By E.B. Tucker, editor, Strategic Investor
Gold just struck a fresh 52-week high.
It’s now up 19% in the past three months alone.
Take a look…
As I’ve been telling you in the Dispatch… I believe this is just the beginning of what I’m calling “the motherlode of all gold rallies.”
In a recent issue of my Strategic Investor newsletter (which subscribers can access here), we said we expected a huge rally. We pointed out that we couldn’t find one fund manager positive on gold. Now, we can’t find one who thinks the recent run in the gold price is real. That tells us there’s more to come.
You see, at the beginning of a new bull market, even the most loyal industry veterans don’t trust higher prices. At the end of a bull market, every fool tells you there’s more to come.
There’s more to this new bull market in gold than lines on a chart, though.
Last week, President Trump took the U.S.-China trade war to a new level, tweeting that he wanted American companies to pull out of China. Tensions are higher than ever, and gold spiked on the news.
But that’s certainly not the only reason we’re bullish today.
Political dysfunction and ballooning deficits also set the stage for gold today. The three largest central banks in the developed world recently declared they’ll do anything to stimulate their economies. That’s central bank lingo for “create more money.”
Keep in mind, the Federal Reserve’s balance sheet was $800 billion before the 2008 crisis. It rose more than five-fold to $4.5 trillion by the end of 2014.
The Fed promised to “normalize” its involvement in the U.S. economy. After reducing its bloated balance sheet by a mere 15%, it cried uncle, promising to reverse course.
Gold sniffed that in advance of the announcement. As plans for the Fed’s next monetary ruse formalize, we expect gold to know first.
Back in December, I said gold would hit $1,500 an ounce. My call was spot on. Gold’s currently at $1,533 an ounce as of this writing. And I see bigger things ahead… Everything looks to be in place for a massive gold rally from here.
If you missed out on the first boom, this is your second chance…
If you don’t own any gold, start with buying physical ounces (more on that below).
After owning physical gold, you should consider speculating on select mining stocks, which can provide leverage to a rising gold price.
Let me explain…
The Power of Leverage
The word “leverage” usually means borrowing. That’s not the case at all in the gold market.
If you aren’t familiar with the concept of leverage in gold stocks, here’s a quick example of how powerful it can be…
Say the price of gold rises from $1,300 to $1,400. That’s roughly an 8% gain. If you own physical gold, you’re up 8%.
Now, say a mining company owns a million ounces of gold in the ground, and gold is trading at $1,300. The value of the gold in the ground isn’t simply $1.3 billion (1 million ounces x $1,300 per ounce). Instead, the gold in the ground is worth much less than that, because it will cost a lot of money to extract.
Say it costs the company $1,250 per ounce, all-in, to mine the gold. At a gold price of $1,300, the company has a potential profit of $50 on each ounce of gold.
However, if the price of gold rises only 8% to $1,400, the company’s profits per ounce increase by 200% ($1,400 – $1,250 = $150 profit per ounce). This small move in gold can cause the stock price to increase 40%, 50%, or more. This is why a small increase in the price of gold can cause a gold stock to soar many times that amount.
It’s happened before…
Gold producers boomed during three separate cycles when gold surged: 1979-1980, the mid-1990s, and 2001-2006.
First up, the king of all gold bull markets: 1979-1980…
Gold more than doubled during this period. But gold stocks more than tripled.
|Returns of Producers From 1979-1980|
|Sept. 1980 Peak||Return|
|Campbell Red Lake Mines||$28.25||$94.75||235.4%|
|Giant Yellowknife Mines||$11.13||$39.00||250.4%|
This wasn’t the only time gold stocks ran further than gold itself…
There was another boom in the 1990s. The average gold producer went up more than 200%…
Cambior rose 124%. Kinross Gold returned more than 190%. And Manhattan Gold & Silver skyrocketed over 760%.
All while gold only rose 8%.
Then, another big boom hit from 2001-2006.
Gold returned 158%, while the average gold producer gained over 400%.
Newmont shot up 270%. Gold Fields soared over 500%. And Goldcorp returned over 800%.
As you can see, an increase in the price of gold (even a small one) can lead to huge returns.
Now’s the Time to Take Advantage
You don’t want to be sitting on the sidelines while the motherlode of all gold rallies gains momentum…
Remember, before owning a gold stock, it’s wise to have some physical gold. If you’re new to gold, start with common 1-ounce coins like the ones offered here by Gainesville Coins.
(By the way, we asked Gainesville Coins to create this page as a starting point for my Strategic Investor subscribers who are new to physical gold… But because of gold’s recent moves, we’re making it available to all Dispatch readers. We do not receive any compensation from Gainesville Coins for bringing you this offer.)
Then, you can speculate on higher gold prices by buying gold miners, which gives you the chance to multiply your money in a gold bull market.
Editor, Strategic Investor
P.S. Even though this is just the start of gold’s rally, readers of my Strategic Investor newsletter are already seeing gains. That’s because I have the top gold stocks set to profit from this surge in our portfolio. (Paid-up subscribers can access these names here.)
One is already up 31% since the beginning of the month. Another is up 20% in 10 days. A third has skyrocketed 165% since we recommended it last year.
Despite the big moves, I still have three explosive gold stocks in buy range today. But that could change any day now as gold takes off.
You don’t want to sit on the sidelines as this rally gains momentum. You can access these names today with a subscription to Strategic Investor. Go here to lock in a subscription now… and start profiting from what could be one of the biggest gold bull markets of our lifetimes.