Stagflation of the 1970s
This is not a sign of a healthy economy…
If we compare gold prices with a inverted chart of consumer sentiment, we see they’re very closely linked.
As gold prices experience a big bull market, consumer sentiment typically declines.
We saw that between 2004 and 2011 and we’ve been experiencing the same thing since 2017.
Going back to the 1970s, we see a similar pattern.
The huge bull market in gold directly coincided with declining consumer sentiment.
When gold finally reversed, only then did consumer sentiment begin to improve.
So, this recent rise in gold prices is not telling us things will get better.
If anything, it’s telling us things will get worse.
The Unusual Disconnect
In each historical instance of depressed consumer sentiment though, you had a specific crisis:
- The European debt crisis
- The great financial crisis
- The 1990 oil shock
- The recessions from the 1970s
The common denominator?
They all occurred during economic downturns.
Historically, low consumer sentiment has coincided with high unemployment.
In every major crisis, 2008, 1990, 1982, 1974. the economy was in a recession, with unemployment rising, markets declining, and GDP contracting.
Today, none of that is happening.
Unemployment remains low, the stock market is on one of its strongest runs in history, and GDP is still growing.
Yet, consumer sentiment is stuck at 2008 levels.
This is the K-shaped recovery that has defined the post-pandemic era, where the financial system has been diverging from the real economy.
Gold is telling us this K-shaped recovery could be far from over, and consumer sentiment is likely to stay quite low over the course of the next year.
What This Means for Stocks
Over the last 2 years, the S&P 500 has rallied by 70%.
We’ve only seen this type of strength a handful of times throughout stock market history:
- The late 1990s during the dot-com bubble
- The late 1980s right before Black Monday
- The 1920s before the Great Depression Crash
All were moments of extreme market euphoria that lasted much longer than investors expected.
We believe this market rally is no different.
We think a true economic recession likely won’t happen until at least 2026.
Until then, the K-shaped recovery could very much continue.
Our Strategy Moving Forward
We expect this recent market correction to end up likely being a buying opportunity for the next leg up.
We’ve put our money where our mouth is and increased our exposure to US stocks during the pullback.
If the bull market does continue, the S&P could reach 7,000 points.
But if price breaks below the key MA’s with the MA’s curling down, then we’ll be quick to re-adjust our strategy.
Being flexible is a key characteristic of being a successful trader.
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