Do Gold’s Historic Highs Predict a Coming Crisis?
Massive money printing and debt accumulation have gone on for something like 80 years, and the system has held together. Why should it end now? Maybe they can wring one more cycle out of the corrupt Keynesian system. That said, I think we have finally reached the actual crisis point. Although this certainly isn’t the first time the inevitable seemed imminent…—Doug Casey
This three-part series sheds light on the multifaceted story of gold:
Part one examines how gold price surges have predicted global crises, from the GFC to today.
Part two analyzes the role of central banks in driving these record highs.
Part three assesses how these highs could impact the shares of listed Philippine gold mining companies.
In this issue
Do Gold’s Historic Highs Predict a Coming Crisis?
I. Gold at All-Time Highs: A Beacon of Crisis or Recession Ahead?
II. Gold, The Philippines and the Pandemic Recession:
III. The Bigger Picture: Gold as a Recession or Crisis Bellwether
IV. Gold Outshines the S&P 500: Gold’s Crisis Predictive Power in Focus
Do Gold’s Historic Highs Predict a Coming Crisis?
First series on gold: Surging USD Gold Prices: A Predictor of Crises from GFC to Pandemic—What’s Next?
I. Gold at All-Time Highs: A Beacon of Crisis or Recession Ahead?
Figure 1
Is the recent record-breaking streak of gold prices signaling an impending global recession or crisis?
The relationship between gold and the US GDP has undergone a profound transformation.
Ironically, gold’s multi-year climb began during the dotcom recession. It surged ahead of the Great Recession of 2007-2009—or 2008 Financial Crisis—and, while falling during its culmination, gained momentum once again before the climax of the Euro crisis. (Figure 1, upper and lower charts)
Between May 2001 and September 2011, gold prices soared approximately 6.9 times, from $270 to $1,873.
Thanks to interventions from central banks like the Federal Reserve (FED) and the European Central Bank (ECB), as well as their global counterparts, volatility subsided, and risk perception diminished, ushering in a “goldilocks” period. During this time, gold prices retraced roughly 43%, falling to $1,060 by December 2015.
However, China’s unexpected currency devaluation in August 2015 triggered a stock market crash lasting until February 2016, further compounded by Donald Trump’s election, ignited the next leg of gold’s bull market, as investors once again sought refuge in the precious metal.
Gold reached new heights during the US repo crisis of 2019, continuing its ascent prior to the onset of the global pandemic recession.
It achieved an interim peak of $2,049 in August 2020, representing a remarkable 93.33% increase from its low in 2015.
Despite the outbreak of the Russia-Ukraine war in February 2022 and peak inflation in mid-2022, gold prices slid by 20%, hitting a low of $1,628 in September 2022.
The Bank of England’s bailout of UK pension funds during the Truss budget crisis in October 2022 provided support or put a floor under gold prices, stabilizing the market.
More recently, geopolitical conflicts—including the Israel-Palestine war and its extension to the Israel-Hezbollah conflict—along with rising tensions in hotspots like the South China Sea, escalating global protectionism, and the increased weaponization of finance, have fueled uncertainty.
Additionally, the re-election of Donald Trump in 2024 and his administration’s policies, including trade wars, demands for the annexation/acquisition of Greenland, and control over the Panama Canal, have added to global economic and geopolitical instability.
The resumption of hostilities in the Middle East, particularly Israeli attacks in Gaza and Beirut following a broken ceasefire, has further destabilized the region.
In the Russia-Ukraine conflict, the UK and France have threatened to send troops to support Kyiv, risking escalation as Trump pushes for a quick resolution with concessions to Russia.
On April 2, 2025, Trump’s administration imposed 25% tariffs on all imported cars and light trucks, effective April 3, with plans for broader “reciprocal tariffs” targeting countries like Canada, Mexico, and the EU, prompting threats of retaliation and fears of a global trade war.
Figure 2
The ongoing trade war, did not emerge in a vacuum; rather, it reflects a broader, underlying trend of deglobalization. The rising number of import curbs—spanning tariffs, antidumping duties, import quotas, and other restrictions—represents the cumulative anti-trade measures undertaken by global authorities.
According to Global Trade Alert, the number of import curbs in force among major economies, including the U.S., EU, China, Canada, Mexico, and the rest of the G20, has surged from under 1,000 in 2008 to over 4,000 by 2024 (Biden era), with the U.S. and EU leading the increase. (Figure 2)
This proliferation of trade barriers has not only strained economic ties but also influenced foreign relations, contributing to a slippery slope of deglobalization that has materially heightened geopolitical stress.
