'Peak Gold' Is a Myth
Editor's note: Unlike corporations and governments around the world, gold can't default on its debts.
That's one of many reasons to own the precious metal today.
In today's Masters Series – the conclusion of an exclusive two-part interview with Stansberry Gold & Silver Investor senior analyst Bill Shaw – you'll learn about the latest in gold prices... what big-picture trends he's keeping an eye on... and the incredible opportunity his readers have coming up this week...
'Peak Gold' Is a Myth
An interview with Bill Shaw, senior analyst, Stansberry Gold & Silver Investor
Sam Latter: Gold has had a strong start to the year, up about 12%. It's outpacing the S&P 500, which is up around 9% in 2017. Is it safe to say gold has resumed its uptrend?
Bill Shaw: Over the last six months, we've seen gold trade in a fairly tight range between $1,200 and $1,300 an ounce. If we see gold prices break through resistance at $1,300, we could see the beginning of a big move higher.
As Stansberry Gold & Silver Investor subscribers know, Porter and I believe we're in the early innings of a long bull market in precious metals. But it's not going to be a straight move higher. Investing in gold – and gold stocks especially – requires the ability to stomach some volatility. Even during a bull market, corrections are expected and healthy. We encourage readers to embrace the volatility and use market dips to add to their positions slowly.
We've seen some positive price action in gold this year. And while we aren't in the business of trying to call market bottoms and market tops, we realize we may not have another chance to buy gold this cheap again... especially if some of the bigger macroeconomic factors we're monitoring start to bubble to the surface.
Sam: Speaking of which, what are some of those macroeconomic factors you're keeping close tabs on today?
Bill: Well, anyone who has read Porter's Friday Digests over the last few years will be familiar with some of the big trends we're seeing in the markets today. But until recently, Porter was the only one sounding the alarm.
I just got back from the Sprott Natural Resource Symposium in Vancouver, and for the first time, I heard other people starting to echo Porter's warnings.
The mood in Vancouver was bullish, as you would expect from mining executives at a resource conference. Most of the usual suspects were there... We heard from industry legends like Robert Friedland, Ross Beaty, and Rick Rule, among others. And while those folks are bullish on the future of gold prices, there was a hint of caution in the air.
But not all of the speakers were industry insiders... We also heard from currency expert Jim Rickards and master speculator Doug Casey, as well as David Stockman, who served under President Reagan as the director of the White House Office of Management and Budget. These guys have been studying markets and macroeconomics for decades. And they agree that it's more important to own gold than ever before. They highlighted a few worrisome trends that will sound familiar to longtime readers.
First, we have a gigantic, unsustainable global debt bubble. In the wake of the 2008 financial crisis, central banks around the world embarked on an unprecedented era of currency manipulation. They printed trillions of dollars and held interest rates near – or below – zero. It's hard to wrap your mind around paying the government for the privilege of lending it your money. Porter calls it the "Escher Economy" and "Bizarro Capitalism." At some point, things will start to unfold. It's hard to envision this ending well.
We can also look at all of the geopolitical concerns taking place around the world. Earlier this week, President Trump responded to North Korea's threats. That alone sent gold prices up 1.3% in a single day. We have no idea what will happen there, or what role China will play.
But the uncertainty extends past that. What will happen with the civil war in Syria, our relationship with Russia, or the ongoing conflict in Afghanistan? Any one of these could cause a chain reaction of chaos in the global stock markets. Trump in particular has proven to be completely unpredictable. Nobody should be surprised at what he says or does anymore. All of this uncertainty points to more reasons to own gold.
Sam: Why should folks bother buying a bar of gold when they could just go into their brokerage account and buy the SPDR Gold Shares Fund (GLD)?
Bill: It's important to note that even though GLD is backed by gold and presumably owns the gold, you as an investor cannot exchange those shares for gold, only cash. Plus, in the U.S., sales of gold ETFs are treated the same as bullion, and thus, taxed at the same 28% rate that applies to gold coins and bars. The only advantage to owning GLD is that it's more convenient than driving to a coin dealer and buying the bullion. But bullion is in your possession. You can hold it in your hands. It's worth a lot more than just a promise.
