28/08/2020
The New Gold Boom: Why Consider Gold
It’s no secret gold is soaring. It’s up 16% since March. In the same time, certain Australian gold stocks have jumped 101%, 89% and even 137%.
But this run up could be the start of something much bigger. In fact, this could be the last time in decades you’ll see gold trading this cheap…
‘The conditions we’re seeing right now are a perfect storm for gold.' - Shae Russell
This is not the first a global crisis has hit the world and the same thing happened. Gold price boomed. History could be repeating itself.
Consider this… 2020 has seen a record-breaking amount of money flow into gold ETFs. In the first five months of this year alone, gold ETFs saw inflows of US$33.7 billion.
That beats the record for any single calendar year in history — in just five months.
All over the world, it seems investors are turning to gold and Bitcoin.
Gold Bull Market #1: The Great Depression’s Greatest Secret
October 1929…
The Great Depression began with ‘Black Thursday’ — as the stock market in the US lost 11% of its value at the opening bell.
The selling intensified…and quickly spread around the world.
Sound familiar?
Soon every economy in the world was staring down the barrel of a brutal economic downturn…followed by mass unemployment…civil unrest…and huge social instability.
Faced with economic Armageddon, the Australian authorities did what governments always do…
They sacrificed the currency.
Back then, we used Australian pounds — which were ‘pegged’ to the British pound, which in turn was tied to gold.
The Great Depression broke that peg.
The Aussie pound left the gold standard…and almost overnight dropped in value by 30% against the pound.
But the panic didn’t stop there.
And nor did the devaluations…
Soon, foreign institutions were demanding their gold back from British gold vaults.
The outflows of gold forced the UK government to take action. It took Britain off the gold standard and devalued its currency.
It’s a little-known side story of the Great Depression.
Most people only understand the Depression in very general terms: The crash, the banking failures, unemployment, strike action, the rise of the N***s, the Second World War.
They don’t understand perhaps the most important part of what happened: The sudden re-ordering of the financial system and the spike in the price of gold.
Between 1931 and 1934, virtually every major nation on the planet sought to manipulate the value of its currency down.
Britain was first. The US followed. Then the rest of the world…
In 1931, an ounce of gold would have set you back US$20. After the war, it was $35. In other words, the dollar dropped off a cliff.
The same was true in France…
In other words: Governments intervened to fight the crisis…devalued their currencies…a new currency system emerged…and gold soared.
Not only that, certain gold stocks went to the Moon — even as other stocks crashed.
Investment Research
It shows what happened in the US markets in the aftermath of the Wall Street Crash of 1929.
The red line tracks the Dow. As you can see, it collapsed in late 1929. But just check out the black line.
It shows what happened to the share price of Homestake, then America’s premier gold miner.
When the crash devastated the markets, Homestake did get momentarily dragged down with everything else.
But as the Dow continued its decline in 1930, Homestake went through the roof.
Between 1929 and 1933, shares in Homestake rose 474%. That would have turned a 10,000 pound stake into more than 50,000 pounds (excluding trading costs) — during the worst economic downturn in history.
And Homestake was not the only mining stock to jump. If you were willing to speculate and put a little capital into higher risk gold miners…you could have made tens of thousands of pounds in profit.
This graph compares the performance of the two outstanding gold miners, Homestake and Dome Mines, against regular stocks between 1929 and 1933...
As you can see, the Dow got pummelled by a collapsing credit bubble — losing 73% of its value. Meanwhile, ‘supply kings’ Homestake and Dome Mines rose 474% and 558% respectively.
Now, those stocks were both listed in the US, not Australia. We didn’t even have an official stock market until 1938.
But that’s the beauty of gold. It’s the same everywhere. It’s ‘God’s currency’, as they say. An ounce of gold in the US is the same as an ounce of gold right here.
And while there are never any guarantees of a repeat — looking at the data available to us — history indicates that there’s a very simple recurring pattern…
A crisis strikes.
Governments respond with devaluations, bailouts and money printing.
Gold soars in response.
And certain gold stocks go to the Moon.
It wasn’t the first time. And I’m sure it won’t be the last…
Gold Bull Market #2: Stocks down, gold UP
‘To create a new prosperity without war…’
That’s how Richard Nixon described his decision to take the US dollar off the gold standard in 1971.
