Editor's note: We believe dedicating a portion of your portfolio to gold is the best move you can make right now. And despite gold's big year so far, this bull market is just heating up…
Today, in place of our normal market commentary, we're passing along expert insight from Palm Beach Letter editor Teeka Tiwari. As you'll see, Teeka likes gold today for the same reasons we do here at the Dispatch. And like us, he says now is the time to take advantage…
From Teeka Tiwari, editor, The Palm Beach Letter:
It’s been a long time since I liked gold. Almost nine years, in fact.
Back in September 2007, I recommended gold to my readers at $750 per ounce. I predicted it would go to $2,000 per ounce.
It “only” went to $1,920. I haven’t heard any complaints…
Since early 2012, I’ve hated gold. It was nothing personal. The charts were telling me that gold was in a bear market. So I’ve been sitting on the sidelines.
But that’s all changed recently…
You see, while I’ve been patiently waiting… a number of factors have begun converging.
And just recently, they activated one of my “bull” triggers… telling me it’s time to buy again.
A Gold Trigger I Haven’t Seen in Years
I’m a chart and big-picture trend guy. I look for big trends driven by economics, demographics, and shifts in political policies.
When I’m analyzing long-term trends, I use Point & Figure (PNF) charts. It’s an underused form of technical analysis that not many people are aware of. I’ve found it’s excellent in measuring the “battle” between buyers (demand) and sellers (supply).
What I like about PNF charts is they screen out a lot of the “noise” that you get on a candlestick or bar chart.
Take a look at the PNF chart of gold below. If you’re a novice investor… you might not know what to make of it…
The downtrend line is in red. You can see that gold has clearly broken the downtrend line that had been in place since 2011. (The Xs represent demand… and the Os represent supply.)
This is an incredibly bullish sign. This breakout tells me that gold has started a brand-new bull market.
These Two Forces Are Driving Up Gold
It’s not just the charts that have me bullish. I’m seeing two bullish forces lining up behind gold.
The first is negative interest rates.
According to Bank of America Merrill Lynch, there is $13 trillion of negative-yielding global government debt… At the beginning of 2014, there was none.
Let me explain why this is very bullish for gold.
When institutions consider buying gold, they pause. That’s because gold pays no dividend. Investors have to rely solely on capital appreciation to see any profits.
Throughout history, cash and cash equivalents (such as bonds) have always paid interest while you hold them. So institutions have preferred to hold cash and bonds over gold.
That is no longer true.
Due to low and negative interest rates, it’s now cheaper to hold gold than it is to hold cash or bonds.
This is the first time in 5,000 years that it’s been cheaper to hold gold than cash and cash equivalents. This is going to cause hundreds of billions of institutional dollars to flow out of cash and bonds and into gold… and that is very bullish.
Another bullish force for gold just took place in the U.K.
In June, 52% of U.K. voters chose to leave the European Union. No one thought it could happen. Certainly not the elite. But the repercussions have been reverberating throughout the world.
The British pound is at its lowest level in over a decade. And European banks are feeling the pain. Credit Suisse, Deutsche Bank, and The Royal Bank of Scotland are all down more than 50% over the last year.
The truth is no one knows for certain how Brexit will play out. But one thing is known: It’s caused a lot of fear and uncertainty in the market.
With negative rates and growing global uncertainty, investors are turning to a safe haven asset—gold.
The combined forces of negative interest rates, European uncertainty, and gold’s recent breakout are what has me so bullish on gold.
And I believe it’s just the beginning…
How We’re Taking Advantage of Gold’s Uptrend
Over the next few years, I expect two things will happen…
The first is interest rates will go even lower as central banks struggle to “fix” the global economy. The second is we’ll see even more uncertainty strike across Europe.
My analysis of the current available gold supply—matched with the new demand I see coming—suggests that these forces will be enough to push gold up to $3,600 per ounce. (It’s currently trading near $1,325.)
One easy way to profit from this trend is to own physical gold.
I recommend holding a small portion of your assets (3-5%) in physical gold as a chaos hedge. In times of turmoil, gold will serve as a store of value for your wealth and as a ballast for your portfolio against any financial chaos.
By owning physical gold, you could more than double your investment when gold hits $3,600.
But if you want a chance to capture massive gains from gold’s rally, I suggest a different approach…
You’re going to want to put a small portion (no more than 1% in each position) of your assets in a few small-cap companies leveraged to the price of gold.
These include smaller gold-mining, royalty, and processing companies.
Investing in these types of stocks is what PBRG founder Tom Dyson and I call “asymmetric” investing.
An asymmetric investment is an idea that has massive upside potential. This can vary from 10-100 times the initial investment.
With that range of returns, you don’t have to put a lot of money into an idea. That’s the asymmetric part.
Your potential upside is so huge… you can risk a very small amount of money (even just $1,000) and still put yourself in a position to make tens of thousands—perhaps even hundreds of thousands—of dollars in profits.
The gold bull market is coming, and now is the time to buy in.
Editor's note: Teeka recently used his “asymmetric” investing strategy to uncover a tiny $2 gold stock in Peru with a major stake in a brand-new gold discovery. And the stock could go up 400%… even 500%… Click here to learn more about this incredible opportunity…