There’s one indicator (and I’ll bet it’s one you’ve never seen before) that’s pointing toward a new secular bull market in gold.

July 27, 2022

Dear Fellow Investor,

I used to think that it was hard to explain the role of gold as money. Someone either “got it,” or they didn’t.

But then I figured out how to explain gold in a way that almost everyone understood.

You see, over the past few years I’ve begun to give lots of presentations on gold to audiences that contained a significant number of investors who are new to the sector.

In these cases, I try to begin my speeches by explaining a “gold-centric” view of the financial system.

I have to thank my friend Russ Gray of The Real Estate Guys for prompting me to sharpen my focus on this approach. I’d already been in the industry for decades when I first met Russ about eight or so years ago, and at that time he was relatively new to gold and silver.

But Russ is a great educator with an amazing talent for simplifying complex ideas, and he was naturally able to distill the concept of gold as money into something very basic and understandable.

Essentially, he approached gold as the center of the financial universe.

And, much like the way that the helio-centric understanding of the sun as the center of the solar system changed the way we viewed the heavens, understanding that the prices of all assets fluctuate against the constant value of gold changes the entire way we look at economics and the financial system.

Of course, I knew this well, having the great fortune to learn these concepts from Jim Blanchard and many of the most remarkable thinkers in Austrian economics. But Russ’ approach reminded me to go back to the basics, especially when trying to explain the “why” of gold.

Because to explain that, you have to get past the fact that the concept of gold as money is foreign to most investors. They’ve grown up believing the dollar, the euro and other currencies are money.

But once an investor gets the concept that gold isn’t, say, $1,700 an ounce, but rather the U.S. dollar is 1/1,700th of an ounce of gold…from that point on they view the world in an entirely new way.

For example, they understand that the role of gold in a portfolio is not, at least foundationally, as an investment...but rather as insurance against the inevitable loss of purchasing power of currencies. They can appreciate, in a great metaphor that Russ popularized, that currencies are like skydivers — constantly in free fall. Some are falling more quickly for a few moments, then others take their place in the lead. But they’re all falling.

So a couple of years ago I began including this approach in my presentations for more-generalist audiences, and I think it’s been very valuable.

To help explain the concept, I use some powerful slides from the wonderful PriceInGold.com website.

As its name implies, this site charts the historic prices for dozens of commodities and assets, but with their nominal prices divided by the then-current price of gold. In this way, the prices in dollars are instead tracked according to their varying equivalent amounts of gold.

In other words, it tracks how the prices of these assets revolve around the non-changing value of gold.

The results can be dramatic. For example, the prices of the Dow, the S&P 500, an Ivy League education, a Big Mac and more haven’t changed in over 50 years when measured against gold.

Gold truly is the unchanging standard against which all other assets revolve.

However, there is one thing that gold has not been able to keep up with...one asset that has often been able to increase far more rapidly than even gold can keep up with.

That “asset — or, more accurately, “liability” — is government debt.

And this brings me to the point of this issue. As you can see from the accompanying chart, federal debt, even when priced in gold, maintains a broad trend from the lower left to the upper right since 1900 (as noted by the red arrows).

But also note the three instances that I’ve circled — the periods when the trendline sharply declines. This is when gold “catches up” as its dollar price soars.

There are three such occurrences noted: the 1970s, the 2000s...and today.

The prior two periods saw the price of gold multiply roughly eight times over as the cycle played out. These were notably the times when people truly became concerned about price inflation.

As I noted on Twitter the other day, gold is insurance against inevitable currency depreciation. It’s an investment when people are about to freak out about the purchasing power of their currencies.

Which brings me to the third circle, a trend that seems just aborning. If this downtrend in the value of federal debt denominated in gold develops similarly to the previous two instances, then we are in the early stages of a multi-year megatrend in gold.

Frankly, I think this is the most important and compelling chart that I present. If its forecasting what I believe it is, every investor absolutely needs to be substantially positioned in gold, silver and the associated mining equities.

So whenever a daily drop in gold gets you down, pull this chart out and reflect on it. And make sure you’re positioned for the upcoming repeat of the 1970s and 2000s.

All the best,

Brien Lundin
Editor, Gold Newsletter
CEO, the New Orleans Investment Conference

P.S. Remember, the best way to make sure you’re properly positioned for this new gold megatrend is to attend the one event that’s guided investors through every previous one: the New Orleans Investment Conference.

CLICK HERE to learn about this year’s blockbuster event and our amazing roster of experts.