Precious Metal Prices Surge As Global Economy Nears Double-Dip Recession – What’s Next?

Latest Central Bank Rate Hikes

Another week and another major central bank rate hike. That’s one of the most lucrative and predictable money making opportunities of the current financial climate that we find ourselves in right now.

Last month, the European Central Bank finally joined the global “Rate-Hike Club”, by delivering its first interest rate increase since 2011.

And they definitely did it in style, by surprising the market with a larger-than-expected 50 basis point hike, in an attempt to play catch-up with the rest of its peers.

A week later, the U.S Federal Reserve raised interest rates by another “super-sized” 75 basis points for the second month in a row – verging on its most aggressive cycle of monetary tightening since 1981.

Fast forward to this week – the Bank of England followed in the ECB’s and Federal Reserve’s aggressive footsteps by unleashing its first “super-sized” interest-rate hike since 1995.

On Thursday, the BoE pushed through its biggest rate hike in 27 years by raising its key interest rate by 50 basis points – as it desperately grapples to fight inflation, which is running at a four-decade high and the worst cost-of-living crisis seen in more than 60 years.

Significant Risk of Recession

As traders know – every major central bank rate hike enviably pushes the global economy one step closer to a recession. Those odds increased last week with the International Monetary Fund warning that the worldwide race to raise interest rates poses a significant risk of a “double-dip” recession..

A double-dip occurs when two successive recessions happen relatively close to one another, and the second one happens because of compounded effects from the first.

In 1980, the global economy had a short recession that lasted just six months, followed by a two-year downturn that stretched from the 1981 through to the fall of 1983.

According to Goldman Sachs, the parallels between then and now are strikingly identical. A very short-lived recession in 2020, is now looking extremely likely to be followed by a severe and prolonged recession ahead.

If history has taught us anything, then the one thing that we do know for certain is both scenarios, whether that’s persistent Inflation or a recession, ultimately present an extremely lucrative backdrop for precious metal prices.

Right now, this is a traders’ market packed with endless opportunities to capitalize on the short-term macro-driven volatility – And that’s the optimal strategy right now!

Commodity Price Forecast Video for August 5, 2022

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