Justin’s note: Today, we’re sharing part two of an exclusive interview between gold expert E.B. Tucker and Chris Lowe, editor of Legacy Inner Circle.
In part one of this interview, E.B. explained why gold prices are set to rally. Today, he’ll tell us how you can make up to 25x more by speculating on gold stocks…
And don’t forget: in just a few hours, at 8 p.m. ET, E.B. is hosting an urgent online event with Doug Casey to reveal a little-known strategy they’ve both used to book big winners over the years. This unique type of security could make you 1,000%-plus in 2019 outside the stock market.
If you haven’t yet, reserve your spot for free right here. It’s sure to be one of the most important events in Casey Research’s history.
Chris: What is going to push gold prices higher?
E.B.: You have to think like a professional fund manager. Because those are the guys that move the needle on the gold price.
And right now, fund managers are looking at the U.S., which has gone on this 10-year run of levitating stock prices… where Amazon has gone up half a percent a day or whatever… and they’re saying to themselves, “This is getting a little stretched. I should start taking some risk off the table to protect my downside.”
Then you look at gold. You see that we’ve had this exodus from gold over the past seven years. And you say to yourself, “Gold has been going down for years. It’s getting to the point where there aren’t many people left to sell. Just like there’s not many people left to buy Amazon stock.”
The same is true of your typical mom-and-pop investor. If you go to your local shopping mall and take a survey, I’ll bet you a lot of the folks you talk to will have Amazon, Facebook, Google, and Netflix stock in their brokerage account or their 401(k).
And if they don’t, chances are they own shares in one of the big index-tracking ETFs. So by default, they own a lot of these stocks anyway. But I bet you none of them have any gold.
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Chris: You’re on the board of a gold royalty company. And you used to co-manage a fund that invested in gold and silver mining stocks. Are you seeing the same lack of interest in gold at industry events you go to?
[A gold royalty company finances mining projects in return for royalty payments on the gold they produce.]
E.B.: Look, nobody cares about gold mining stocks right now – not even folks in the industry. I’m going to the PDAC [Prospectors and Developers Association of Canada] convention in Toronto at the start of March. It’s the premier international event for the mineral industry.
Still, you can go to the PDAC convention, and there’s hardly anybody there. There’s no interest in mining stocks right now. But that’s good. It’s yet another sign we’re at the bottom. And that means we’re close to another historic run higher for gold.
Chris: What kind of returns can folks expect in a gold bull market?
E.B.: The king of all gold bull markets was 1979-1980. Gold more than tripled, racking up a 214% gain. But gold stocks more than quadrupled. The average return for the leading gold stocks was 322%.
And that wasn’t the only time gold stocks soared. From 1981-1983, gold producers returned over 70% on average. This stemmed from a mere 11% rise in gold. And it happened in less than two years.
There was another boom in the 1990s. The average gold producer went up more than 200%, while gold only rose 8%.
Then another big boom hit from 2001-2006. Gold returned 158%, while the average gold producer gained over 400%.
Chris: Why do gold stocks outrun physical gold in these rallies?
E.B.: Physical gold is money. You don’t speculate with physical gold. You’re not buying it to see a huge appreciation and then sell it. Physical gold – whether it’s bullion or coins – is money you own and trade for whatever you need. It’s a good form of money to own on your personal balance sheet because it’s not someone else’s promise to pay.
Mining stocks, on the other hand, are speculations. They’re moonshots. You see these explosive moves higher in gold mining stocks when the gold price is climbing.
That’s because when the price of gold goes up by, say, $100, the profitability of the mining company goes up exponentially.
Think about it. All the mining company’s labor contracts… its processing costs… its smelting costs… its transportation costs – these are all locked in in the short run. So the extra $100 flows straight to the company’s gross profit. It’s doing the same work – at the same cost – to extract the ore. But it’s selling it for $100 more.
Gold stocks are leveraged speculations on the underlying gold price. That’s why a small increase in the price of gold can cause a gold stock to soar many times that amount.
Chris: Could you walk us through how that leverage works in the gold market?
E.B.: The word “leverage” usually means borrowing. But that’s not the case in the gold market.
Let me give you an example. Let’s say the price of gold rises from $1,300 to $1,400. That’s roughly an 8% gain if you own physical gold.
Now, let’s say you own shares in a mining company that owns 1 million ounces of gold in the ground. And say it costs the company $1,250 per ounce to mine that gold. At a gold price of $1,300, that company is turning a profit of $50 on each ounce of gold.
If the price of gold now rises by 8% to $1,400, the company’s profits per ounce shoot up by 200% ($1,400 – $1,250 = $150 profit per ounce). This small move in gold could cause that company’s stock price to jump 40%, 50%, or more.
It’s why now is a great time to invest in gold stocks. As the price of physical gold moves higher, gold mining stocks will do even better.
