The Pause
That Refreshes
Gold takes a break from its head-snapping rise.
Is this your last chance to get onboard?
Dear <<MainListProfiles\ESP_FIRST_NAME Default=’Fellow Investor’>>,
A few days back I told you that gold was proving me wrong.
That’s because I had been skeptical of the amazing gains the yellow metal had been making.
I was the first analyst to predict — back in December — that investors would start worrying about negative interest rates in the U.S. and that gold would soar in response.
But I had never expected it all to happen so quickly…and for gold to post such a strong rally right out of the gate in 2016.
Gold’s been up as much as 20% since the beginning of the year. And the Gold Bugs index of gold stocks multiplied those gains three times over.
That’s a tremendous performance by any measure. But with just about every other asset class experiencing major sell-offs at the same time, you can understand why so many trend-following investors have jumped into the gold camp.
And, not coincidentally, you can understand why the metal has taken a break from its rocket-like trajectory — the gold bull likes to buck as many people off of its back as it rises.
So the market got a bit over-extended, as you could expect. In the paper gold market, the large speculators had gotten hugely long, while the large commercials built up big short positions as the price rose.
A correction was expected. And so it’s happened as, over the last couple of trading sessions, gold’s lost about $35.
Part of this has been the Johnny-come-lately investors quickly dumping their new gold holdings as the upward momentum waned. Part of it has profit-taking by those who had bought awhile back.
And part of it has been worries that the Fed will announce tomorrow, at the conclusion of its latest meeting, that more rate hikes are likely.
Add it all together, and I wouldn’t be surprised to see gold continue to languish over the next week or so.
If so, you need to hand on tight…because the longer-term view is as bullish as ever.
Golden Opportunities continues below…
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Betting On
The Inevitable
Why do I believe that higher…much higher…gold prices are inevitable?
First, because we are absolutely addicted to a world of debt and the easy money that finances it.
Consider that fully one-quarter of the developed world is now living under negative interest rates.
That means that banks are charging you rent for your savings. On a relative basis, they’re paying you to take your money out of the bank and spend it on something…anything.
The unintended consequence is that people are taking their money out of the banks and buying gold.
Did you know that it’s now become incredibly difficult to find a safe in Japan to buy? The demand for them has soared through the roof.
The Japanese (and everyone else living under negative interest rates) have rediscovered the age-old reality: When cash no longer works, gold will.
Second, the U.S. is not immune to the addiction to debt and easy money. As the only major economy that is (supposedly) in a tightening mode, America is trying to fight against the tide of monetary easing around the world.
Recent U.S. economic data have raised the possibility of a recession in the near term. Although I was among the first to point to this, at the moment I think the odds have diminished somewhat.
Still, whether it’s next month or next year, a U.S. recession is inevitable. And whenever it occurs, the margin between the current interest rate and zero will be razor-thin.
That’s because it will be generations before the Fed can “normalize” interest rates again.
Never mind how fragile the economy is — the Federal debt is so large that just paying the interest at higher rates would bankrupt the country.
No, easy money is here to stay. And that will stoke a constant fire under the gold market.
Third, gold production is falling. It takes about 20 years from discovery to production for the average gold mine, and the record shows that discovery of new gold deposits peaked about 20 years ago.
Just as you would expect, the World Gold Council says that we reached peak gold mine production last year…and gold production will continue to slip from this point on.
Fourth, even as gold production is falling, demand is surging.
Consider this: Last year withdrawals from the Shanghai Gold Exchange (which represents total domestic demand in China) surged to 2,650 tonnes!
To put this into perspective, only about 3,165 tonnes of gold were mined last year…so the vast majority of that newly mined gold was absorbed by China alone.
Add in India with about 850 tonnes of demand last year, and you’re already dipping deeply into above-ground supplies with demand from just those two countries.
So you can see why I believe much higher gold prices are inevitable over the longer term.
