The Bullish Case for Gold You've Probably Never Heard

A distinct perspective on the gold market... The bullish case for gold you've probably never heard... What a Chinese (or Indian) wedding can tell us about gold... Five times the gold stored in Fort Knox... This situation could supercharge the next gold rally... An exclusive offer for Digest readers only...

Many of us own gold in one form or another...

If you love holding the gold in your hands, you probably have some coins or bars stashed away in a safe deposit box at a local bank or in a secret space in your basement or a closet.

If you want exposure to the precious metal without the hassle of taking physical delivery, you might own "paper gold" through exchange-traded funds ("ETFs"). And of course, you could own shares of gold miners and similar stocks in your portfolio, too.

Even if you're indifferent about gold as an investment vehicle, you likely own some of it through other means or for other purposes... For example, you might have solid gold or gold-plated jewelry (or your spouse does).

Or maybe you asked your dentist to give you a gold crown years ago.

Even those people who hate gold but carry a smartphone technically own a small amount... It's tucked inside the device, thanks to gold's great conductive and anti-corrosive qualities. That group alone covers roughly 3.6 billion people globally today.

So, yes, many folks in the world – even the biggest cynics – own at least a minuscule portion of gold.

But in today's Digest, I (Brian Tycangco) want to focus on one global region where many people take gold ownership to extremes...

As you'll see, this region's potential to impact the gold market in the coming months is huge, yet few people are really paying attention today. And from where I'm sitting as I write this Digest, this is setting up what I believe will be a big move higher in gold prices...

Before I go any further, I need to be clear about one thing...

I'm not a gold expert or a "gold bug" in any way whatsoever. I don't write for any of our gold-focused publications here at Stansberry Research – like Gold Stock Analyst or Stansberry Gold & Silver Investor.

My main role is working as an analyst on Dr. Steve Sjuggerud's research team. I spend most of my time looking for investment opportunities in China and other Asian countries. I live in one of these places, too – the Philippines in southeast Asia.

But where I live (and where I come from) is also why I do have a distinct perspective on the gold market... And I believe that's why I can offer a different look at the turning point that's approaching.

You see, I've spent my entire life in this part of the world. I've had a firsthand look at what I'm about to discuss today. And it's a part of the world where gold isn't just valued for its role as an inflationary hedge, its industrial uses, or its utility in jewelry.

Among the billions of people who live in Asia... gold is deeply rooted in the culture.

China, the world's most populated country, is a perfect example...

If you've never been to a traditional Chinese wedding – and there were about 8.1 million of these ceremonies last year – you should know something about them...

They involve a hefty amount of gold. It's given by guests to the bride and groom as a lasting symbol of wealth and prosperity.

In fact, weddings traditionally make up as much as 40% of China's annual gold demand, according to data from the World Gold Council ("WGC"). As a previous WGC report noted...

Typically a three-piece wedding set, known in Mandarin Chinese as jiehun san jing, might consist of a necklace/pendant/bracelet, ring, and earring combination. Bracelets are especially popular in southern China where wedding sets are also often five-[piece] rather than three-piece.

These jewelry sets are big, thick, and rather heavy... And they aren't designed to be worn casually for a reason (unless you're looking for the wrong kind of attention).

Instead, the 24-carat composition of these jewelry sets offers an unmatched purity that makes them easy to sell... As such, they're a de facto form of savings for the newlyweds.

And unless the couple falls on hard times, this gold almost never gets sold off... It simply gets passed on to the next generation. It's like an "insurance policy" for the couple. (Again, as someone immersed in this culture who has been to dozens of family weddings, I can speak to this point firsthand.)

In 2019, demand for gold jewelry in China totaled roughly 638 metric tons. Based on historical figures, the amount of gold from the wedding industry likely accounted for roughly 29% of that total – or 185 metric tons.

That's enough for about a third of an ounce of gold for each wedding in China, on average.

You can see in the following chart of WGC data that China leads the world in gold jewelry demand. It makes up about 30% of total gold demand for this purpose...

Demand for gold around the world took a big hit in 2020 because of the COVID-19 pandemic. But with 415.6 metric tons of demand for gold jewelry last year, China still accounted for 30% of the global total in that category.

China has since returned to normal operations. And so have its gold purchases...

In the first quarter of 2021, total gold consumption jumped to 288 metric tons. That's up 94% from the same period during the previous year. And gold jewelry accounted for 191 metric tons (66%) of the total in the first quarter of this year.

