Credit Card Delinquencies Signal Economic Shifts: Impacts on Consumer Spending and Gold Prices
October 27, 2023
1. Credit Card Delinquencies and Economic Recession:
Rising levels of credit card delinquencies over 30 and 90 days in the United States are often precursors to an economic recession. As credit card holders delay payments on outstanding balances, it historically indicates an upcoming economic slowdown. Consumers, facing strained balance sheets, cut back on spending, affecting both discretionary items like dining out and travel, and essentials like medication and food.
2. Market Reactions and Federal Reserve's Monetary Policy:
Data since 2003 shows that once credit card defaults broke the declining trend in July 2007, it heralded an imminent economic recession and signaled a peak in the stock market. Conversely, when 30-day delinquencies form a double top and break support, it indicates economic improvement, acting as a bullish signal for the stock market. Increasing speculation that the Federal Reserve might end its rate-tightening cycle aligns with the recent approach of gold prices to $2000 per ounce.