Now, here’s why I think we could get a major surprise in the short-term…
Something’s Up
In Gold
Considering the statistics above, you won’t be surprised to learn that massive supplies of gold have been moving from West to East.
As a result, as I’ve reported here before, the amount of gold backing futures contracts on the Comex has been dwindling.
When I first started telling you about this, there were about 50 claims — or “owners per ounce” — for each ounce of gold in the Comex warehouse designated to back futures contracts.
Then, not long ago, I told you that the owners-per-ounce figure had soared to 150. Then it briefly spiked to 540 owners-per-ounce, before settling back around the 150 level today.
Concurrent with this, someone’s been buying gold hand-over-fist in the New York market. This is completely contrary to our experience of the past few years, when gold would be strong overnight in Asia, only to get clobbered in New York.
For example, the Friday before last, when the February nonfarm payrolls number was released, was a prime example. At 242,000 jobs, it was a blowout, upside surprise…and incredibly bearish for gold.
The metal immediately dropped $10 an ounce…but then quickly surged over $25!
Somebody was buying gold regardless of the economic data or headlines, and they were doing it in New York.
Frankly, I think there are some hedge funds testing the tenuous supplies of gold backing the massive paper gold market. It won’t take much to send the Comex into the market to buy gold desperately…or to break its rules and settle in cash for deliveries.
Either way, the world’s investors will be forced to face how little gold there is in the West, and the price will spike far higher.
That’s the short-term wildcard. I won’t hazard a guess as to its likelihood, but I do believe that much higher gold prices over the long-term are a near certainty.
Three Things You Need To Do Now…
If you accept the fact that gold’s going to be much more expensive in dollars, yen, euros and the rest, then you need to get prepared.
Here’s what I think you need to do right now.
1) Buy Kaminak Gold (KAM.V; C$1.28). With millions of ounces of gold and a robust feasibility study in hand, Kaminak is my top gold stock recommendation.
Of course, it’s already up a lot since I last recommended the stock. But the current correction in gold has taken the share price back from its recent peak, and there are rumors that big companies are considering a take-over offer.
Buy it now, while it’s on sale.
2) Subscribe to Gold Newsletter. I’m not going to mislead you and say that we’ve been rolling in the dough over the past few years as gold and silver prices have been in a tailspin.
But I will tell you this: In a gold bull market, nothing has outperformed Gold Newsletter.
After decades as the nexus of the investment end of the business, my rolodex in the resource market is unsurpassed. And I often discover companies and situations that completely escape everyone else.
The result is that we’ve found stocks that don’t just multiply four or five times over, but 10, 20…even as much as 40 times over.
If gold’s in a bull run (and I believe it is, or will be in the very near future), then you absolutely need to read Gold Newsletter.
CLICK HERE to subscribe now, and we’ll rush you my Money Multipliers special report, with details on my current Top Ten stock recommendations.
3) Mingle with the world’s top experts in the lap of luxury. As you can see, we’ve featured an ad for this year’s exciting Money, Metals and Mining investment cruise to Alaska.
On this cruise, you’ll mingle with Rick Rule, Brent Cook, Mike Larson and yours truly on the uber-exclusive Crystal Cruise line…and get our top strategies and specific recommendations.
Then you’ll enjoy a special one-day symposium in Vancouver, featuring presentations by Peter Schiff, Gwen Preston and Eric Coffin.
Quite frankly, if you’re looking for a key to a fortune in gold’s next big run, this is it.
This reminds me of the first investment cruise I participated in, back in 2006. Many of the resource stocks I recommended then more than tripled in value soon after. One soared over 30 times in price.
That’s the kind of opportunity I see facing us now.
But our cabin block for our Alaska Cruise is about to expire, and your chance to participate will disappear. So CLICK HERE to learn more.
All the best,
Brien Lundin
Publisher, Gold Newsletter
CEO, the New Orleans Investment Conference
P.S. If you’re not a Gold Newsletter subscriber, you can join up immediately and get access to all our upcoming updates and recommendations by clicking here.
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