By Nick Giambruno, chief analyst, The Casey Report
Gold has been a big winner so far in 2019.
Today, the yellow metal is up about 27% on a year-over-year basis.
If you’ve been reading the Dispatch, you may not be surprised by such a performance.
Earlier this year, I told you 2019 could be the start of the biggest gold bull market in history. I’m not talking about a typical gold bull market. This gold bull market is riding a huge, unstoppable trend: Gold is being re-monetized and is returning as money. Back in June, I showed you eight reasons why.
As I explained then, one of the biggest reasons is the Federal Reserve’s reversal from a policy of tightening to pumping out more easy money.
The Fed’s board members are not in the habit of admitting there’s ever anything wrong with the economy. Acknowledging they have no control over the situation, or that things can go off the deep end, is not an option.
But the recent rate cuts were just that – an admission of weakness. Why else would you need to cut rates if this is the “greatest economy ever,” as Trump has claimed?
The gold bulls realized this and sent gold soaring right through the psychologically significant $1,500 level last month. Gold has decisively broken out of its six-year trading range:
Of course, from the perspective of gold mining companies themselves (the kind we also recommend in my Casey Report newsletter), the number itself is not that important. But the magnitude is. The companies that were making $100 an ounce at $1,300 gold would be making three times as much profit at $1,500 gold. It’s the reason why gold mining stocks offer enormous upside as the price of gold rises.
Aside from the Fed’s return to easy money, there’s another significant catalyst for gold.
Central banks bought a record 651 tonnes of gold in 2018. It was the highest level of net purchases since 1971 when Nixon closed the gold window. And it’s a 75% increase from 2017.
Countries like Russia and China are buying gold to reduce their reliance on the US dollar and exposure to US financial sanctions.
Last year, Russia notably dumped $101 billion worth of US Treasurys, and according to the World Gold Council, it replaced much of it with gold. The country’s reserves have quadrupled in the last decade alone. Russia is now the fifth-largest holder of gold in the world.
Russia and China have continued their buying into 2019. I don’t see any signs that either of these two countries will slow down. I expect the opposite.
Other nations like Iran, Turkey, and Venezuela use gold for trading (in energy and other goods) to bypass US restrictions and sanctions.
All this is accelerating the trend of gold’s re-monetization.
Room to Run
Despite its recent spectacular performance, I believe gold still has enormous upside. Remember, the price of gold is nowhere close to its all-time high.
Here’s the bottom line: The stars have aligned for gold. A bull market of historic proportions is on the menu and likely is already in its early innings.
That’s why it’s not too late to take advantage.
The possibility of a correction is always there, of course. I think it would be healthy for gold to level off and consolidate before going higher. After all, nothing ever goes up in a straight line. It dipped below $1,500 last month already, but only temporarily.
With the Fed’s recent rate cuts and the dollar continuing to weaken, it’s hard to see gold prices correcting much more and staying low. I see pullbacks as an excellent buying opportunity.
You can learn the best ways to buy and store physical gold in our free “Gold Investor’s Guide” right here.
Chief Analyst, The Casey Report
Chris’ note: Owning physical gold is a great first step toward gaining exposure to this bull market. If you’re new to gold, you can start with common 1-ounce coins like the ones offered here by Gainesville Coins.
We asked Gainesville Coins to create this page as a starting point for Casey Daily Dispatch subscribers who are new to physical gold. We do not receive any compensation from Gainesville Coins for bringing you this offer.
P.S. And make sure to keep your eyes peeled tomorrow morning for a special edition of the Dispatch on one of the biggest money-making opportunities today…