It’s now known as the Nixon Shock.
It was the same story as the 1930s…
The Vietnam War had put the US under huge financial strain.
And so Nixon was forced to take the global financial system off the dollar.
That unleashed a huge binge of government spending…borrowing…and money printing.
Wharton professor Jeremy Siegel called it ‘the greatest failure of American macroeconomic policy in the post-war period’.
And it led to a wave of instability…volatility…social disorder…and inflation.
We got our own taste of this right here in Australia.
Between 1970 and 1981, inflation soared — crushing savers and wiping out billions of dollars in real wealth.
For much of that period, stocks were crushed.
Between 1969 and 1976, the All Ordinaries crashed by 34%.
But what happened to the dollar in your pocket was even worse…
According to the Australian Bureau of Statistics, inflation in the 1970s sent the price of everyday goods soaring a staggering 194%!
That means what cost you $10 in the 1970s set you back $29.50 by the end of 1981.
What does that do to the real value of your savings?
If you can bear to look, just consider this chart of the true value of a dollar through the 1970s and beyond…
It seemed like every time you turned your back, bank savings lost more of their value.
Every single day, you became a little poorer.
Unless you understood history.
Unless you knew what was really happening.
Unless you owned enough gold to offset the damage.
As a Business Insider piece from 2016 put it (emphasis added):
‘The world didn’t end in the 1970s, but double-digit inflation, oil price shocks, a weak dollar, and political instability made investors fearful and nervous. With rising fear and uncertainty investors bought more gold, since it is a tangible store of wealth. As the ’70s drew to a close, people stampeded to own it.
‘It happened once – and it could happen again.’
Between 1970 and 1980, gold prices soared by 1,607%.
And gold stocks?
Some of them soared.
Here’s a sample of the performance of some overseas gold stocks between the end of 1978 and the peak of the mania in September 1980 (excluding trading costs).
Look at smaller gold and silver stocks around the world, and you’ll see just how profitable the mania was for some speculators willing to take a risk, and who bought and sold at the right time.
In fact, for some very small stocks — and many in the list below are American and Canadian — we can only roughly calculate the gains, since they were so volatile.
Stock & Ticker
Percentage
Gains
NRD Mining – NMN
38,200%
Silverstack Mines – SVR
36,000%
Banner Resources – BSS
32,000%
Carolin Mines – CLL
28,250%
United Hearne Resources – UHR
23,300%
Consolidated Cinola Mines – CSZ
22,000%
Cusac Industries – CQC
21,200%
Copper Lake Explorations – CKX
21,000%
Balmoral Mines – BME
20,000%
New Cinch Uranium – NCU
19,667%
Joutel Copper Mines – JTL
18,800%
Page Petroleum – PGE
17,600%
United Westland Resources – UWR
17,500%
Twin Richfield Oils – TWR
16,800%
Bearcat Explorations – BEA
14,500%
Futurity Oils – FTY
14,000%
Canadian Bashaw – CNB
14,000%
Arizona Silver Corp – ARZ
13,500%
Dumagami Mines – DM1
13,300%
Keep in mind: Not all gold stocks performed like these. Gains like that are extraordinary. And you would’ve had to brave some extremely high volatility — and take a high-risk punt — to generate gains like that.
But at times like this, everything is volatile.
Just stepping out the door feels risky.
Yet the perfect mix of runaway inflation, loose money and political unrest sent some gold stocks to the Moon — rewarding speculators and risk takers.
While there’s no guarantee that we’ll see similar results from gold miners in Australia now, you can certainly see that this followed the same pattern again.
A panic. Intervention on a huge scale. Money printing. A new financial system. And a massive gold and gold stocks bull market.
And it happened again in 2008.
Gold Bull Market #3: Banks crash, gold soars
I’ll keep this short because by now you can see my point, I’m sure.
In 2008, Lehman Brothers went to the wall.
The US authorities responded with a monetary bazooka…the biggest round of bailouts in history.
In the space of a few short months, central banks around the world pumped trillions into the financial system, led by the US Federal Reserve.
Just as in the 1930s and 1970s, that sent gold and other commodities on a tear.
Here’s what happened to the gold price (in US dollars) post 2008:
And certain gold stocks shot up even quicker.