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Chris: I know you recommended “best in breed” gold stocks for paid-up subscribers of your Strategic Investor advisory. But is there a specific way to take advantage of the setup in gold right now?
E.B.: The best way to get broad exposure to gold stocks – and the leverage they give you to rising gold prices – is through the VanEck Vectors Gold Miners ETF (GDX).
It holds shares of 46 of the most well-established and widely traded stocks involved in the gold mining business. So it’s the easiest alternative to picking individual mining companies.
Chris: Thank you… and before you go… you’re hosting a special broadcast, the Stock Market Escape Summit. I know you can’t reveal the full details until later tonight, but can you tell us a little about what you’ll be covering?
E.B.: This year is going to be highly volatile for stocks. Don’t be fooled by the rally in stocks we’ve seen since January 1. It’s not going to last.
As I’ve been telling my readers, the Fed began unwinding its debt binge recently. When the bonds it bought under its quantitative easing programs mature, it opts not to repurchase new ones with the proceeds.
In December, this helped trigger the most volatile stock market we’ve seen all decade. There’s just no way the Fed can ever unwind its debt binge without triggering another big sell-off in stocks.
For years, I’ve been using a very unusual investment strategy – I’d say not even 1 in 100 investors has ever heard of it – to make gains as stocks get roiled. It’s not cryptocurrencies… or stocks… or options. It’s something I call “premium shares.”
Last year, for example, the U.S. stock market had its worst year in a decade. The S&P 500 ended the year down 6%. And it fell 9% in December – making it the worst December for stocks since the Great Depression.
But if you owned premium shares of a little-known power company called Vistra Energy, you could have made 620% in just six months… without putting a single cent in the stock market. In fact, if you’d owned regular shares of Vistra, you would’ve made just 20% over the same time.
That’s just one example. I’ll be talking more about other examples of this strategy in action during my broadcast tonight.
I strongly encourage readers to tune in. The broadcast is free to watch. And my premium shares strategy is something that needs to be acted on now. I’ve got a watchlist of 15 premium shares that fit my buying criteria. But I have three others that are strong buys today. Anyone who tunes into the summit will have the chance to get these three names. The other picks are going to be sent in the weeks that follow to those who sign up to my new service.
Now, this is a professional strategy. It’s not for everyone. But it’s easy to understand. And you’re going to see me walk viewers through it. So even somebody with limited experience can use this to profit as the big stock market indexes hit the skids.
Chris: And Doug Casey’s going to be on with you, correct?
E.B.: He’s promised us he’ll call in live from his estancia in Uruguay. This is a strategy he’s used in his personal account for years.
As some of your readers may already know, Doug and I have invested in several big deals in the public markets together over the years. So he’s going to talk about the gains he’s made using this same strategy.
As you’ll learn if you join us for the Stock Market Escape Summit tonight, some of the biggest gains in Doug’s career have come from using this strategy. So he’ll share his experience on that. It’s going to be interesting to see.
Chris: Great. I look forward to it, E.B. Thanks for your time.
E.B.: Thanks, Chris.
Justin’s note: Tonight is the big night… E.B. Tucker and Doug Casey are getting ready to reveal the details on this exclusive investing strategy.
Be sure to tune in to The Stock Market Escape Summit at 8 p.m. ET. There are only a few hours left to reserve your free spot…
Reader Mailbag
Readers continue to flood our inbox with their thoughts on Doug Casey’s interview on class warfare…
When an entire interview with Doug Casey starts to sound like a personal echo chamber it is time to take notice. The question is to act or not to act. In five years will I look back and revel at having made the right decision or lament for doing nothing? My gut feeling is to run, but my thinking causes me pause. The time is coming closer to make a decision.
Thanks for making the issues clearer.
– Art
I believe it to be a distinct possibility for another Civil War. Not between the States, rather between the ideologies of Trump and those who oppose him.
There is no blending between these two groups. They seem opposite on every view and there’s no “common solution.”
– Judith
Great article! Let’s just hope the collapse of our economy isn’t as bad as Doug says!
– Joe
I read the interview and believe it sound, scary, but some truth there. Our country is being destroyed by power mad and greedy people. There is no moral compass in politics anymore or in a small percentage of the public. Races and cultures are divided and kept that way by brainwashing by the left and the media.
I would pray that intelligent heads prevail. I have been here before progress hit and sped this country to its downward slide. There are a lot of good, hardworking, honest Americans still out there. I know quite a few. I have faith in them and God. I am positive all will end as it is supposed to.
– Katja
And high praise from a new reader who recently came across Doug…
Doug. I admit that I never heard about you before. But since last night I have been reading about you. There are no more people who think like you. Thanks for being the way you are. For me life hasn’t been easy. But I never forgot where I came from. I try to help everybody and most of the time I forgot about me. I really admire you, I would like to learn more about you! I want to grow as a person and help my people.
— Aracely
As always, send any questions, comments, or suggestions to [email protected].