China has been the world's largest buyer of gold since 2009, and the pandemic didn't change that. So this country is going to continue playing a big role in the gold market in the foreseeable future. And it pays to keep an eye on what's happening there.

But it's the other country in this chart that I want to bring to your attention right now...

As you can see, I'm talking about India.

With roughly 1.38 billion people, it's the second-most-populated country in the world behind China (with about 1.4 billion people). Like Chinese citizens, Indians also have a strong cultural affinity to gold.

And as I'll explain, they could also hold the key to where gold prices go next...

Prior to 2009, India had been the world's largest gold buyer for decades...

As early as 1997, the country's gold stockpile was estimated at 10,000 metric tons. And by 2009, Indian households reportedly had 15,000 metric tons of physical gold... At the time, that equaled almost one out of every 10 ounces of gold ever mined.

Since then, India has added about another 8,870 metric tons of gold, according to WGC data. Take a look...

Now, India's central bank purchased about 310 metric tons of gold over this period.

But even after you subtract that amount from the total, it tells us that Indian households effectively now hold a mind-boggling 23,000 to 24,000 metric tons of gold.

That's about five times the amount of gold stored in Fort Knox (4,580 metric tons).

India's primary driver of gold demand is similar to China's...

Weddings.

Roughly 10 million weddings take place in India each year, too. And like in China, gold is generally given for similar beliefs – it brings good luck and prosperity to the newlyweds.

The popular wedding season in India falls during the second quarter of each year. That coincides with the Akshaya Tritiya festival, which happens every spring. It's a major gold-buying season. The second-most-popular time for weddings in India is the fourth quarter, which coincides with the annual Diwali festival – another big gold-buying event.

In the following chart, you can see that gold demand in India typically picks up during these two quarters each year...

But now, take a look at what happened during the first half of 2020...

As you can see, the COVID-19 pandemic pummeled Indian gold demand. The spreading fears about the virus slammed right into the country's peak wedding season in the second quarter... Millions of Indian weddings had to be put off to a later date.

Like China, gold jewelry demand from weddings in India will eventually bounce back. It's deeply rooted in culture and tradition... So they must own it and will continue buying it.

But unlike the Chinese, Indians also have two other very important reasons to want to buy as much gold as they can when things do go back to normal...

I'm talking about high inflation and massive devaluation. These are two things that people living in China haven't had to worry about so far...

Owning gold in India is a practical way to shield people from a double whammy of inflation and devaluation...

You see, people in India have been dealing with a long history of inflation. Since 1960, Indians have experienced 16 years with a double-digit inflation rate. (In comparison, the U.S. has only seen a double-digit inflation rate in four years over that stretch.)

India's accumulated inflation rate over the past 60 years is a whopping 7,579%.

The same thing an Indian consumer could buy with 100 rupees back in 1960 would now require 7,679 rupees today. In other words, thanks to inflation, that's a nearly 99% erosion of the rupee's purchasing power over the past six decades.

Along the way, Indians have also had to deal with the seemingly bottomless devaluation of the rupee. The exchange rate has gone from 4.76 rupees per U.S. dollar in 1960... to an astounding 72.54 rupees per U.S. dollar today.

The result is a gold price that has exploded up in local currency terms.

Take a look at the following chart. It shows you exactly how gold's price action would've seemed to you if you were living in India all these years...

In 1960, an ounce of gold could be bought for $35.31. That was equivalent to only 168 rupees back then.

Today, the same ounce of gold – valued at about $1,900 in U.S. dollars – will now cost Indian buyers a staggering 137,826 rupees. That's an 820-fold increase over the past 60 years, or roughly 12% annualized... It's almost double the 6.8% annualized return of gold in terms of U.S. dollars over the same span.

This month, the country hoped it could get back to normal during a major gold-buying season...

You see, as I mentioned earlier, the Akshaya Tritiya festival takes place every spring in India. (In 2021, it was May 14... But it varies every year.)

Indians hoped the festival would push the country toward a return to its 2019 level of 690 metric tons of gold demand. On top of the increase in weddings around this time of the year, this one-day festival alone normally generates up to 40 metric tons of gold sales.

But unfortunately, just weeks before this year's festival, disaster struck...

The country's COVID-19 infections started to get out of hand. New mutant variations emerged. And by early April, India was reporting more than 100,000 new infections per day – much higher than the rate it experienced during the first wave of the pandemic.

As a result, what was supposed to be a haul of roughly 40 metric tons for India's gold jewelers on Akshaya Tritiya is now expected to be a tiny fraction of that amount.

