Yesterday, we noted the bullish gold stance in DailyWealth Trader, our newest product... In short, co-editors Amber Lee Mason and Brian Hunt said the global race to devalue currencies (via central bank easing) will push investors into gold. The precious metal is the best insurance against weak and manipulated currencies.
We're long-term bullish on gold... Steve Sjuggerud first recommended the metal in the June 2002 issue of True Wealth. Back then, gold was trading for around $300 an ounce. From that issue...
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For the masses to pile into gold, they need to believe that we are at war. They need to believe that our nation is at risk. They need to believe that the dollar is going to fall and that inflation is going to appear. And most important, they need to believe that the men at the controls are no longer in control. Or at least, these are the things that have caused gold to move in the past. |
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It will be hard to convince investors of these things. Investors haven't worried about any of these things for many years now – if they've ever worried about them. And old habits die hard. Funny how times change... 1980 wasn't that long ago... |
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In January of 1980, nobody trusted anybody in government to man the controls. Gold hit $850 an ounce. After a decade of dumb ideas from our political leaders (including Nixon's price controls), the Vietnam War, and the OPEC oil embargo, we were stuck with drastic inflation, high unemployment, and no signs of economic growth. Everything the government touched turned to stone. So people wanted out of government, and especially didn't want government to have control over their wealth. |
The first paragraph above is particularly prescient... People do believe the dollar is going to fall (it has)... People do fear inflation (though those fears will grow in the coming years)... And nobody believes the government can control this fiscal disaster.
Since Steve wrote that piece, gold has gone up for 11 straight years and rallied to a high of $1,900 an ounce.
Nothing goes straight up without taking a breather. Gold needed to correct. But the loose-money policies of the world's central banks will keep gold prices from falling too far... Today, gold trades for about $1,600 an ounce. And Amber and Brian aren't our only bullish analysts...
This morning, master trader Jeff Clark sent an update to S&A Short Report subscribers, saying gold is approaching a short-term buy signal...
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Gold stocks are getting close to another buy signal from the bullish percent index (BPGDM). We've had a couple rally attempts in the sector since April, but neither of them really developed their full potential. Perhaps the third time will be the charm. Here's an updated look at the BPGDM... |
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The blue circles indicate each time the index dropped into oversold territory – below 30 – and then turned higher, thereby generating a buy signal. We are on the verge of another one any day now. |
And in True Wealth Systems, Steve also said it's time to buy...
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It's time to buy gold... |
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Last month, we explained that investor sentiment is at the point of "maximum pessimism." We also predicted that "we are at the brink of a major move," and there are two likely outcomes: |
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We will have a massive crisis of confidence. In this situation, nobody will trust the banks or any other financial institution. Gold will be the only asset that soars. |
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Or... |
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This moment of maximum pessimism simply passes... It gets "less bad" – which kicks off a rally in "risky" assets like stocks and commodities. Everything soars except the U.S. dollar. |
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Gold is the only asset that could go up in either of our two scenarios. Our problem at the time was that we didn't have an uptrend in gold, so we couldn't buy it. |
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That has changed... |
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Now is the perfect moment to own gold... Gold sentiment is still negative. And we have a hint of an uptrend. |
To create True Wealth Systems, we spent hundreds of thousands of dollars building custom-analysis software that performs high-probability/high-profit trading strategies. By applying these strategies to data from all corners of the market – stocks, currencies, commodities, etc. – Steve can watch for money-making opportunities wherever they crop up.
And of course, gold is among the commodities Steve and his research assistant Brett Eversole track. Based on 40 years of historical data, Steve and Brett found a simple way to know when to buy gold...
When gold is going up against the world's four major currencies (the U.S. dollar, Japanese yen, British pound, and euro) in the previous month... it's time to buy.
I know this sounds simple, but it works... Following this strategy over the past 40 years has produced annualized returns of 41.4% on each trade. Take a look at this chart from the most recent True Wealth Systems...
