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Dear Fellow Investor,
Last week, I led off my July issue of Gold Newsletter with this statement: “Believe it or not, I’m excited about the gold market.”
I also noted that I wouldn’t blame them for thinking I was crazy.
After all, gold had recently broken through major support lines to six-month lows, had just traced out a “death cross” on the charts and was battling against trade wars and intractable political turmoil in the eurozone that were keeping the dollar elevated.
There was little evidence to argue for higher gold prices at the time, and few willing to present what little there was.
To give some context, I had just asked my thousands of Twitter followers, which include many of the most outspoken gold bugs out there, to contribute their reasons why gold was bottoming at the time.
The result? Crickets. Not a single response.
And I didn’t blame them. Considering everything, how in the world could anyone be excited about gold at the time?
Easy: Because it was precisely at such times, if one had both cash and courage, that a foundation could be built for a fortune in the resource markets.
The most successful investors in metals and mining are those who have learned to play the cycles in the sector to their advantage...to fight their emotional swings and employ cold, calculating logic in their investing decisions.
In other words, to buy low and sell high.
Of course, this advice is easy to give but hard to take. But over the last month or so my convictions have been bolstered by our Money, Metals and Mining cruise around Europe, in which I spent 10 days in deep conversations with an elite group of very smart, very successful experts and investors.
Granted, we were all talking our own books, and it’s easy to get your emotions ratcheted up in an echo chamber. But every one of these investors has experienced a number of cycles in the markets and paid significant real-world tuition to learn their investing lessons.
And we were all excited about the bargains that are now available, especially in the context of a gold market that, inevitably, will rise to far higher levels.
The Lesson Of History
A focus of my recent speeches, and one that I’ve also begun to explore in these pages, is the idea that we’re living out a story that has been played out similarly over millennia of human history, with only minor variations.
Governments overspend on wars, official extravagance and/or entitlements, piling up unmanageable debts. To reduce the costs of such debts, they debase the currency.
It’s happened over and over, without fail. And it’s happening again today.
The CBO just came out with a projection that the Federal debt will double over the next 30 years. Actually, past experience argues that the debt will more likely quadruple over that time span.
Regardless of what may happen over the next few decades, the Federal debt is already too high to address through tax hikes, spending cuts or growth.
Simply put, the dollar will be...must be...devalued more rapidly than we’ve seen before during our lifetimes.
It’s simple math, and it’s inevitable.
The variation this time — and it’s an important one — is that for the first time in human history every developed economy is in the same boat. Every currency will be devalued.
But if every currency is getting cheaper, what will be the remaining standard of value?
The same one that has always played the role: gold.
Of course, other tangible assets, like silver, other precious and base metals, commodities in general and real estate, will also benefit and offer their own particular advantages.
But gold will be the one to rule them all, and serve as the standard against which all other asset values are measured as they constantly shift in relation to it.
To illustrate this powerfully simple fact, I began my first presentation on the Money, Metals & Mining cruise with a slide that simply posed this question: “What is an ounce of gold worth today?”
My audience jumped at the easy answer, with one up-to-date attendee volunteering a price of $1,295.
“Wrong!” I countered. “That’s the inverse of the value of the U.S. dollar.” Then, with as much flourish as I could muster, I revealed the answer with the next slide:
An ounce of gold is worth...an ounce of gold!
Get the point? Gold’s value is constant; the values of everything else fluctuate around it.
Just as the heliocentric view of the solar system radically transformed our understanding of the universe, this gold-centric view of money dramatically changes how you view the values of everything else.
For instance, knowing that currencies will depreciate while gold will generally hold its value — thereby rising in terms of fiat currencies and protecting your wealth from their depreciation — gives you comfort in stocking away some gold and silver as insurance, without worrying about the daily fluctuations in its “price.”
Of course, in addition to protecting your wealth there are opportunities to build wealth by investing in assets, like mining shares, that can offer leverage as currencies depreciate against gold. And we do a very thorough job of covering those opportunities in this newsletter and our Alert Service.
But it’s always important to remember what gold’s true role is, to remind ourselves that it will protect us against the inevitability of currency debasement, and to make sure we have our fundamental insurance of physical metals in place.
Where We Are Now
Last week, there were few willing to speak bullishly about gold.
This week, with the metal adding about $15 from its lows and with major technical evidence showing that last week was the bottom (as we predicted in Gold Newsletter), there’s a veritable chorus of experts calling for a big gold rally.
To put things in perspective, a 10% rise from these levels would get us to the $1,375 area for gold, above the important resistance at $1,372 (which was the 2016 high). Momentum from there could carry us above $1,400, where there would be no technical resistance before the old highs in the $1,800-$1,900 range.
That would equate to a 40%-50% rise in gold, which in turn would imply gains of 300% or more for just the average junior gold stock. The better plays, many of which we detailed in last week’s Gold Newsletter, would have the potential to rise 10 times or more.
That’s balanced against a downside risk of perhaps 5% from here.
Now see why I’m so excited?
All the best,
Brien Lundin
Editor, Gold Newsletter
CEO, the New Orleans Investment Conference
P.S. If you’d like to join the family of Gold Newsletter subscribers at this crucial turn in the markets, just CLICK HERE.
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