But the thing is... this situation isn't going to last forever.

And as this temporary problem gets solved, it could mean good news for gold investors...

You see, pent-up demand from India could supercharge the next gold rally...

As I've explained today, the world's second-largest consumer of gold – and its biggest consumer of gold jewelry – was effectively sidelined last year and in the second quarter of this year due to COVID-19.

That means Indians couldn't buy their normal amounts of gold. In the first quarter, for example, WGC data shows that they've only purchased 140 metric tons. That's still below pre-pandemic levels.

But the second wave of COVID-19 is already subsiding in India. After reaching a record of 400,000 new cases per day, that number has since halved. It's still a high number right now, but with the trend pointing down, the country's government is optimistic that the worst is now in the rearview mirror.

It remains to be seen how long it'll take for things to get back to normal in India. But one thing is clear...

For more than a year, Indians have been sitting at home and accumulating rupees that they know will erode in value the longer they hold on to them. They're itching to get out to the jewelry shops and load up on their go-to wedding gift and financial-safety asset...

Gold.

As they do, the amount of gold purchased in the country will soar. And because India imports all of the gold it buys (except for recycled supplies domestically), these purchases will slam into a gold market buoyed by the sharp rebound in Chinese demand.

It's a situation where the world's two largest consumers are going to be competing with each other for gold. And it's worth noting that the production of gold last year was even lower than 2016 – again, thanks to shutdowns related to the COVID-19 pandemic.

That should be music to your ears if you're holding gold right now...

In this case, surging demand will be more than enough to push gold prices higher. But due to production shutdowns, the supply of gold is also not at its normal level.

When the world's top two gold-jewelry-buying countries start returning to normal behaviors after more than a year of being sidelined by a pandemic, it's going to move the market.

And of course, this isn't the only factor pushing gold prices higher today...

Chinese investors are buying more gold each year through ETFs, which are becoming increasingly popular with the country's 177 million stock market investors as a way to diversify out of the Chinese yuan. Their holdings of gold through ETFs have risen sixfold since the beginning of 2016...

In March of this year, Chinese gold ETF holdings hit a record 72.4 metric tons.

Then, of course, we have growing inflation fears in the U.S. According to the Federal Reserve Bank of New York's Survey of Consumer Expectations for April, Americans expect inflation of 3.4% a year from now. That's the highest level in almost eight years.

Yet, yields on the one-year U.S. Treasury bill remain stuck at 0.04%, while the Fed refuses to raise short-term interest rates.

As regular Digest readers know, the central bank has its reasons for how it's acting right now. But for average Americans, those reasons also mean holding government bonds today is tantamount to holding a certificate that's guaranteed confiscation through negative real returns.

Now, take a look at the following chart. Notice that gold just broke out of a nine-month downtrend. It's a great sign that momentum is behind a bigger move to the upside...

When you add everything together, it's clear that now is a great time to own gold...

If you're comfortable with the amount of gold you already hold, that's great... You can just hang tight. Based on what I've shared in today's Digest, I believe your position should do well in the coming weeks and months.

If you're looking to increase your exposure to precious metals today, you can do a couple of things...

First, of course, you can buy some gold bars and coins. While it often takes a little more legwork, there's just something wonderful about holding the physical gold in your own hands.

But if you're not worried about that, you can also get involved in gold's next leg higher with just "one click" today...

A simple, cost-efficient way to take advantage is through an ETF like the SPDR Gold Trust (GLD). It's the largest, most liquid gold ETF today... with about 33.6 million ounces of gold worth around $63.5 billion at current prices.

Finally, if you want to go beyond just holding gold and venture into gold stocks...

We encourage you to check out John Doody's Gold Stock Analyst publication today.

Regular Digest readers know that John officially joined the Stansberry Research universe in the summer of 2019. But he has been writing the preeminent publication on gold stocks for more than two decades.

With the help of his analyst Garrett Goggin, John tracks all the notable gold mines in the world. John and Garrett use proprietary tools to evaluate what a gold business is worth... and then figure out the best time for their subscribers to buy into the stock.

Plus, John is one of the most well-connected people in the precious metals space. He knows everyone. And he has developed a tremendous reputation for his thorough, credible, and trustworthy research.

John's successful approach is clear when you look at the numbers...

His service racked up a 1,239.7% cumulative return from 2001 through 2020. That translates into 24.1% average annual gains for 20 straight years. Those returns crushed both gold and regular stocks...

