Gold Has Become a Currency Again
Brexit fears continue... A new 31-year low for the British pound... China devalues the yuan (again)... About our Brexit 'prediction'... Gold has become a currency again... How high silver could soar... How to make volatility your friend...
The British pound plunged again today...
Following last week's "Brexit" vote, the U.K.'s currency fell 13% to a new 30-year low on Friday. This morning, it plunged another 4% to a 31-year low. The pound fell to nearly $1.31... a level not seen since July 1985.
Yields on U.K. 10-year government bonds – known as "gilts" – plunged again, too. Gilts now yield less than 1% for the first time in history. And they could be headed even lower from there.
In fact, if the Bank of England begins cutting rates again next month, as several analysts now believe, it's likely only a matter of time before they turn negative like those in Germany and Japan.
Perhaps more important, we note China quietly devalued its currency, the yuan, again this morning.
China's central bank – the People's Bank of China ("PBOC") – set the yuan's official rate 0.91% lower versus the dollar. This is the biggest devaluation since last August, when the PBOC slashed the yuan by nearly 2%.
As we've discussed, China – like all the world's major governments – is determined to weaken its currency. But last August's devaluation backfired... It set off a panic that caused capital to flee the country.
Since then the PBOC has devalued the yuan several more times, but it has kept these moves much smaller. It has clearly tried to avoid a repeat of last summer's declines.
Today's big move could mean that strategy has changed.
The PBOC may be testing the market's reaction to a larger devaluation... or perhaps the Chinese economy is even worse than we know, and it simply has no choice.
Either way, it suggests bigger moves are coming... which is exactly what Porter's "Metropolitan Man" has predicted.
Speaking of the Brexit, we'd like to clear something up...
We received several notes from folks suggesting we were trying to take credit for calling it.
That's simply not the case... As we explained many times, a Brexit was possible, but unlikely. Yet even the most unlikely events sometimes do occur.
On the other hand, we have been warning folks for months to be ready for periods of extreme volatility and panic.
This panic came from an unexpected event. But it's important to realize these problems are all connected.
The rise of antiestablishment sentiment in the U.K. and Europe – and even here in the U.S. during this election season – is just one symptom of a much bigger disease that Porter has been warning about for years: Rampant credit manipulation and currency debasement by corrupt governments around the world.
Unfortunately, we can't tell you exactly how it all will end... There's no way to know what event will ultimately trigger the collapse of the paper money system.
It could be the breakup of the European Union... the spread of negative interest rates to the U.S... contagion in the credit markets... or something completely unexpected. And that's the point.
While we can't know what will trigger this crisis or exactly when it will arrive, we can know two important things:
| 1. | A crisis is virtually unavoidable now... Bankrupt governments around the world have no real choice but to default or print money to paper over massive bad debts. Periods of volatility and panic are likely to become more common from here. |
| 2. | This crisis will cause devastating losses for those who aren't prepared. |
As regular readers know, one of best ways to prepare is to own plenty of gold. And gold behaved exactly as you'd expect following last week's vote. As Bloomberg reported this morning...
The U.K.'s historic vote to end its European Union membership was a call to action for risk-averse investors, triggering a $4.3 billion surge in holdings in gold-backed funds, the most in a single day in four years.
It adds up to a net inflow of $32 billion into bullion-backed exchange-traded funds this year, pushing the assets to the highest level since October 2013, according to data compiled by Bloomberg.
It's important to note that gold didn't move higher on the dollar's weakness, as is often the case. In fact, gold rallied despite a higher dollar. In other words, gold is behaving as a currency. And that has been the case for months now.
The world's major currencies are rising and falling against each other as central banks race to devalue. But gold has been rising in all of them. And this trend is likely to continue.
Governments around the world have racked up unprecedented amounts of debt... global interest rates are already sitting at the lowest levels in all of recorded history... and negative interest rate policy is rapidly spreading to every major currency around the world.
As financial blog Zero Hedge noted last week, if someone asked you to come up with the ideal scenario for higher gold prices, it would be difficult to come up with a better one than what we have right now.
And if gold moves much higher, silver could soar...
This morning, our colleague Ben Morris explained just how big the gains in silver could be this time around. As he wrote in today's issue of our free Growth Stock Wire e-letter...
The piddly 30% gain we've seen so far is nothing. Once it gets going, 200%-plus gains are the norm...
So following its largest drop in 34 years – and its third-largest drop ever – you can reasonably expect its price to double, triple, or more...
If you're concerned about getting in at a good price, take a look at the chart below. As you'll see, when silver booms, it really booms.
As Ben explained, every time silver has dropped 40% or more and then rallied at least 25%, it has averaged 339% gains in total.
After the 30% rally this year, an average gain for silver would mean an additional rally of 176% from here. But we believe this bull market could be one for the record books.
Of course, select gold and silver stocks are likely to do even better...