Not all, but take US gold miner Royal Gold, for instance. It soared four times in the next decade.
And some Australian mining stocks got in on the party this time around!
Alkane Resources traded at just 27 cents on 18 June 2010. Yet less than a year later on 21 April, it had gone vertical — up to $2.51. That’s more than 900% in less than a year.
Or take Saracen Minerals. On 19 September 2008, it traded at just nine cents… By 18 November 2011, it had soared more than eightfold.
Now, given what you’ve just seen…consider what is happening in the financial system right now.
The Federal Reserve has committed to unlimited money printing in a new QE program…and committed $1 trillion every day in emergency ‘repo’ funding…
Our own government is already pumping an enormous volume of cash into the economy…with $200 billion in new spending and borrowing. (That’s equal to 10% of the entire economy…in one shot.)
The ECB has launched a mammoth 750 billion euro money-printing program.
Germany has freed its state bank to lend out an additional $610 billion to ‘cushion’ the impact.
China has pumped $79 billion of extra stimulus into its economy.
The US government has created a $2 trillion ‘rescue package’ for Americans…which may involve mailing cheques to everyone in the post.
The UK government has begun pumping taxpayer money into the economy…with a total of 330 billion pounds committed so far.
All of this has happened in 2020 alone.
New measures are being announced all the time.
It’s hard to add up the total cost, because there’s just so much ‘stimulus’ happening. But as I showed you earlier, Reuters has recorded a sum of at least $15 trillion.
To put that into perspective, in today’s dollar terms, fighting the Second World War cost America $4 trillion.
In other words: The COVID-19 ‘stimulus’ packages are nearly four times more expensive than the costliest war in history.
And we’re only five months in!
Now ask yourself:
Exactly where is all that money going to come from?
It won’t come from tax receipts…which are likely to fall off a cliff too.
And thanks to the policies implemented after the financial crisis, the world is already awash in debt.
So it’ll simply be ‘created’.
Globally, the bill will run into the tens of trillions of dollars.
Anyone who tells you that it won’t have serious consequences is either a liar or a madman.
We’re witnessing the death of the old monetary system…and the rapid emergence of something new and dangerous.
Ask yourself:
Can things really go back to ‘normal’ after this?
Can things really go back to the way they were?
Can we really expect no CONSEQUENCES of what we’re seeing?
We both know the answers to those questions.
And as we've just shown you, the lessons of history are clear:
The conditions we’re seeing right now are a perfect storm for gold.
I’m not talking about a short-term rally. Or a 10% ‘pop’ higher over a few months.
If I’m right, we could be looking at one of the biggest gold booms OF ALL TIME.
And you know what?
It has already begun
Look at gold any way you like and you see it’s ALREADY at all-time highs:
How long before gold hits all-time highs in US dollars?
Well, after the last crisis, it took around three years — from 2009 to 2012 — before gold had smashed through its all-time high…
This time, with the chaos we’re seeing in the markets and the rampant money printing from just about every central bank in the world…it could be a hell of a lot quicker.
In fact, gold is already up 16% in USD terms since its March lows.
We are ready to capitalise on that.
Are you?
Given what we've just shown you…you should be.
In fact, we can’t remember a better time than right now to load up on gold and a handful of specific speculative gold investments.
Now, we know that lots of people will say that the best way to capitalise on a gold bull market is to buy physical gold, in the form of bullion or coins.
After all, it seems like the logical thing to do when the gold price is going up.
And it makes sense.
Though we believe it means you could miss some of the bigger, faster gains of the bull market.
To capture them, history tells us you have to look beyond bullion…and consider swiftly building a portfolio of other gold investments, particularly certain gold miners primed to explode higher…
And that’s not easy. Nor is it risk-free. Gold mining stocks are speculative and can be highly risky. There’s no guarantee that the historical examples will be repeated. You should not speculate on these types of stocks with money you can’t afford to lose.
Our research aims to guide you through how best to manage your risk.
Now, we know full well that not everyone can do this kind of specific research. They don’t have the time, the knowledge, the expertise or the confidence, for that matter.
This inflation calculator uses the official US consumer price index and breaks down inflation by spending category. Enter any year since 1635 to adjust for inflation, measure change in purchasing power, and more.
