Take a look at this rare chart pattern.
What you’re seeing is a recession-predicting signal with a near-perfect track record.
Wall Street Journal says it is often a “red flag that a recession is looming.” Forbes says it has “accurately predicted the ten most recent recessions.” The NY Times says this pattern “has preceded every recession for the past half-century…. it’s seen as a harbinger of economic doom. And it’s happening now.”
Analysts call this omen of recession an “inverted” yield curve.
And while it may signal bad news for the economy…
It may also signal very good news for gold owners, as you’ll see in a moment.
First, what exactly IS an “inverted” yield curve?
The yield curve compares interest rates for government bonds. And the interest rates are the yields (profits) the government pays to bond investors.
Most of the time, short-term bonds pay lower yields. And longer-term bonds pay higher yields because investors expect the bond issuer to reward them for letting it keep their money longer.
But under rare economic circumstances, short-term yields rise above long-term yields. This means the government pays more to holders of short-term bonds. And it pays less to holders of longer-term bonds.
That is an inverted yield curve.
And right now, The New York Fed is keeping a very close eye on it. Central banks worldwide are watching it. Wall Street is watching it. And gold owners who know this pattern’s history are paying sharp attention too.
But why is everyone so focused on the yield curve inversion?
What would make you want to pause and pay sharp attention right now?
Two main reasons:
Reason #1: The yield curve inversion’s astonishing predictive track record
As you can see, since 1976, every time the yield curve has “inverted,” a recession has followed in 6–18 months.
Now, here we are again.
The yield curve inverted again on March 31, 2022. And many experts believe this indicates a recession may be coming soon.
Matt Diczok, head of fixed income strategy at Bank of America Private Bank, agrees and told Bloomberg:
“The yield curve is definitely telling you a recession is coming. It’s not here yet but the check is certainly in the mail,”
Reason #2: Gold
Those who know their history know yield curve inversions have preceded recessions…
And many of those recessions have preceded rallies in gold prices.
Take a look:
Most recently, gold rallied to record levels after the 2008 recession, which followed the 2006 yield curve inversion. And gold rallied to another record high after the 2020 recession, which followed the 2019 yield curve inversion.
So, yes, as Bank of America interest rate strategist Mark Cabana says, the current yield curve inversion may mean “we are likely heading for a recession.” And it may be speeding our way soon.
But if history repeats, a recession may once again trigger a gold rally. This means right now may be a historic gold-buying opportunity. And some gold owners may soon have a very good reason to rejoice.
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