Eric Sepanek
SBC Founder
Eric Sepanek is the founder of Scottsdale Bullion & Coin, established in 2011. With extensive experience in the precious metals industry, he is dedicated to educating Americans on the wealth preservation power of gold and silver.
Saxo Bank is sounding the economic alarm as symptoms of stagflation emerge. Stubborn inflation, a softening job market, and declining growth projections should serve as hazard signs for where the economy is headed. At the same time, Trump’s unpredictable trade war is piercing the rapidly thinning veil of American economic dominance as global investors shift their wealth to safer harbors.
Capital Drains from US Markets
The US economy is paying a high price for Trump’s bold tariff gamble. The Dow Jones and S&P 500 dropped by roughly 9% and 10%, respectively, from recent all-time highs. Investors are redirecting these capital outflows toward economic zones with a more robust short-term outlook such as Europe which is improving economic cooperation and increasing spending between member states.
The deeper the administration digs into the trade war, the murkier its objectives and timeline, and the more acute the economic ramifications.
Saxo Bank warns this global drain could bring about “the beginning of the end of US exceptionalism.” All of the economic benefits associated with American hegemony would be lost, too.
Gold Flexes Its Strength
In the fog of the tariff war, gold is rising as the strongest asset, recently surpassing the $3,000 psychological barrier. As the yellow metal blows past fresh records amid an ongoing rally, conventional assets show their vulnerability. The dollar, which tends to perform well during trade wars, has been falling against foreign currencies. The stock market is reeling from some of its steepest losses in recent memory, with many analysts calling it a correction. As Saxo Bank points out, bond yields have also fallen, further signaling a flight to safe-haven assets.
Stagflation Symptoms Emerge
As policy unpredictability has global markets “on both a technical and an emotional edge,” Americans face a slew of concerning economic data:
Sticky Inflation — Despite remaining near the target range, inflation is sticking around and showing signs of creeping up. Recently, long-term inflation forecasts charted a 32-year high, indicating higher prices and an elevated cost of living down the road.
Weak Job Market — The unemployment rate in February rose to 4.1%. Job openings are stalled at multi-year lows. Moving forward, experts expect the job market to soften due to federal spending cuts and hiring hesitancy in the private sector.
Stagnated Growth — The latest forecast from the Atlanta Fed’s GDPNow metric has economic growth falling by more than 2% in Q1. In early February, GDP was expected to increase by nearly 4%, representing a drastic downward spiral.
Economists call this dangerous mix of slow growth, high inflation, and rising unemployment stagflation—a rare but toxic economic scenario.
Gold vs Stagflation
History suggests that gold’s tendency to perform well during bouts of economic weakness is supercharged in a stagflationary climate. In 1971, the end of the Bretton Woods Agreement effectively took the US off the gold standard. At the time, the gold price was fixed at $35/oz. Over the next decade of economically debilitating stagflation, gold shot exploded in value, reaching $850 by January 1980, representing more than a 2,300% surge.
If the yellow metal were to make a similar jump today, prices would reach a jaw-dropping $72,000. Although this staggering figure seems far-fetched today, consider that gold’s recent passing of the $3,000 barrier seemed equally impossible decades ago.