New Gold Highs Are On the Way. Here's Why...
These are interesting times. Over 30 million people have filed for unemployment and governments around the world are scrambling to fight off a deflationary collapse.
The good news is gold is in a clear bull market which will allow you the luxury — with a little work — to read through my ideas, decide why you agree or disagree, do some research of your own, and either follow the guidance or make some picks of your own.
The basics when evaluating a company aren’t changing.
Share structure from inception (who owns what and at what price point, are all shares reporting, etc), people, then projects.
The share structure will often tell you a lot about the people and how they treat and view shareholders.
In the bull market we are entering and the low baseline the past few years have granted us, you’ll be able to make your own picks and likely do very well.
In a brutal bear market — like the one we’re coming out of — the most connected, hard-working stock pickers can find a way to lose money.
In a bull market like the one that we’re entering it is still a stock picker’s game but it becomes more of a choice of how you want to make your money.
Explorers? Developers? Producers? When things start really heating up it’ll be like buying the major U.S. indices over the past decade or so.
Ditto for uranium, just on steroids.
But those real highs in the gold price — as I warned last year — come with a lot of volatility. Paradigm shift-type of volatility.
The trillions in stimulus is just getting started. The collapse in state tax revenue is going to create a powder keg of circumstances that have ramifications much more significant than whether the price of gold makes new real highs and your favorite gold stock triples or quadruples.
States are mandated to balance their budgets, the federal government is not.
Most states have done as good a job having rainy day funds as the average American consumer, which is to say they don’t exist. Most states are also very aware this is the situation they are faced with and it is undoubtedly playing into how quickly or not states reopen for business. Not an opinion, just a fact.
Here in Texas, where I reside, we can survive approximately 70 days operating on the reserve fund while lockdowns are lifted and tax receipts start trickling back in.
Illinois could run for, wait for it, less than a minute. $8 billion in unpaid bills at 12% interest will do that.
Which brings me to an asset you can’t just add a zero to or print up on a whim… gold.
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Gold is up approximately 12% on a year-to-date basis while the S&P 500 is down by roughly the same amount (-13%).
This despite the dollar index at triple digits. A true bull market indeed.
Margin calls, stock market crashes, insolvent governments, none of that has been enough to discourage gold-backed ETFs from adding the highest quarterly amount ever in absolute U.S. dollar terms in Q1.
Here’s the thing, with coordinated global central bank balance sheets ballooning, gold is still cheap, which makes the gold stocks and the leverage they provide an absolute gift. How cheap? Cheapest ever relative to the gold price.
Here’s a Bloomberg chart from John Hathaway’s most recent Sprott Gold Report showing the relative value of the gold stocks versus bullion.
While the major U.S. indices continue to rebound at a rapid pace due to the trillions of dollars of capital being directed towards corporations (and a little for the peasants, I mean people), the backdrop of globally coordinated pledges to buy unlimited amounts of seemingly every asset class has supercharged the gold space.
New highs are on the way. Whether or not that happens in June of 2020 or June of 2021 isn’t really significant. What is significant is that you understand that we are in the early stages of a historic gold bull market, that you understand the trend and make sure you own the positions you want to own at these levels.
To your wealth,
For the past decade, Gerardo Del Real has worked behind-the-scenes providing research, due diligence and advice to large institutional players, fund managers, newsletter writers and some of the most active high net worth investors in the resource space. Now, he is bringing his extensive experience to the public through Outsider Club, Junior Mining Monthly, and Junior Mining Trader. For more about Gerardo, check out his editor page.
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