Gold Prices May Hit $6,500 by 2019
How Prepared Are You?
I am very excited to begin writing for Wealth Daily again.
Long-time subscribers know that I was an editorial contributor for Wealth Daily, focused on the gold and mining investment markets, up until the summer of 2011. It was then that the price of gold tipped $1,900 an ounce. And the equity positions in my premium newsletter services (as well as the positions in my own portfolio) were soaring.
I was sitting on dozens of triple-digit and several quadruple-digit gains. These gains were so spectacular that I decided it was time to secure all profits from my six-year run of gains. And I sold everything.
It was perfect timing.
The price of gold topped $1,900 an ounce, but only briefly, before a solid five straight years of price declines, which pushed gold prices all the way down to almost $1,000 an ounce at the end of 2015.
But after watching gold and mining markets continue to get beaten down as the Plunge Protection Team successfully delayed a still-coming catastrophe, I quickly reentered the gold and precious metal markets in October 2015 because I began to see the bigger picture...
And beginning around November 2015, I began to contribute to Wealth Daily's sister publication, Energy and Capital, urging subscribers to once again start buying gold and precious metal stocks.
Again, it was nearly perfect timing.
Gold prices bottomed out in December when the Federal Reserve decided to raise interest rates. Since then, my gold and precious metal recommendations to Energy and Capital subscribers have killed it. Here is every single precious metal stock I've specifically recommended to buy in Energy and Capital since mid-November...
|Company||Ticker||Market Cap||Recommendation Price (Date)||Last Price||Change|
|Avino Silver & Gold Mines||TSX-V: ASM||$98M||$0.80 (12/23/15)||$2.52||+215%|
|Barrick Gold||NYSE: ABX||$22.0B||$13.61 (03/28/16)
|Endeavor Silver||NYSE: EXK||$441M||$1.55 (03/02/16)||$4.44||+344%|
|First Majestic Silver||NYSE: AG||$2.5B||$3.42 (12/23/15)||$15.89||+365%|
|Goldcorp||NYSE: GG||$14.2B||$12.05 (11/16/15)
|McEwen Mining||NYSE: MUX||$935M||$2.21 (05/29/16)||$3.96||+79%|
|New Gold||NYSE: NGD||$2.1B||$3.73 (05/29/16)||$4.41||+18%|
|Royal Gold||NASDAQ: RGLD||$4.9B||$36.58 (11/16/15)
|Sandspring Resources||TSX-V: SSP||$81M||CAD$0.44 (05/29/16)||CAD$0.80||+82%|
|Sandstorm Gold||NYSE: SAND||$721M||$3.49 (05/29/16)
|Silver Wheaton||NYSE: SLW||$11.1B||$18.20 (05/29/16)||$26.13||+44%|
|Stillwater Mining||NYSE: SWC||$1.6B||$9.77 (05/29/16)||$13.22||+35%|
|Tahoe Resources||NYSE: TAHO
Now, I don't point those gains out to boast. Rather, I want you to see that the rally in the gold market is real... and so are the profits.
Honestly, these gains are just okay relative to those we've seen in the past when gold was screaming at $1,900 an ounce in 2011. And I expect that, even though they look pretty good now, the gains above will pale in comparison to those we'll see when gold prices really take off.
Here's the thing that the extreme majority of investors haven't figured out yet...
The gold bull market did NOT end in 2011.
Nor did it stall.
A long-term gold bull super cycle started in the summer of 2001. And it hasn't stopped since.
In fact — despite the drop in prices over the past few years — the long-term gold bull market is actually going exactly as expected. The thing is...
Investors simply can't see the forest for the trees.
But if history can be used as any metric of what we can look forward to from gold, prices could easily reach as high as $6,500 an ounce.
To understand what I mean, we have to go back to the late 1960s and early 1970s...
At that time, the U.S. found it necessary to begin abandoning the quasi-gold standard that had been adopted by the Gold Reserve Act of 1934.
And in August 1971, the Nixon administration announced that it would no longer freely convert U.S. dollars to gold at the official exchange rate.
This marked what many consider as the official end of any kind of gold standard in America — and the beginning of a 10-year gold bull market, which lasted through January 1980.
Here's the entire gold bull super cycle of the 1970s from beginning to end...
This bull market can be broken down into three general stages: where gold prices first rise, then fall, and finally soar.
Stage 1: Currency Devaluation Leading to Recession: 1971 through 1974 — Gold Prices Rise
Stage 2: Short-Term Currency and Broad Market Recovery: 1974 through 1976 — Gold Prices Fall
Stage 3: Uncontrollable Currency Devaluation Leading to Speculative Mania Buying: 1976 through 1980 — Gold Prices Soar
And the whole thing started with old Tricky Dick...
