What This Chart Says About the Health of the U.S. Economy

Hi. It’s Murray Gunn from Elliott Wave International here.

I just wanted to take a minute to show you an interesting chart.

It could be more evidence that recession is coming.

This chart shows the gold futures prices divided by the crude oil futures price. When the line is going up, the gold price is outperforming oil and some people say that it is a sign of economic recession.

Well, the last three U.S. recessions have all seen gold rise versus oil.

In the brief recession in 2020, when the war on Covid (World War C) resulted in societal lockdowns, gold soared versus oil as crude collapsed and gold advanced.

Gold started rallying versus oil in July 2008, just as the Global Financial Crisis was about to explode, and it continued to outperform oil into the second quarter of 2009.

And the yellow metal outperformed crude oil during the recession of 2001 after the dot.com boom and bust gave a lead indicator of what was coming.

The gold/oil ratio also advanced in the run up to the Russian debt crisis of 1998 when the failure of the hedge fund Long Term Capital Management (LTCM) created a systemic financial implosion.

Not every time gold rallies versus oil coincides with a financial crisis or economic slowdown but the fact that the ratio has been advancing since the middle of 2022 is worth noting.

Given the fact that our Elliott wave analysis continues to point towards declining stock markets, an economic recession looks highly probable.

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