Tier 2 Gold Market Going Berserk

Written by Nick Hodge
Posted March 25, 2020

Capitalism and the stock market are now broken.

That’s great news for you. 

Things are now happening in the market that haven't happened since World War II — or ever. 

And it’s at moments of extreme dislocations like this when big money is made (and lost).

Some of what we’ve been writing to you about for years is now playing out in front of your eyes. 

Trillions and trillions of dollars are now being thrown at the bond market and the consumer in an effort to stave off a severe recession or depression. 

The Federal Reserve has said it will buy Treasury bonds and mortgage-backed debt “in the amounts needed.” There was no cap on that, indicating the Fed, as we long knew, can and will conjure up as many paper dollars as it wants literally to infinity. 

It needs to suppress interest rates because corporations feasted at the debt trough for the past decade and any rise in rates would mean they can’t pay their debts.  

Meanwhile, the people you stupidly voted for to represent your interests are busy bailing out those same corporations that fed at the debt trough. The $2 trillion measure passed today will send paltry $1,200 checks to some Americans. But at least 25% of it is going to bail out businesses that made bad decisions. 

And so the question begs… if the Federal Reserve can print unlimited dollars as it has now said… why can’t we all just get unlimited free dollars and be rich?

When you get to questions like this being out in the open is truly when you know the system is broken. 

Enter: Gold

As these trillion-dollar measures have been announced, gold has gone absolutely berserk in historical fashion. 

Not only has the price of a single ounce of gold gone up by as much as $150 since Monday, but the market for gold actually broke, with the price of gold in New York and London spreading to its widest point in 40 years as investors raced to buy as much as they could as fast as they could. From Bloomberg (emphasis mine): 

This isn’t anything that we’ve seen in a generation because refiners never had to shut down — not in war, not in the great financial crisis, not in natural disasters,” Tai Wong, the head of metals derivatives trading at BMO Capital Markets, said by phone Tuesday. “It’s never happened. And it happened astonishingly rapidly.”

The concerns over supply and the rush on gold purchases has sent futures in New York skyrocketing to the highest premium over spot gold in London in decades and underscores how desperate investors are to find a safe haven amid the market tumult brought on by the virus. The last time the New York-London spread was this massive was in the 1980s when the Hunt brothers attempted to corner the silver market and sent gold futures soaring to a high of $850 an ounce, a record it didn’t surpass for 25 years.

We here at Outsider Club are, of course, plugged directly into the gold market

While this was happening yesterday our own Gerardo Del Real got directly on the phone with Van Simmons. Van founded Professional Coin Grading Service, literally created the standard by which gold coins are graded, and is one of the most well-known and respected bullion dealers in the world. Van confirmed even he was unable to secure gold in the quantities he’d like. 

Brien Lundin of Gold Newsletter reported yesterday that physical silver was changing hands at $7 per ounce more than the spot price — indicating as much as a 50% premium to physical over paper. 

Some gold stocks were up 30%-50% ON THE DAY!

But the gold companies up the most don’t produce anything at all. Instead, they own gold resources in the ground that give them significant leverage in a rising gold price environment like we’re seeing now. 

Complete faith is being lost in the Federal Reserve and the government. Global investors fear the bond market spinning out of control and are staring at an economic standstill. 

It’s during these periods of time that gold stocks can deliver the thousands of percent gains they’re known for. 

Compounding the problem — and potentially the upside — is the fact that gold mines are going offline in a big way due to the virus. Over 30 precious metal mines have already been shut down, and exploration for new ones is grinding to a halt. 

So the companies with already proven large resources — so-called Tier 2 gold — are in a prime position. They’re the ones investors will buy first. 

And it’s no secret those are the ones that Gerardo and I have been buying hand over fist preparing for this moment. 

It’s not too late. 

The paper market for gold just broke yesterday. 

I view it as kicking off the next leg up for gold prices and stocks. 

Call it like you see it,

Nick Hodge Signature

Nick Hodge

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Nick is the founder and president of the Outsider Club, and the investment director of the thousands-strong stock advisories, Early Advantage and Wall Street's Underground Profits. He also heads Nick’s Notebook, a private placement and alert service that has raised tens of millions of dollars of investment capital for resource, energy, cannabis, and medical technology companies. Co-author of two best-selling investment books, including Energy Investing for Dummies, his insights have been shared on news programs and in magazines and newspapers around the world. For more on Nick, take a look at his editor's page.

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