As our colleague Sean Goldsmith noted on Friday, since we launched our new Stansberry Gold Investor service in April, gold has rallied about 7%. But Stansberry Gold Investor subscribers are holding double-digit gains on every single recommendation, including gains of 83%, 90%, and even 98% so far.
All told, Stansberry Gold Investor subscribers are up an average of 32% across the entire portfolio (including positions in the metal itself). That's more than four times the return of gold over the same period.
But the biggest gains are yet to come...
Despite the big rally so far, gold stocks are still incredibly cheap. In fact, they're still cheaper relative to the price of gold than they were at the bear market bottom in 2000.
In short, gold and silver are virtually guaranteed to rally hundreds of percent over the next few years... meaning the best precious metals stocks could soar to prices that are unimaginable today.
If you missed it last week, be sure check out a special offer on our best gold and silver research right here. (You won't have to sit through a long promotional video.)
As you'll read in the mailbag below, folks who took our advice to reduce risk and hold plenty of cash and gold weathered the storm just fine. They were able to stay calm while the market panicked. We hope you did, too.
But you may not realize there's another way you can take advantage of periods of volatility... a strategy that's so powerful some subscribers tell us they actually look forward to market panics like this.
As longtime subscribers may have guessed, we're talking about options trading.
Trading options is one of the best ways to take advantage of market volatility. And despite what you may have heard, it's incredibly safe... and surprisingly easy to learn.
Nobody knows this better than our colleague Dr. David "Doc" Eifrig, editor of Retirement Trader...
Over the past several years, Doc has taught literally thousands of people with little or no options experience how to safely take advantage of volatility... generate safe, consistent income... and sleep well at night no matter what the markets are doing.
If you've never tried it, Doc says this is an ideal time to add options trading to your investment "toolbox"...
In last Friday's issue of Retirement Trader, Doc explained exactly how these trades work to generate consistent income when volatility spikes... and shared four great ways to take advantage of Brexit fears today.
You can learn more about Doc's excellent Retirement Trader – including how you can get immediate access to his latest issue – right here (without sitting through a promotional video).
New 52-week highs (as of 6/24/16): Central Fund of Canada (CEF), Franco-Nevada (FNV), VanEck Vectors Junior Gold Miners Fund (GDXJ), SPDR Gold Shares Trust (GLD), Hershey (HSY), Invesco Value Municipal Income Trust (IIM), Kaminak Gold (KAM.V), Altria (MO), Newmont Mining (NEM), Nuveen Premium Income Municipal Fund 2 (NPM), Nuveen Municipal Value Fund (NUV), OceanaGold (OGC.TO), Pretium Resources (PVG), SEMAFO (SMF.TO), and Silver Standard Resources (SSRI).
Several readers weigh in on the Brexit and last Friday's market action. How is your portfolio weathering the volatility? Let us know at feedback@stansberryresearch.com.
"The U.S. markets are down almost 4% today, but my portfolio is up about 2% today thanks to my gold stocks... and now I find out maybe the Netherlands and France may want to exit the EU. It just keeps getting better for my stock portfolio. Keep it coming." – Paid-up subscriber Kenneth S.
"All I have to say is thank you. I have 4.5 mm of liquid assets, 1mm in cash, and 500k in metals and metal stocks, the balance in stocks and bonds. Friday's market action was actually enjoyable for the first time. Thank you Porter, Steve, Matt, and the rest of the team." – Paid-up subscriber Charlie T.
"I wanted to write to thank you for your learning moment newsletters. Today the S&P dropped 4.12% but my portfolio dropped only 0.3%. The reason is that I took your advice. I have increased my cash, sold off some of my more volatile positions (as indicated by TradeStops), increased my fixed income portion using Stansberry's Credit Opportunities, and populated the portfolio with many WDDG stocks. But the biggest reason it didn't drop more is the [Stansberry Gold Investor] portfolio.
"I've learned a lot about option investing, and since Jan 1 have set of goal of making $2000/week trading options and am on target. That's enough to fund my retirement, while risking less than 20% of the portfolio on the options (and actually much less since the options/stocks rarely drop to zero). Thanks again. Keep up the good work." – Paid-up subscriber B.V.
"I read Mr. Westenson's lament with amusement. There have been one or two occasions in the past when things were happening in the market and I would have liked someone from Stansberry Research to give me a clue about what to do. But Friday (June 24) wasn't one of them. I have been trying to stay lined up with Porter's advice over the past few months and was able to simply sit back and watch as the day played out. Disappointed, perhaps, that gold didn't go a bit higher but otherwise quite content. Thanks for keeping life interesting." – Paid-up subscriber Dave B.
"No matter what is booked, this is the one e-mail I will stop, search for, and read every day. I don't care to think of what I would not understand and be prepared for without you, as well as your other publications. Saying thanks is not enough." – Paid-up subscriber G.F.
Regards,
Justin Brill
Baltimore, Maryland
June 27, 2016
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