Stage 1: Currency Devaluation Leading to Recession
Nixon's move to deny the dollar's convertibility to gold had an immediate and clear impact on the value of the greenback as measured by the U.S. Dollar Index, which plunged 25% from 1971 to mid-1973.
This led to a period of higher U.S. inflation levels and (in conjunction with the energy crisis) eventually tipped the entire global economy into a recession lasting through 1975. This was the first global recession since WWII.
At that time, there was no private market for gold in the U.S. In fact, Americans didn't fully regain the right to own gold bullion until the last day of 1974. But private gold markets elsewhere around the world did exist. And from the day Nixon halted the dollar's convertibility to the yellow metal, the price for gold against the U.S. dollar soared nearly 400%. This marked the first stage of the gold super cycle with gold prices rising.
Stage 2: Short-Term Currency and Broad Market Recovery
To answer the American recession in the mid 1970s, the Federal Reserve dropped key interest rates and increased money supply to spur lending and jumpstart the economy. It worked for a very brief period, and the U.S. dollar seemed to recover. And during this second stage of the 1970s gold super cycle, the price of gold decreased for several months.
But the Fed's monetary policies eventually caught up with them. And the U.S. dollar fell to one of its lowest points in history.
And that's when gold prices took off — sending them to record highs and increasing over 500% in less than two years.
Now, here's why all that's important...
Nearly the same exact scenario started in 2001 and continues to unfold before our very eyes today — with only a few minor exceptions.
The First Two Stages of Today's Gold Bull Market Super Cycle
Starting in the summer of 2001, the value of the greenback as measured by the U.S Dollar Index started to plunge leading up to the global financial crisis of 2007.
Then the Plunge Protection Team stepped in with the Federal Reserve cutting key interest rates and (this time) introducing their first round of quantitative easing to spur lending and jumpstart the economy. Any of this sounding a bit familiar?
|U.S. Dollar Index 1970–1976||U.S. Dollar Index 2001–2011|
|Click to Enlarge|
This time, however, the gold markets weren't restricted in terms of investment vehicle options — meaning the market was significantly larger and more volatile. The result...
The price of gold continued to soar against the U.S. dollar well past the recession and through 2011 to record highs of over $1,900 an ounce as fears of higher inflation spread. Although it lasted over a longer period of time, and the market was unrestricted in terms of investment vehicles, the period from 2001 to 2011 represents the first stage of the ongoing gold super cycle.
Some believe that's where the story ended for gold. Because the price of gold dropped for four years straight. But they forget (or never knew) that gold prices also dropped for nearly two years during the super cycle of the 1970s for the same reasons the yellow metal's value fell between 2011 and 2015 — resulting in the second stage of the ongoing gold super cycle.
Just compare gold prices from the first two stages of the 1970s gold bull super cycle to prices from 2001 to today...
|First Two Stages of 1970s
Gold Bull Market
|First Two Stages of Today's
Gold Bull Market
|Click to Enlarge|
The Plunge Protection Team was able to delay the crash that started in 2007. But we can expect that — again, just like in the 1970s — the Fed's monetary policies will eventually catch up with them. And that a crash in the U.S. dollar (and probably another global recession) is inevitable, ushering in the third and final stage of the 21st century gold bull super cycle.
Stage 3: Uncontrollable Currency Devaluation Leading to Speculative Mania Buying
Between the bottom of gold prices in August 1976 to the top in January 1980 (41 months), the price of gold soared 514%!
If we consider gold prices in December 2015 as the bottom, an equivalent 514% increase puts gold over $6,500 an ounce.
|1971–1980 Gold Bull Super Cycle||2001–Present Gold Bull Super Cycle|
|Click to Enlarge|
The next financial crisis could make the crash of 2008 look like a fender bender.
And make no mistake about it...
The Federal Reserve and corrupt politicians can’t save the value of the U.S. dollar or your hard-earned assets, even if they wanted to. Take control of your own money and do what the smart money did in 1976...
Gold is money — despite what some might want you to believe. Money (the U.S. dollar to you) is nothing more than a medium for labor storage and exchange. Gold is the ultimate medium for labor storage (a.k.a. “wealth storage”). However, it does not make for a great medium for exchange. But that doesn't matter because the goal of this investment is not using physical gold as currency... it's ultimately to simultaneously hedge against global recession and leverage this coming spike in gold prices.
The safest way to hedge against global recession and leverage this coming spike in gold prices is to diversify your precious metal assets... don't put all your eggs into one gold mine.
You're going to want to own physical gold as well as a portfolio of precious metal stocks, ranging from small-cap exploration companies to major international producers.
The physical gold will protect your labor storage and can be easily converted back into a fiat currency (maybe not the U.S. dollar) for easy exchange at any time.
Larger mining stocks are going to more safely leverage rising gold prices, while small-cap exploration firms offer greater potential for big returns (with greater risk). There have already been several quadruple-digit gains from micro-cap mineral exploration stocks since the beginning of this year. Just during the first half of 2016:
- Rupert Resources (TSX-V: RUP) increased over 3,500%.
