This episode explores the potential for gold and oil to serve as recession hedges, given the heightened recession risk due to recent tariff announcements. Against the backdrop of recent market volatility, the discussion analyzes why gold, despite its safe-haven reputation, experienced temporary sell-offs due to forced liquidation by investors facing margin calls. More significantly, the guest argues that the current positioning in gold is near historical averages, presenting an attractive entry point for long positions, particularly as a hedge against recession risks stemming from U.S. trade policy and potential erosion of investor trust in U.S. assets. For instance, the guest projects a 10% rise in gold prices by year-end in a base-case scenario, with a potential rally to $4,250 per troy ounce in a recessionary scenario. In contrast, the guest presents a bearish outlook on oil prices, forecasting a decline to $55 per barrel by the end of 2026, primarily due to anticipated increased OPEC+ production and reduced demand in a potential economic slowdown. This bearish outlook on oil, coupled with the bullish outlook on gold, suggests a strategic approach of using long gold positions and short oil positions as a comprehensive recession hedge. The discussion concludes by highlighting investor interest in commodity markets, particularly the increased trading volume of oil puts, reflecting a growing awareness of downside risks.
