In December, when much of the country was riding a wave of optimism over Donald Trump's presidential victory, I warned that we were heading full speed toward a recession (and said it may have already begun). I also pointed out that the increasing likelihood of a recession would drive gold prices higher (and the recent rise is clear confirmation of that).

My prediction was not motivated by political bias, but by hard data and reliable recession indicators, which had pointed to economic problems long before Trump's victory. And now, as expected, a growing body of evidence confirms that the odds of an impending U.S. recession are increasing.

One key indicator that signals an impending recession is the Atlanta Fed's GDPNow forecasting model, which updates in real time as new economic data comes in. Last Thursday, the model projected a 2.3% annual growth rate for the first quarter of 2025. However, after Friday's economic data release, that estimate plummeted to a recessionary -1.5%.

Then on Monday, additional data dropped the forecast further to a staggering -2.8%, reinforcing the recession warning and silencing skeptics who doubted Friday's steep decline.

When GDPNow's estimate for first-quarter 2025 growth plunged to -1.5% on Friday, some skeptics argued that the drop was skewed by a temporary surge in imports. U.S. importers had been frontloading shipments ahead of the impending imposition of tariffs, they said, creating an anomaly that would soon normalize.

While there is some truth to that, it is only part of the story. A major factor contributing to the decline in GDP estimates is the weakening of consumer spending, which drives more than two-thirds of U.S. economic activity.

In January, consumer spending contracted for the first time in nearly two years, as fears of rising inflation led many to pull back.

In addition, Monday's sharp drop in GDPNow's estimate for first-quarter 2025 growth was largely driven by a steep decline in residential investment (spending on new homes and home renovations).

Given that housing contributes between 15% and 18% of U.S. GDP, this slowdown is a major drag on economic growth.

What is surprising is that today's drop to a -2.8% GDP contraction marks the worst forecast since the COVID confinements in 2020.

One of the main reasons I have been warning about a recession in recent months is that predicting one is not that complicated, especially if we take into account historical patterns. The most important factor is the near inevitability of recessions following rate hike cycles, as shown in the chart below.

In general, the Fed raises rates until "something breaks," and that something is usually industries or speculative booms that flourished in the previous low rate environment.

Over the past three years, the Federal Reserve has embarked on an aggressive rate hike cycle, pushing the federal funds rate from near zero to a peak of 5.3%, the fastest increase since the early 1980s.

Recently, they cut rates to 4.3% amid growing signs of economic weakness. The tightening cycle had been even more extreme than the hikes of the mid-2000s that helped trigger the housing market crash and subsequent Great Recession.

While many economists and investors remain hopeful of a soft landing, history shows that such outcomes are rare, especially after rate hikes of this scale.

This time, I believe the U.S. economy will be dragged into a recession by the bursting of what I call the "everything bubble," a term I coined in 2014 to describe the multiple financial and asset bubbles inflated during the era of unprecedented quantitative easing (QE) and zero interest rate policy (ZIRP) after 2008.

In the U.S., this includes bubbles in real estate, equities, emerging technology companies, artificial intelligence, much of the cryptocurrency sector, healthcare, higher education and auto loans. Outside the U.S., similarly fragile real estate bubbles in Australia, Canada and Western Europe add to global economic risks.

Let's not kid ourselves: there are likely many other risks hidden beneath the surface, waiting to be exposed in the next recession. As billionaire investor Warren Buffett said, "It's only when the tide goes out that you find out who's been swimming naked."

Several key indicators are warning of an impending recession, or even suggesting that we may already be in one.

Among the most reliable is the yield spread between 10-year Treasury bonds and 2-year bonds, which is calculated by subtracting the yield on 2-year Treasury bonds from the yield on 10-year Treasury bonds. This measure has accurately predicted the last six recessions. When the spread falls below 0%, it indicates an inverted yield curve, one of the strongest predictors of an impending recession.

As shown in the graph below, the shaded gray areas represent past recessions, clearly illustrating the historical correlation between yield curve inversions and economic downturns.

Another recession indicator based on the yield curve is the New York Fed's Recession Probability Model, which estimates the probability of a recession in the next 12 months. As this indicator increases, so does the probability of a recession.