- Gold Mountain Mining (TSX-V: GUM) and West Red Lake Gold Mines (CSE: RLG) ballooned over 1,200%.
- Silver Bear Resources (TSX: SBR) and Colorado Resources (TSX-V: CXO) have also moved over 1,000% higher.
The price of gold has increased about 25% since bottoming out in December. And the fact that prices have risen so much so quickly will turn some investors off... thinking they've missed the boat. Don't let the rise in gold prices stop you from buying now. By my estimate, the price of gold has only moved 5% of what we can expect.
The stars are aligned. The price of gold is coiled to skyrocket. Act today.
Over the next several weeks, I will be bringing you much more on the specifics of investing in gold and gold stocks, as well as several recommendations like those I brought to Energy and Capital subscribers.
But you can prepare right now, without any need for a broker or trading account. All you need is a little cash — $150 would even get you started.
I'm talking about owning physical gold.
There are several important aspects about physical gold that affect retail prices. That is to say, all gold is not equal. There are even certain gold coins that, when you go to sell them, can sometimes only fetch 90% of the value contained in the coin.
Like every other market, the physical gold bullion market is cyclical. And as we go forward, I'll tell you exactly which physical gold bullion to avoid and which to buy as the market changes to help you maximize your physical gold investments.
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But right now, I want you to go find and purchase an American Gold Eagle within your price range.
As the official gold bullion coin of the United States, the American Gold Eagle is the standard among physical gold bullion. There is simply nothing better. The American Gold Eagle is not the most affordable of the gold bullion options. However, it is the most widely recognized and traded gold bullion coin in the world and is a must-own for any serious gold investor.
The standard size for the American Gold Eagle is one troy ounce. (AGEs actually weigh over a troy ounce in total weight but contain one full troy ounce of pure gold.) But they are also available in fractional sizes of 1/10-, 1/4-, and 1/2-ounce.
Brand new precious metal investors are often surprised to find that American Gold Eagles sell at prices higher than current cash spot prices as quoted by the CME Group. That means, with gold cash spot prices currently at about $1,325 per ounce, the retail price for a one-ounce American Gold Eagle can be over $1,400. But a retail “premium” is attached to all physical gold bullion, whether it's government-issued or privately minted.
The premium for American Gold Eagles is notably higher than most other government or privately minted gold bullion. However, nothing matches the American Gold Eagle's recognizability and liquidity. (The Canadian Gold Maple Leaf is a close second.) And for serious gold investors, the American Gold Eagle is the bullion coin to own.
The fractional American Gold Eagles retail at a higher premium than their full one-troy-ounce counterparts. For example, a 1/10-ounce American Gold Eagle retails for about $150 right now. So that's equal to paying $1,500 for an ounce of gold while CME spot prices are at about $1,325. And again, a full one-troy-ounce American Gold Eagle would retail for a bit over $1,400. So buying larger coins is more affordable.
But don't get too bogged down with premiums for now. When you go to sell your American Gold Eagles, you'll also be able to sell them at a premium over CME cash spot prices. And if you believe the price of gold is headed anywhere to the heights I do, that little extra premium won't matter much.
At the very minimum, I want you to go right now and buy a 1/10-ounce American Gold Eagle.
American Gold Eagle
Now, this is very important...
I absolutely do not want you to buy any kind of “collector” coin.
Some coin collectors do collect American Gold Eagles. And this does add to the retail price of some AGEs. Mostly, these are coins that have been authenticated and certified being in exceptionally good condition. The most well-known coin authenticators are PCGS and NGC — and you'll sometimes see American Gold Eagles in their holders (as seen below).
Stay away from these! These are coins for collectors, not investors.
When buying 1/10-ounce American Gold Eagles, or any bullion coin, for that matter, the most affordable options are typically going to be either brand new or “random date” uncirculated coins.
Most of the time they are referred to as “BU,” which is simply an abbreviation meaning “Brilliant Uncirculated.” Here's a screenshot from bullion dealer APMEX's website as an example:
The 1/10-ounce American Gold Eagle actually represents more than half of my personal physical gold holdings — both long and short term. I find that it is the easiest physical gold bullion coin to trade because, whether you're selling rolls of 20 coins or individual ones, there's always a fast buyer for small amounts of gold.
I've tried to only cover the very basics of my overarching argument for higher gold prices and how to create leverage. And I've already taken up too much of your time today.
But as I already mentioned, I will be bringing you much more on investing in physical gold and other precious metals as well as related equities and funds to take advantage of what I believe will turn out to be the greatest gold bull market in history... perhaps the greatest bull market, period.
I'm very excited to rejoin Wealth Daily. And I'm certain I'll be able to show you some great big profits from gold and precious metal investments.
We'll talk again soon,
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