Gold & Silver: Mysteries of Safe Havens

Written by James Dines
Posted September 7, 2019

Publisher's Note: Mr. James Dines is widely known as the "original goldbug" and we're turning to him today for a look at the fundamental forces at play behind the latest rise in gold and silver.

Read on for an excerpt from the latest issue of The Dines Letter and hear from him about what he's calling a “Super Major Bull Market.”

To Your Wealth,

Nick Hodge Signature

Nick Hodge


Experience is the worst teacher; it gives the test before presenting the lesson.

                                                                                                                      — Vernon Law

TDL’s purpose is to lead you toward profit by detecting important clues ahead of others, upstream from The Herd, before an opportunity vanishes. You recently observed that in our daring to have become “The Original Pot Bug” before gratifyingly huge rises in cannabis stocks. Again in Bitcoin: as “The Original Crypto Bug,” despite general skepticism. We turned bullish again in our 2019 Annual Forecast Issue; Bitcoin has risen as much as 332% since last December. So far, so good.

We believe gold and silver will triumph next. If so, what might be rousing those ultimate havens? What evidence might we base that on?

We predicted 1997’s international currency crisis in Thailand, which shook Southeast Asia to its economic roots; the area was rescued by international lenders. Now the very fact that havens are in uptrends is suggestive of comparably unattractive economic news ahead again.

Another clue, a veritable bent blade of grass, has been our “haven” theory, and it occurred when Russia’s stock market average unexpectedly had an upside breakout. We wondered why a new Russian uptrendline appeared despite the crippling international economic sanctions that followed its illegal seizure of Crimea and eastern Ukraine. Again, our natural curiosity was aroused.

Then we watched Russia steadily buying gold, month after month. Why gold, and from where was Russia getting the money to buy it despite the above mentioned sanctions? Indeed, China, Turkey, and India have also been big gold buyers recently. As Alice in Wonderland said, it’s getting “curiouser and curiouser.” Other nations have likewise been buying gold, despite agreement in the international media that gold was out of fashion. What’s going on?

That’s not all. TDL has for a long time been underlining other weird things in the currency arena. For example, the very emergence of new currencies in cryptocoins (2,337 kinds) got crowned by Facebook, a public corporation, actually seeking to establish its own currency, the Libra coin!

We have been reporting for some time that many international currencies were signaling trouble by declining against the U.S. dollar. Confirmation of “The Coming Currency Crisis” emerged with gold and silver having displayed uptrends! Sensing underlying concern.

Only frightened money that unmasks a flight to safety could explain the above disparate anomalies! Look around: the mass media doesn’t even mention “The Coming Currency Crisis.” Nothing new: here is TDL stuck alone again in our predictions. “He who is first always ‘looks wrong’ because the future is inherently ‘unbelievable.’”

Returning to where Russia has been getting money for gold. We’ve mentioned how a Danish bank was recently caught accepting wads of newly-printed rubles, selling them in the open markets, buying U.S. dollars with the proceeds, and returning the American bucks to Russia. It’s a true story and we predicted it would happen in our book The Invisible Crash. Because paper money has no intrinsic value, any nation could print paper money and could exchange it into dollars (pounds, yen, whichever), to buy real estate in London, New York, or wherever else — with free money, just by printing it! Unbacked paper money is the basis of what TDL calls “crackpot economics,” and we have long warned that it is dangerously unstable.

There will be currency crises again and again, until the ultimate one. Government economists don’t believe this, which is why we have such a low opinion of the Fed: its obsessive tinkering with interest rates, instead of comprehending the danger of an upheaval in the entire paper currency system. It was easy for anyone to have foreseen. And the recent nomination of goldbug Judy Shelton to the Fed is too-little-too-late for a return to a link with gold; a vast avalanche of old paper money already overhangs the world.

As we struggle to calculate how to lead you, our guess is the coming flight from paper money would lead to some kind of new currency. Probably just for transfers of land and corporations, backed by gold, barrels of oil, or something else of tangible value, possibly a crypto such as Bitcoin, or even America’s gold in Fort Knox. We’re not certain yet, but the odds are increasing that the next paper money will be linked to gold. And thus silver also.

The above confirms why we became “The Original Goldbug.” Gold’s rejection by government economists at “central banks” is why America’s debt was permitted to soar to the current unpayably high $22 trillion. There is an understandably muted undertone of Mass Fear driving the various anomalies listed above. For the full story, obtain our full-length, hardcover book Goldbug!, often called “the bible of the goldbugs.”

Big Money has evidently been shifting out of stocks and toward safety — even unwisely pushing already overpriced “junk bonds” to new highs! Germany’s entire range of bonds has an unheard-of negative yield; people now need to pay to lend money to governments! That is unsustainable.

Bottom line, lenders are not getting enough returns making loans, so in desperation they have been resorting to buying risky junk bonds at sky-high prices, and have increasingly gambled in general stock-market speculation, partially explaining recent higher prices. There is veritably no safe source of high income these days, so many investors are concluding they might as well hold gold instead of taking a guaranteed loss in bonds. Or a stock such as Newmont (NEM), whose dividend approximates U.S. government yields.

We still believe the world is already in a recession, for example in Europe, which is also driving interest in havens. The automotive industry worldwide is suffering. Record-low interest rates are tempting corporations to borrow but instead of investing in something, they buy their own stock to buoy its price — also their executives' stock options. Greed stinks.

Nearly 10% of the value of stocks are held in ETFs (Exchange Traded Funds), which we call a “liquidity time bomb,” because an inevitable wafting whiff of Mass Fear will eventually trigger Mass Psychological-driven selling. Who would buy large blocks of stock from ETFs when they sell? During the 2008 crash, the answer was “nobody.” Some ETFs will be forced to close their doors, as in 2008.

An ebb and flow is a force of nature. For example, we spend our lives filling up a hypothetical theater with people. And someday it begins to empty. This is all natural. Bull markets often follow a similar path. A boom in hi-tech stocks begins, they dominate the investment world, and then their supporters slowly drift away.

Gold is in a brand-new bull market. Actually, it would be its third one in a row. There is no stock market term for this configuration, and long ago we baptized its beginnings a “Super Major Bull Market,” of at least three bull phases.

It would be prudent to own some golds and silvers. 


James Dines is legendary for having made correct forecasts that were in complete contradiction to the rest of the financial community. He is the author of five highly regarded books, including "Goldbug!," in addition to his popular newsletter, The Dines Letter, and videotaped educational series. Dines' highly successful investment strategies have been praised by Barron's, Financial Times, Forbes, Moneyline, and The New York Times, among others.

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