Gold Is Taking a Brief 'Breather'

The Treasury Secretary tells Congress not to worry... Famous last words... The Federal Reserve changed the game again... Gold is taking a brief 'breather'... How to take advantage and protect your portfolio...

'Now is not the time to worry'...

Any time we hear those words, our ears perk up.

We don't normally watch or listen to CNBC (for our own health). But with U.S. Treasury Secretary Steve Mnuchin going on the financial-news network for an early Monday morning interview, we figured it would be wise to at least see what he said...

You see, Mnuchin could simply pass his message along to those who needed to know it through a phone call or an e-mail. But by going on national TV, he's intentionally drawing it to the attention of a much larger audience – including elected decision-makers and the general public...

In this morning's case, Mnuchin's audience was Congress. Lawmakers have been battling back and forth over more stimulus proposals the past few months, and Mnuchin wants to get another green light to allow the Federal Reserve to create more "fake money."

That's why Mnuchin, a former banker at Goldman Sachs (GS), said from the White House lawn today...

Now is not the time to worry about shrinking the deficit or shrinking the Fed balance sheet.

They sound like famous last words to us...

We find it hard to believe Mnuchin's statement is rooted in real, on-the-ground reporting. We haven't seen him on TV anywhere outside of Capitol Hill for the past six months.

If he would've been out in Main Street communities, maybe he would have heard something like what I (Corey McLaughlin) did from a new neighbor over the weekend... This 30-something man told me that he spent his stimulus check on a brand-new bicycle.

But how Americans spent the government handouts is a topic for another Digest. Here's what we want to focus on today... Importantly, a lot of the first round of stimulus money – which started going out five months ago – still hasn't been spent yet.

This tells us two things...

1. The folks at the Treasury who make their livings pulling the strings on our economy sure are irresponsible when it comes to money.
2. We still have plenty of time for existing, if not new, Fed-created "fake money" to make its way through our financial system.

For example, about $560 billion that the Fed created and allocated to its Main Street Lending Program earlier this year remains available to small and medium-sized businesses and nonprofit institutions like schools that were in sound condition before the pandemic. As of a few days ago, less than $40 billion of this $600 billion program, or 6% of its capacity, had been used.

Meanwhile, as Stansberry NewsWire analyst Daniel Smoot reported earlier today, Democrats and Republicans are about $1 trillion apart in their negotiations on more fiscal policy (different from the Fed's monetary policies) that they started on months ago...

A "skinny" $650 billion bill failed in the Senate because Democrats thought it wasn't big enough. A few Republicans also voted against the measure.

All in all, this is a political game more than a practical budget matter. How else do you explain one hand (Congress) asking for billions of additional dollars to send to Americans when the other hand (the Fed) already has them sitting on its balance sheet?

It is needless debt that we should worry about.

For better or worse, the actions of the Treasury and the Fed color everything about the economy and markets...

We've said before that the broader U.S. stock market likely would have plunged even deeper back in March if the Fed didn't step in and inject unprecedented amounts of artificial liquidity into the system.

Yet, by doing that, the central bank "changed the game" once again.

We're reminded of something that Gold Stock Analyst editor John Doody wrote in his August issue to subscribers...

Always remember... Politicians' No. 1 goal is reelection. To accomplish this, they try to get nine slices out of an eight-slice pizza... to get the economy to deliver more output and jobs than it's able to provide. But no matter how they slice the pizza, the size of the pie doesn't change. All politicians are really doing is debasing the dollar.

And as we just pointed out, the Fed still has plenty of untapped funds on its massive balance sheet. What it created back in March was the capacity to lend more money, but it hasn't even used much of the new programs yet. As Stansberry NewsWire editor C. Scott Garliss told us in a private message today...

The Fed hasn't even tapped into its firepower. It talked the stock market into doing its job instead.

Stocks have skyrocketed to dot-com-bubble-like valuations... Interest rates are near zero, just like they were for years after the Great Recession... And now, the Fed wants inflation to run higher to make up for lack of growth.

That devalues the U.S. dollar and makes poor people poorer, whether they know it or not... leading to more calls for handouts.

This is why, as far back as all this started in the spring, many of our editors have urged investors to own "hard assets" that will increase in relative value as the value of things priced in U.S. dollars goes down.

That concept is key to understanding how to protect your portfolio against inflation. Hard assets are things like gold, silver, real estate, art, and timber.

The world only contains so much of these physical assets. And as John has preached for decades, the companies that deal with gold, for instance, stand to make exponentially more money when inflation is being stoked like it is today.