If you instead would've invested into the benchmark S&P 500 Index back in 2001, you would've made 322.2% over the same span – or 9.1% average annual gains. And it's a similar story if you would've just bought physical gold... Your holdings would've gained 585.6% (11.2% average annual return).

That would be an incredible feat for any analyst selecting across many industry sectors... And John did it by holding no more than 10 gold stocks at any given time. It's what he calls the "GSA Top 10" – the best of the best.

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And whatever you do, just make sure not to miss gold's next move higher from here.

New 52-week highs (as of 5/26/21): Analog Devices (ADI), Richemont (CFRUY), Expeditors International of Washington (EXPD), Forum Energy Technologies (FET), Intuit (INTU), Coca-Cola (KO), Invesco S&P 500 BuyWrite Fund (PBP), VanEck Vectors Russia Fund (RSX), and TFI International (TFII).

In today's mailbag, an Alliance member writes in about watching Marc Chaikin's "Prediction 2021" event. Do you have a comment or question – about this or anything else? Send your notes to feedback@stansberryresearch.com.

"Robert T's 'I usually don't complain about free products, but...' letter at the end of [Wednesday's] Digest really struck a chord with me. I too am constantly frustrated at the inability to pause these marketing webinars you people do. I watch all of them, despite being an Alliance member and therefore already a subscriber to most of what is being promoted. I love the content, but dang it people! Please enable us to pause, rewind, and fast forward! I can't even count the number of times I want to hear something repeated, but my only choice is to re-watch the presentation a second time. Ridiculous!" – Stansberry Alliance member Barbara D.

Corey McLaughlin comment: Thanks for your note, Barbara, and to a few others who wrote in with similar thoughts... even if you called us "you people." What do you mean, you people? (We kid, we kid.)

The best thing we can tell you is what our founder Porter Stansberry has said about this topic – and our marketing, in general – in the past. Here's what Porter wrote back in a September 2012 Digest. It still applies today...

We admit to being aggressive marketers. That is, we spend heavily to sell our products. We also rigorously test (and re-test) the techniques we employ to get the highest return on our marketing. You should expect that from a company owned and led by a financial analyst.

You might be surprised to know... like you... I personally don't like our video sales letters. But they always win in our marketing tests. Likewise, giving people stop, start, and rewind buttons reduces response rates. I don't know why that's so... but I know we've tested it thoroughly.

In other words, we actually want people to watch every single second of our marketing videos. That's true for a few reasons...

For one, viewers are better prepared to make an educated decision about whatever product we're offering if they watch the whole thing... and there's no way for us to guarantee that folks will watch the entire video if everyone is able to skip ahead, pause, rewind, etc.

But, even with that said, we do have another, relatively simple option if you were booted out of the presentation for whatever reason and don't want to sit through the whole thing again. We understand that people are busy with their lives, of course.

If you exit our marketing videos, you'll be given the option to read the plain-text version through a link in a pop-up box. You can click that link and peruse the written transcript of the presentation at your convenience... and we hope you do.

You're likely a long way from that link, though. So I asked our marketing department to create a direct link for today's Digest that will take you straight to the written transcript of Marc's presentation. Here it is.

This transcript includes almost all of the event, except for the Q&A parts at the very end.

And longtime subscribers know this part, too, but it's worth saying while we're on the topic...

Our business model and our goals – to deliver the high-quality, independent financial research that we would want if our roles were reversed – is based on folks buying subscriptions to our products and those of corporate affiliates like Chaikin Analytics.

And these videos work to accomplish our goals...

On a related note, by now, you should've received word that our StansberryInvestor.com platform is now available to all paid Stansberry Research subscribers.

If you haven't checked it out yet, please do. We believe you'll be blown away with the investing tools that are available to you... many of which most individual investors simply don't have access to.

For one thing, StansberryInvestor.com is a great one-stop shop to find all the research our editors have published on a particular company. That includes our "Stansberry Score" – which combines our various proprietary indicators into one easy-to-understand ranking.

There's much more, too... And our work on this platform is really only just getting started.

In other words, when it comes to our videos, just remember that you likely found us in the first place because of one of them... And we're happy that you did – as are countless other folks you might've never met in person.

It's you – our paying subscribers and Alliance partners – who allow us to produce the high-quality and growing amount of independent financial research that we deliver to you and tens of thousands of others every single day.

Good investing,

Brian Tycangco
San Juan City, Philippines
May 27, 2021