However, when it begins to fall, it coincides with the disinvestment of the yield curve, a sign that the economy is likely already in recession.

Over the past year, this indicator has begun to decline, suggesting that, unfortunately, the U.S. economy is already in recession.

As I commented earlier, I believe the U.S. is in the midst of another housing bubble - what I call the Housing Bubble 2.0 - and I expect its collapse to be a major trigger for the next recession.

Simply put, inflation-adjusted U.S. home prices have already surpassed the peak of the mid-2000s housing bubble that led to the 2008 collapse. Remember The Big Short ? We have made the same mistake again.

Housing has become so expensive that, in order to buy a median-priced home of $433,100, Americans now need an annual income of $166,600, even though the median household income is just $78,538, as Fortune recently reported.

This level of imbalance is unsustainable and history has shown us exactly how it ends: with a collapse of the real estate market.

Severe housing unaffordability in recent years has driven existing home sales to their lowest levels since 1995, even though the U.S. population grew by 80 million during that period.

This is a clear sign of a deeply dysfunctional market, which cannot be sustained indefinitely. Sooner or later, something will have to give, and that something will be housing prices returning to reality.

Federal Reserve stimulus during the pandemic artificially inflated home prices to unreasonable levels, which fueled a surge in housing construction.

Now, as those newly built homes hit the market, an oversupply is emerging, particularly in the Sun Belt region. This type of excess inventory is a classic warning sign that often precedes a real estate crisis.

As home sales stagnate due to lack of affordability and inventory continues to increase (with even more on the way), housing starts have entered a recession. This downturn is a classic recession indicator, heralding broader economic weakness in the future.

Another key indicator of the health of the U.S. housing market is homebuilder stocks, tracked by the SPDR Homebuilders ETF (XHB). Right now, these stocks are starting to recover, just as they did in 2005, before the housing market crash that followed a couple of years later.

A decisive close below the $96 to $100 support zone would signal the start of a deeper bear market in housing and construction stocks, which will spread throughout the U.S. economy and accelerate the recession.

In addition to the housing market, another major bubble that I believe will burst is that of U.S. stocks. Numerous indicators confirm that the stock market is dangerously overvalued and poised for a reversion to the mean, a correction that will drag down inflated stock prices and serve as a symptom and catalyst for the coming recession.

One of the clearest signs of this excessive valuation is the cyclically adjusted price-to-earnings ratio (CAPE) of the S&P 500, which compares the current price of the S&P 500 to its average earnings over the past 10 years.

Historically, when this metric reaches extreme levels (20 and above), sharp market declines tend to occur.

Technology stocks, in particular, are hugely inflated, as evidenced by the Nasdaq 100 adjusted by the U.S. M2 money supply, which represents the total amount of dollars in circulation. This metric reveals that the Nasdaq 100 (and tech stocks as a whole) are now even more overvalued than during the dotcom bubble of the late 1990s, which ended in a spectacular crash.

When the "everything bubble" bursts, triggering a severe recession (or, more realistically, a depression), the Federal Reserve and the U.S. government will do everything possible to prop up the economy.

This will include reducing interest rates to zero (or even negative territory), while abruptly ending the current policy of quantitative tightening (QT) and reviving quantitative easing (QE).

In doing so, they will digitally create hundreds of billions (eventually trillions) of new dollars in a desperate attempt to stabilize the financial markets and the economy in general.

Gold has a remarkable ability to anticipate recession risks and the monetary stimulus that usually follows, two factors that are very favorable to its price. This is one of the main reasons why gold has risen over the past year, leaving many puzzled.

As the next recession unfolds, I expect gold to continue its upward trajectory, with silver eventually catching up, as it historically tends to lag before making its move.

In summary, the risk of a recession in the United States is increasing rapidly, and I expect it to involve the bursting of several bubbles within the "everything bubble", especially in the real estate and stock market sector.

Unfortunately, this economic crisis was already well underway long before Trump won the election, leaving him little ability to avert it.

This impending recession will cause serious damage to traditional investors, who are highly exposed to oversupplied trades such as housing, stocks and cryptocurrencies.

However, for those positioned in precious metals - a small but savvy minority - it will be highly profitable and beneficial.

Jesse Colombo, Money Metals