For instance, the U.S.’s aggressive tariff policies have prompted retaliatory measures from trading partners, fracturing alliances and fostering and deepening a climate of mistrust, which in turn exacerbates conflicts in regions like the South China Sea and Ukraine.
This deglobalization trend, coupled with geopolitical flashpoints, has driven investors to seek safe-haven assets like gold, pushing prices to new all-time highs, as shown in the earlier chart, where NYMEX gold futures prices have spiked since 2023 even as the U.S. nominal GDP share of global GDP remains flat.
II. Gold, The Philippines and the Pandemic Recession
Back in February 2020, I warned:
In an interview with Ms. Gillian Tett at Council of Foreign Relations (CFR) on October 2014, former Fed chief Alan Greenspan aptly remarked:
Remember what we’re looking at. Gold is a currency. It is still, by all evidence, a premier currency, where no fiat currency, including the dollar, can match it. And so that the issue is if you are looking at the question of turmoil, you’ll find as we always find in the past, it moves into the gold price.
The bottom line: Gold’s uprising against central banking fiat currencies warn that the world is in the transition of entering the eye of the financial-economic hurricane! (Prudent Investor Newsletter)
It turned out that a global recession had already begun.
In the Philippines, the first local COVID-19 case was reported in early March 2020, prompting the Duterte administration to impose a Luzon-wide lockdown, officially termed “Enhanced Community Quarantine.”
The Philippine economy subsequently plunged into a recession, with GDP contracting from Q1 2020 to Q1 2021.
Figure 3
Gold in the priced in the Philippine peso also soared ahead of the pandemic crisis. (Figure 3)
III. The Bigger Picture: Gold as a Recession or Crisis Bellwether
The charts illustrate a clear pattern: since the “Fed Put” during the dotcom bubble, gold’s record-breaking runs have consistently foreshadowed major recessions, economic crises, and geopolitical upheavals.
These include the GFC, the Eurozone debt crisis, the U.S. repo crisis, the global pandemic recession, and the recent wave of conflicts and protectionist policies. Gold has also proven responsive to the serial interventions of central banks and governments, which have deployed easy money regimes and fiscal stimulus to mitigate these crises.
For instance, the chart highlights how gold prices dipped during periods of perceived stability (e.g., post-2011 Euro crisis) but surged ahead of crises, reflecting its role as a leading indicator of economic distress.
Is gold’s series of epic all-time highs yet another chapter in this unfolding saga of economic and geopolitical turmoil? The historical correlation between gold price surges and impending crises suggests that investors should remain vigilant
IV. Gold Outshines the S&P 500: Gold’s Crisis Predictive Power in Focus
Figure 4
Finally, the mainstream financial narrative often compares gold’s performance to that of the stock market, framing gold as a speculative asset. In this context, gold has significantly outperformed the U.S. S&P 500 by a substantial margin over the past century, particularly since 2000.
However, this comparison is somewhat of an apples-to-oranges exercise. Gold, as a safe-haven asset, serves a fundamentally different role than equities, which are driven by corporate earnings, economic growth, and investor sentiment.
Gold’s value is tied to its scarcity, historical role as money, and its appeal during times of uncertainty, whereas the S&P 500 reflects the performance of the U.S. economy’s largest companies.
Despite this distinction, the comparison underscores gold’s resilience and appeal in an era marked by economic and geopolitical turbulence.
For a more nuanced perspective, the chart’s lower section presents the S&P 500-to-gold ratio, which measures how many ounces of gold are needed to buy the S&P 500 index. This ratio reveals a striking technical pattern: a massive head-and-shoulders formation, a bearish indicator in technical analysis that often signals a potential reversal.
If this pattern completes, it could indicate a significant outperformance of gold over the S&P 500 in the coming years, potentially driven by a crisis that erodes confidence in equities while boosting demand for gold.
Given gold’s historical predictive prowess for crises, as evidenced by its price surges before major economic and geopolitical upheavals, this head-and-shoulders pattern may well be fulfilled.
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References
Prudent Investor Newsletter Oh, Gold!!!! February 23, 2020
Source: http://prudentinvestornewsletters.blogspot.com/2025/03/do-golds-historic-highs-predict-coming.html