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So we have the short-term buy signal for gold from Jeff... and one from Steve that has historically produced big gains. And we have no doubt the long-term trend is in place... The world's central banks will continue printing money and ruining currencies.
And as bullish as we are on gold... we expect the weakening global currencies to cause another metal – silver – to soar as well. Silver is also viewed as a monetary asset. And as our friend Doug Casey likes to say, silver is "going to the moon!"
One of the greatest resource investors in the world, Eric Sprott, also has faith in silver as a monetary asset. In an April 2011 letter to investors, he wrote...
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What the so-called silver "experts" neglect to account for in their models and projections is that the fiat money experiment has failed. And in this context, we believe the Market has assigned world reserve currency status to gold – not USD, not EUR, and not JPY. In our opinion, gold's continued appreciation vis-à-vis every currency is assured because the great flight from fiat has only just begun. Like gold, silver also has a long monetary history, and as such, investors are now also buying silver as protection from the ravages of fiat currency debasement... We truly believe that this is the investment opportunity of a lifetime. |
Adding to his bullishness, Sprott also believes the world is running out of silver. You can read his thesis here. This quote from Sprott, which he gave at a Casey Research resource investment conference, sums up his thoughts... "There's $22 billion of silver available in the world, of which the [exchange-traded funds] already own half. And between you guys and us we probably own the other half... Which means there's nothing left."
Silver is a volatile metal. When a bull market hits, it soars. For example, from August 2010 to April 2011, silver shot from around $18 an ounce to almost $50 an ounce. But when the market turns bearish, the drop is also violent...
Right now, we think we're on the verge of a major bull run. There are lots of ways to play the silver market... You can buy the metal. That's the safest way to establish a position. Bullion should form the foundation of any precious metal position. You can also buy exchange-traded funds backed by the metal. These are supposed to mirror price movements in the metal... While not as secure as locking a chunk of actual metal in your basement... for many folks, it's easier than accumulating bullion.
However, to capture really huge gains that can happen during a silver bull market, you need to hold a small position in silver-mining stocks and royalty stocks. These speculative stocks are riskier than holding bullion... But building a selective portfolio of high-quality silver stocks could produce triple-digit returns over the next year.
In fact, the best gold-stock analyst we know, John Doody, is turning his focus to silver. John made a fortune in the gold markets (around $11 million to date). And he thinks he's about to make even more money buying silver.
As we've said about John before... no one is better at identifying the top gold stocks to buy at any one time... In his flagship newsletter, Gold Stock Analyst, he analyzes the value of the gold the biggest mining companies produce based on their share prices and compares that with the market price of gold. It's a strategy that's been wildly successful. Over the past 10 years, his top 10 has compiled an annual return of more than 40%... and it's up more than 1,000% cumulatively over that time.
Now, John is placing a heavy focus on silver.
For his new service... Silver Stock Analyst... John is applying the same scrutiny to silver stocks. He's analyzed the entire market of publicly traded silver stocks. And he's put together a report identifying his favorite stocks... the highest-quality silver producers that will soar when the bull market in silver hits. If you'd like to learn more about John's new silver service, you can click here...
New 52-week highs (as of 7/9/12): Abbott Laboratories (ABT), Alico (ALCO), Two Harbors (TWO), Wal-Mart (WMT), Altria Group (MO), and Philip Morris International (PM).
In today's mailbag... one subscriber wonders where the SPDR Consumer Staples Select Fund has been all his life... Send your questions to feedback@stansberryresearch.com.
Regards,
Sean Goldsmith and Dan Ferris
New York, New York and Medford, Oregon
July 10, 2012
DailyWealth Trader is bullish on gold... Sjug's incredible gold call... Jeff Clark: A 'gold buy signal imminent'... True Wealth Systems: Buy Gold... Why silver is going 'to the moon!'... The best gold stock analyst we know...