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Dear Fellow Investor,
The set-up is almost perfect.
I say “almost” because, despite a scorching run in silver yesterday, both metals are down today.
Still, the story remains the same: When silver out-performs gold, it’s a sign of a healthy bull market based on long-term economic fundamentals.
And as you can see, silver has been taking off like a banshee since the early days of this month.
For its part, gold just hasn’t been able to catch up. But it should begin moving, and soon.
Why Is Silver Taking Off?
At the end of March, I told my Gold Newsletter readers that a break-out in silver was imminent.
The reason: The “paper silver” speculators in the futures markets had, for the first time ever, gone “net short” on the metal. These traders are usually wrong on market direction, and they were more bearish on silver than ever before.
On the other hand the commercial segment of the futures market, who are usually short the metal to some extent, had gone essentially flat in their positioning. This sector is usually right on market direction, and they had basically turned very bullish (commercials typically short the metals because they have to lock in pricing for their inventories).
This factor argued for a dramatic move higher for silver over the near term, as once the price started to move the speculators would have to buy hand-over-fist to cover their short positions.
That appears to be happening right now.
Importantly, as I told my Gold Newsletter readers in late March, “It’s hard to imagine a scenario where silver rises but gold doesn’t.”
Right now, silver is moving while gold is still holding fast. But I don’t think that’s going to last for long.
Revisiting The Fundamental Story For Gold
I just returned from a week-long cruise through the Caribbean, but I had little time to relax.
Instead, I presented the fundamental investment thesis for gold and silver on the “Real Estate Guys” Investment Summit At Sea.
The experience was nothing short of amazing — a true intellectual tour de force, with a surprisingly varied group of speakers including Robert and Kim Kiyosaki, Peter Schiff, Chris Martenson and Adam Taggart (of Peak Prosperity), G. Edward Griffin, Simon Black and, of course, the Real Estate Guys themselves in Russ Gray and Robert Helms.
It wasn’t all real estate, by any means. In fact, the speakers above focused on the major economic trends affecting all asset classes.
A number of these same speakers will be presenting at this year’s New Orleans Investment Conference, being held from November 1-4, and I urge you to register now for this exciting gathering.
You’ll not only save up to $400 and get a free Gold Club upgrade, but you’ll guarantee your attendance at an event that’s going to be especially valuable as the major markets reach important turning points.
But back to last week’s investment cruise....
Because the group I was speaking to was, by and large, new to the metals and mining sector, I focused on presenting the “big picture” for gold and silver. It was a refreshing exercise, literally, as it forced me to reexamine the fundamental reasons why every investor has to own some gold and silver.
In a word, the reason is debt.
I told the Summit audience that, although today’s Federal debt load is absolutely enormous, the situation facing us is nothing new.
Throughout thousands of years of human history, governments have repeatedly overspent to fund wars and/or entitlements. The examples are countless.
And in every occurrence, the supposed remedy was the same: The currency was devalued.
When currencies were gold and silver coins, the edges of those coins would be clipped by citizens, or the government would dilute the gold or silver with cheaper alloys. In the Civil War, paper currencies would be backed by increasingly smaller fractions of gold.
It was in every case a form of monetary debasement.
The point is, the same scenario has happened over and over again throughout history, and everywhere and always the end result has been a debasing of the currency to devalue the government’s debt load.
It’s important to remember that nothing is new under the sun.
Except now.
You see, today’s situation is different in one key way: Instead of a debt crisis occurring in a single nation or economy, it’s occurring in every developed economy in the world.
In past debt crises, a nation could devalue its currency and get back on a path to economic growth as its cheaper currency provided a trade advantage over its peers.
But in today’s inter-connected, global economy, every developed nation now sports an unmanageable debt load. Thus, there is no other currency that they can devalue against — no standard anchor of value save one.
And that’s gold.
...Plus, of course, silver. And other “real,” tangible asset classes to some extent.
As we endure the daily fluctuations of metals prices, it’s important to remember that the U.S. and every other major economy are traveling an unalterable path toward currency devaluation.
Because of this, anyone with any appreciable level of assets needs to protect themselves with physical gold and silver. And investors looking to grow their wealth need to build exposure to not only the metals, but the miners as well.
All the best,
Brien Lundin
Editor, Gold Newsletter
CEO, the New Orleans Investment Conference
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