A “perfect storm” has hit the gold market…
Longtime readers know Casey Research founder Doug Casey has been warning of another major financial disaster for years. According to Doug, the financial hurricane that made landfall in 2008 never left. It’s been hovering above us, gaining strength.
Doug now thinks we’re exiting the eye of the storm. When the trailing edge hits, it will trigger a crisis “much more severe, different, and longer lasting than what we saw in 2008 and 2009.”
He’s encouraged anyone listening to buy gold, the ultimate safe haven asset. If you took Doug’s advice, you’re likely sitting on big gains.
The price of gold has surged 27% this year. It’s beat global stocks 6-to-1. Gold hasn’t done this well in years.
Today, we’ll explain what’s driving gold prices. As you’ll see, folks are piling into gold at the fastest pace ever. And there’s no reason to think this buying mania will end anytime soon.
• Gold is having a historic year…
Over the first six months of this year, the price of gold surged 25%. According to the World Gold Council, gold had its best start to a new year since 1980.
Record “investment demand” caused gold to take off.
If you’ve been reading the Dispatch, you might find the phrase “investment demand” odd. After all, we don’t consider gold an investment. We think of it as real money.
For centuries, gold has preserved wealth because it’s unlike any other asset. It’s durable, easy to transport, and easily divisible. Unlike paper currencies, it’s survived every financial crisis in history. It’s the most reliable store of value on the planet.
When the World Gold Council says “investment demand,” it’s talking about gold coins, gold bars, and gold ETFs… basically anything but jewelry.
Frankly, it doesn’t matter if you call gold an investment or real money. The point is that folks are buying gold at the fastest pace ever.
• Investors bought 1,064 tons’ worth of gold during the first half of this year…
That shatters the previous all-time record.
Investors bought 16% more gold during the first six months of this year than they did in the first half of 2009…when we were still in the midst of a global financial crisis.
Investors are buying any gold they can get their hands on…
MarketWatch reported last week:
Demand comes from a “broad spectrum of investors accessing gold via a range of products with gold-backed ETFs and bars and coins performing particularly strongly.”
As you probably know, gold ETFs like the SPDR Gold Trust ETF (GLD) track the price of gold. They trade like stocks, making them a convenient way to “own” gold.
However, it’s important to keep in mind that gold ETFs are “paper gold”—they’re no substitute for a gold coin you can hold in your hand.
That said, gold ETFs are incredibly popular. They can say a lot about investor sentiment toward gold.
Right now, investors can’t get enough of these funds. According to the World Gold Council, inflows into gold-backed ETFs hit 579.2 metric tons during the first half of the year. That, too, is a new all-time high.
• “Mom-and-pop” investors aren’t the only ones buying gold…
Legendary investors George Soros, Carl Icahn, Stan Druckenmiller, Bill Gross, and David Einhorn have all recently placed huge bets on gold.
These are some of the best investors to ever walk the Earth. None of these men got to where they’re at by investing like everyone else. They made billions of dollars by being contrarians. Yet, they’re all doing the same thing right now: buying gold.
Just as important, they’re buying gold for the same reasons we own gold. It’s the ultimate safe haven asset.
This tells us something is very wrong with the global economy or financial system.
• The World Gold Council says a “perfect storm” has pushed investors into gold…
MarketWatch reported on Thursday:
“The global picture for gold is dominated by considerable and continued investment demand driven by the West as investors rebalance their investment in response to the ever-expanding pool of negative yielding government bonds and heightened political and economic uncertainty,” said Alistair Hewitt, head of market intelligence at the WGC, in a statement.
Regular readers won’t find this surprising. All year, we’ve been pointing out dangers in the economy and financial system.
• Governments are desperately trying to prevent another major financial crisis…
Since 2008, central banks have cut interest rates more than 650 times. And they’ve “printed” more than $12 trillion.
Central bankers thought flooding the global economy with easy money would make it grow. It hasn’t worked. The U.S., Europe, and Japan are all growing at their slowest rates in decades.
• Governments are trying to “stimulate” the economy with even more extreme policies…
Negative rates are the latest government “stimulus” measure.
This radical policy basically flips your bank account upside down. Instead of earning interest on your money in the bank, you pay the bank money. The idea is that people will spend more money if they’re “taxed” to save money.
It’s a completely idiotic idea. Yet, as the World Gold Council noted, negative rates are spreading like a plague.
According to Business Insider, more than $13 trillion worth of government bonds now have negative rates. Keep in mind, negative rates were practically unheard of two years ago.
• The average investor is starting to realize easy money doesn’t work…
Just look at what’s happening in Europe.
Two months ago, Great Britain voted to leave the European Union. The “Brexit” shook the global financial system.
It knocked more than $3 trillion from the stock market in two days.
Policymakers immediately sprang into action.
Within hours, the Bank of England (BoE) pledged to pump £250 billion ($322 billion) into Europe’s financial system. And two weeks ago, the BoE announced its biggest stimulus package since the 2008-2009 financial crisis.
It dropped its key interest rate just above zero. And it launched a new £70 ($90) billion “money-printing” scheme. It hopes its “sledgehammer stimulus” program will help England avoid a recession.
We wouldn’t bet on it. As we often point out, easy money policies don’t actually help the economy. At best, they buy the government time… but this comes at a price.
• Easy-money policies destroy the value of paper currencies…
The euro has lost 18% of its value since the European Central Bank (ECB) introduced negative rates in 2014.
And the British pound plummeted after the BoE announced its new stimulus plan. It’s now down 13% since the start of the year. On Friday, it hit a 31-year low.
People in Europe are taking shelter in gold. According to the World Gold Council, Europe was the biggest source of gold investment demand over the first six months of this year.
• Doug Casey thinks paper currencies will fall one by one in the coming years…
A panic into gold. You’ve heard this story many times before here. But it’s truer than ever as we approach a genuine crisis. There are no stable paper currencies anywhere in the world. The dollar has been strong only because it’s liquid. Liquidity is good, but here, we’re talking about liquid like nitroglycerin.
While gold is already up big this year, Doug thinks it’s headed much higher in the coming years:
Hedge funds will start buying gold in size. As will central banks, who don’t want to hold each other’s paper. As will individual investors. Right now, few people even think about gold, much less understand it. How to profit? Buy gold. I expect we’ll see it well over $5,000 this cycle.
Right now, gold trades for around $1,340, meaning Doug thinks gold could easily triple in the coming years.
• If you do one thing to protect yourself from the coming crisis, own physical gold…
We also encourage you to watch this important presentation.
As you’ll see, the crisis Doug’s been warning about has already begun. It could eventually take out every major paper currency, including the U.S. dollar.
The good news is that you can still protect yourself. If you act soon, you could even turn this coming crisis into an opportunity to make BIG gains. Watch this free video to learn how.
Chart of the Day
The U.S. economy is growing at its slowest pace in decades.
Today’s chart shows the average annualized growth rate of the past 11 U.S. economic recoveries. As you can see, the U.S. economy has grown just 2.1% per year since 2009. That makes the current “recovery” by far the slowest since World War II.
Last quarter, the economy grew at an annualized rate of only 1.2%. That’s not even close to the average annualized growth rate (4.7%) of the last 10 recoveries.
We’ve been saying for months that the U.S. is in big trouble. We’re now starting to see this in the headline gross domestic product (GDP) number, which lags other indicators we follow. This tells us a major crisis could be around the corner.
We encourage you to protect yourself before it’s too late. Step No. 1 is to own physical gold. We recommend most investors put 10% to 15% of their wealth in gold. For other ways to safeguard your wealth, watch this short video.
Delray Beach, Florida
August 15, 2016
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