Plus, whether we like it or not, more stimulus could be on the way.

That's why we want to note the value of gold today...

Since hitting a new high of more than $2,000 per ounce in early August, the price of gold has traded in a small range around $1,950 for the past month. It's trading up about 1% today, hovering around $1,960 per ounce as we go to press.

That's about 50% less than John's target of $3,000.

And as Stansberry Gold & Silver Investor editor Bill Shaw wrote in this month's issue – out last Tuesday – even though gold stocks remain up a ton in 2020, they're still historically cheap today.

Bill shared the details of a report that Canada's Scotiabank (BNS) published earlier this month. As he explained, the report shows that gold prices may just be taking a brief "breather"...

The following chart from Scotiabank compares the average price of mining stocks with their average earnings before interest, taxes, depreciation, and amortization ("EBITDA"). It also compares their average enterprise value ("EV") with EBITDA. (Remember, EV represents the total stakeholder value, including a company's market cap as well as its net debt.)

As you can see, gold stocks are incredibly cheap right now based on both metrics...

No matter how you slice it, gold stocks still have a lot of room to run before they even get close to becoming expensive. That will occur as the gold "mania" continues to play out.

And of course, all the catalysts for higher gold prices remain...

To this, we say... It's a perfect time to consider gold and gold stocks if you haven't already. And if you're still building your positions, it's a good time to add exposure.

It's not too late to get in on what John and Bill believe will be a massive run higher.

The Fed remains in "do whatever it takes" mode. And in the meantime, many members of Congress want to get more fiscal stimulus done... and clearly, the White House does, too. When that occurs, it will drive the value of the U.S. dollar down even further.

Elsewhere, the European Central Bank is signaling more stimulus measures... Japan's incoming prime minister said Sunday that the amount of bonds the government can issue to stimulate its economy doesn't have a limit... And negative-yielding debt, which gold prices have tracked almost identically over the past four years, continues to rise.

In short, we're not going back to a world free of "quantitative easing" anytime soon. And we can expect that the prices of hard assets like gold will likely shoot higher as more money floods the global economy.

A few weeks ago, we told you that even Warren Buffett (or one of his smart underlings) bought a gold stock...

This was eye-catching because Buffett historically has been a gold "hater." He once said, among other things, that gold is "incapable of producing anything." That's not totally true... which either Buffett or somebody on his team is convinced of today.

Specifically, Barrick Gold (GOLD) – the high-quality mining stock that Buffett's Berkshire Hathaway recently took a small position in – was, perhaps not coincidentally, the first gold stock that John bought decades ago.

It pays a dividend like all of Buffett's other preferred investments, and this number figures to increase as the price of gold goes up. This is why Berkshire is dipping its toe in the gold pond by buying about $500 million worth of GOLD shares in the second quarter of 2020.

At the very least, in the short term, the price of gold is unlikely to go significantly down anytime soon. That's what Dr. David "Doc" Eifrig wrote just this afternoon in his Advanced Options newsletter...

Demand for gold worldwide as an investment has increased recently. One year ago, demand for gold was 295 metric tons. Today, investors have driven demand for the precious metal up to 582.9 metric tons, nearly double.

When things are unpredictable, as they have been this year, folks want the safety of owning gold. And that's because it's seen as a chaos hedge.

We can't think of too many other situations where a "chaos hedge" investment would be more useful than today.

A pandemic is still raging... The U.S. has a pivotal presidential election approaching in less than two months... And no matter who wins, more "fake money" is on the table in addition to ever-increasing pushes for socialist policies.

The trend in gold is up this year... But recently, it has taken a break in what our experts believe will be a long-running bull market. That's your buying opportunity... If at least a portion of your overall portfolio isn't allocated to gold or precious metals, we urge you to consider changing that today.

And if you're interested in learning more about the best investments in the space, be sure to follow John's Gold Stock Analyst and Bill's Stansberry Gold & Silver Investor for plenty of ideas.

You won't find better guidance anywhere else in our business. Subscribers to John's service should receive the latest issue in their inboxes this evening, and Bill's readers can find their latest issue right here.

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New 52-week highs (as of 9/11/20): Gravity (GRVY), Jushi (JUSHF), McDonald's (MCD), and Osisko Gold Royalties (OR).

Today's mailbag is overflowing with feedback on Dan Ferris' poignant Friday Digest. Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"So sorry to hear about your mom. It is a crushing blow, to say the least. Hopefully you have oodles of fond memories to draw from. Focus on them – it has helped a lot of us manage the loss." – Paid-up subscriber Bill T.