Sam: What long-term trends are you looking at in the gold market?
Bill: One interesting trend we've seen over the past decade or so has been the lack of major new gold discoveries. The total ounces discovered in 2015 was down 85% over the previous decade. And that's despite huge exploration budgets during the peak of the last bull market. Most of the easy deposits have already been found. Mining companies must replace each ounce of gold they take from the ground or they'll quickly run through their reserves.
Miners can obtain more reserves in one of two ways. The first is through acquisitions. Each month in Stansberry Gold & Silver Investor, we update subscribers on the mergers and acquisitions taking place in the precious metals market. The first half of 2017 was roughly the same as the first half of 2016 in terms of total deals and dollar value. I expect to see both of those numbers rise over the next year.
The second way a miner can obtain more reserves is through exploration. But new discoveries take years to come on line. Under current conditions, gold production is expected to peak in 2019 and fall every year until at least 2025.
Of course, that doesn't mean we'll see a gold shortage. Again, most of the gold ever mined is sitting in vaults or being worn as jewelry. If demand rises enough, some of this supply could re-enter the market.
And increased demand could spur revolutionary new mining practices. I've heard the term "Peak Gold" thrown around. Much like the "Peak Oil" theory, the concept of Peak Gold is absurd. I have a feeling if gold hits $5,000 per ounce, human ingenuity will find a way to extract more of it.
Sam: Switching gears a bit, I've seen a lot of headlines this year about the rise of bitcoin and other cryptocurrencies. Some people argue they compare favorably to gold as a decentralized currency and a way to store wealth. What are your thoughts on the topic?
Bill: Blockchain – the technology behind cryptocurrencies – is fascinating. I look forward to seeing what uses and applications it has down the road. It feels like we're in the early stages of something big.
That said, it's hard to argue that cryptocurrencies compare favorably to gold. Even though they're a medium of exchange and a way to store wealth without needing to use banks, they have plenty of drawbacks.
They're vulnerable to cybercrimes, human error, power outages, and government regulations. They're not particularly portable or widely accepted as a currency. I realize that bitcoin and other cryptocurrencies have created a bunch of millionaires recently, and that people will continue to win and lose fortunes betting on them. But in a crisis, an Amish farmer would trade me food for gold... I doubt he accepts bitcoin. For those reasons, cryptocurrencies are more suitable for speculators right now.
Sam: So you have a big call coming up for Stansberry Gold & Silver Investor subscribers. Can you tell us a little about that?
Bill: Yes, that's coming up this week. I'll be speaking with a 33-year veteran of the mining industry. Years ago, he was named Entrepreneur of the Year, and for good reason.
Back in the 1990s, he launched a company that became one of the world's largest copper producers. In the 2000s, his second venture turned into the second-largest silver producer of its kind. Now, he's on to his third venture... And he has been buying the stock hand over fist, acquiring millions of shares over the past several months.
I recently flew thousands of miles to meet him in person and visit the site of this gold discovery. And on Wednesday, I'm hosting a conference call to present our findings. The chairman of this company will join us to share all of the details on what's happening. It's sure to be an informative and fascinating conversation. People who tune in will learn everything we know, including the risks, rewards, and identity of this company.
We're excited for the chance to pick his brain and get the details on this fantastic opportunity.
Sam: Sounds like a great opportunity to learn a lot more about the precious metals market. Good luck with the call, and thanks for taking the time to speak with us today, Bill.
Bill: Of course, it was my pleasure.
Editor's note: The best recommendation in Stansberry Research history was Seabridge Gold (SA). The tiny gold stock returned 995%, enough to turn every $10,000 into nearly $110,000.
Recently, Bill discovered what he believes could be the next Seabridge. If he's right, this could overtake Seabridge as the No. 1 pick in our company's 18-year history. He shared his findings in a brand-new presentation... Watch it here.