Tom Beck, senior editor of Portfolio Wealth Group, examines how low real interest rates boost gold.
In a fiat monetary system, gold is apparently not money anymore for 99.15% of the population. Although demand is outstripping supply by $54 billion annually, only 0.85% of the population owns any gold or silver!
The ownership of gold and silver stocks is even more miniscule. To 99 out of every 100 citizens of our planet in 2017, a government note makes more sense than a gold coin, and even a digital currency, such as Bitcoin or this potentially explosive new one, is apparently more appealing.
But some investors see the eternal importance of gold, like Jeff Gundlach, who manages more than $100 billion through his investment firm, DoubleLine Capital.
“I expect a rally on the 10-year,” Gundlach said. A “rally” means higher bond prices, and therefore lower interest rates.
Gundlach predicts they will fall “to below 2.25%, at a minimum. . .maybe a bit lower than 2%.”
Interest rates are already the lowest they’ve been since our ancestors watched gladiators fight for gold, and this investor optimism is what tells me that Gundlach sees what I see.
Real interest rates (you know, after you deduct inflation) are negative—not just in the U.S., but everywhere else in the developed world as well.
The reason to own gold is because it’s a safe haven and it’s a hedge against currency devaluation.
I personally own 8% high-yield special stocks for my retirement account and Wealth Stocks for long-term compounding, but for massive mind-boggling gains, nothing comes close to catching a gold stock’s bull market and avoiding a bear market.
Only a well-funded, properly managed, financially sound company survived the brutal bear market of 2011–2015, but a few (around 10) thrived in the bear market, taking advantage of the fire-sale prices.
The reason is that funding was absolutely scarce—no one wanted to touch a new gold project. But if you are as talented as this CEO is, the greatest investors were lining up.
The “Bond God” knows that gold is competing with bond yields for most institutional investors, but what these mega hedge funds have never done is own junior gold stocks.
Central banks have been massive gold hoarders since 2010, though. These are bigger buyers than hedge funds!
At Portfolio Wealth Global, the one major theme we uncovered in 2016 was the participation of the Swiss and Norwegian central banks in the gold stock market.
To us, that marked the real opportunity and the No. 1 reason why the shares gained so much in the first six months of the year.
You see, these small-cap stocks thinly trade unless a major news release is issued. Most junior mining stocks trade with 10–15 transactions per day! That’s nothing. . .
When the big central banks started positioning, the bids went a lot higher, and I expect not only central banks to pile back in, but for the first time in more than a decade, I expect that “Mom and Pop America” will head back in.
Market optimism hasn’t been this high since 2004, and the preceding three years brought massive gains.
Through all the research we’ve put into this sector, we’ve seen no better company to be partners with than this one.
From 2015 to the 2016 top, this company was up 748%, compared to gold bullion rising 24%.
That’s the massive difference between owning this gold stock with ounces in the ground and merely owning the metal—one is insurance and the other is a growth equity investment.
In fact, if you had sold HALF of your position, you could have bought 300% more gold bullion with the profits and still owned a substantial equity position!
There’s simply no better way to get involved in the gold bull market if your goal is gains, on top of protection from your bullion position.
Tom Beck is senior editor of Portfolio Wealth Global. Known as one of the first millennial millionaires in the United States, Beck is a relentless idea machine. After retiring two years ago at age 33, he’s officially come out of retirement to head up Portfolio Wealth Global. He brings a vision of setting a new record for millionaires with his seven-year plan to accelerate any subscribers’ net worth who will commit to the income lifestyle. Beck delivers new ideas on the marketplace that were once only available to the rich. Traveling the world, he’s invested in over a dozen countries, including real estate.
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1) Tom Beck: I, or members of my immediate household or family, own shares of the following companies referred to in this article: None. I personally am, or members of my immediate household or family are, paid by the following companies referred to in this article: None. My company has a financial relationship with the following companies referred to in this article: GoldMining Inc. has a marketing agreement with Gold Standard Media. I determined which companies would be included in this article based on my research and understanding of the sector.
2) The following companies mentioned in this article are sponsors of Streetwise Reports: None. Streetwise Reports does not accept stock in exchange for its services. Click here for important disclosures about sponsor’s fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview or article until after it publishes.
Charts courtesy of the author
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