"ONE OF YOUR BEST EVER. Thanks. And so sorry for your loss. Lost my mom 7/31. Spectacular life filled with love and purpose. She was awesome (and also just as flawed as the rest of us). Keep up the great work." – Paid-up subscriber David C.

"First of all, my condolences. I've been where you are twice with the passing of my mom and dad. Your Digest today was obviously deeply heart felt and to the point. Times like this have a way of focusing the mind with a piercing clarity. Phil Graham's 'Life Is Short' blog reminds me of my own epiphany at the time of my dad's passing. Time is the only asset that matters. It is also both a decaying asset and you don't know just how much you are allowed. Spend it wisely on only those very few things that matter." – Paid-up subscriber Michael G.

"Thank you for a great article that I ever came across in my life. I am 82 years old and all three 'Delphic Maxims' apply not only as a financial tool to investing as you eloquently explained but apply to every action and facet of life. I may have been a billionaire if I had disciplined my journey while following these Maxims.

"One thing that I have learned in life is to work hard and stay focused towards personal and financial goals while enjoying the process to achieve them. After all, these goals are always transitory, once you achieve one, there is always another one that you are striving to achieve. But if you enjoy the process regardless of the outcome, that's all that is needed for a joyful and peaceful journey in life.

"Finally, I share your loss and sadness but we all are destined to go away someday and merge with the supreme power and end this role that we have been born to perform. A significant part of this role is to learn from the sad and hurtful memories of the loved ones. So why not perform and lead our journey peacefully and joyfully while expressing gratitude for all that we have been given by God!!!" – Paid-up subscriber Ram B.

"As always, Dan, a great perspective on life and investing. Thank you for sharing your loss at this time when so many are grieving fire victims, COVID deaths and violent end of life scenarios. We end up all being enveloped in the same fog and putting one foot in front of the other to find our way through.

"As an avid reader I was interested in your list and might suggest any of David Whyte's books, prose and poetry, to your discovery list. With continuing admiration and with sympathy for this moment." – Paid-up subscriber Milly V.

"My journey began this past Tuesday, when we found my younger brother on the floor of his home, possibly succumbed to the virus. His services [were Saturday], so I'm still in the midst of grief. But the big thing about his passing was his resolute refusal of any assistance. He was very sick, but refused any help from me, or any of his other siblings. We even sent the police over for a welfare check, and he refused their offer to take him to the local hospital. Yes, he lived alone.

"But the one big thing in this is his refusal of help. No matter how big or tough we think we might be, no matter how many other times we've overcome setbacks, there is always that one time, when even a little 'bug' can bring you down.

"And that applies to virtually all aspects of life. When help is available, you should always take it. Maybe you really didn't need it, but the fact you accepted some help will just make the task simpler.

"Just because you can do trading commission-free and at home in your pj's doesn't mean you don't need a little help. When professional advice is there, take it. Read about the advice given, and act on it. Many hands can make a light load, and many experts can help make a solid portfolio.

"My brother's passing has deeply saddened me, and I will forever have a gaping hole in my life. But it has emphasized the fact that help is a very valuable commodity. If someone comes to me, offering their hand, I will look up and say, 'See how easy this is Sam?' And every chance I have, I'll be offering my hand, believing Sam is helping me extend it." – Stansberry Alliance member Daniel K.

"Dan, I thoroughly enjoyed your philosophical treatise in today's Digest. Take a look at The University of Success. This is a compendium of stories compiled by Og Mandingo from several years ago, written by a wide range of authors that share their methods of successful living.

"Many stories go back to antiquity, as well as more current offerings. Most are short, easy to get through in a few minutes and share a common thread... hard work, persistence and good attitude are the vital ingredients for successful living. I hope that you add this book to your library." – Stansberry Alliance member John G.

"Dan Ferris... I truly enjoy your articles. Now I know why. I was recently introduced to Stoicism and enjoy Shane's Mental Models. Condolences to you and your family on your recent loss. Cheers my friend!" – Paid-up subscriber Jim C.

"Great article Dan! The maxims are not only very useful for an investor, but as I thought about them further, I found them very useful for my life in general, including my job. As a business lender, I see many applications for these maxims. The Greeks were truly very wise!" – Paid-up subscriber George T.

"Some of the best, even if most personal advice you have ever published.

"Oh swell. More homework. Worth it." – Paid-up subscriber M. J.

All the best,

Corey McLaughlin
Baltimore, Maryland
September 14, 2020