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Perspective Are you sensing winds of change? I am. Those of you who have met me in person at conferences have no doubt heard me say, “I am not a cheerleader. I don’t have the legs for it.” Rather, I call it like I see it… good, bad, or indifferent. Right now, I am sensing a change in the wind. Lukewarm At Best Tom simply does not see any meaningful interest in gold compared to the peak of the last bull market. No headlines. No lines around the block. No euphoria. I agree with Tom. Last month, we wrote about how there were more sellers than buyers in this market. Wholesalers are buried in gold and silver that they bought back from investors. Premiums for fabricated coins and bars are tiny. Heck, lately, we have been able to sell Junk Silver – pre-1965 90% U.S. dimes, quarters, and half dollars – below spot silver. We are practically giving it away. This is absolutely not what a late-stage bull market in gold and silver looks like. Investor interest is lukewarm at best. We have plenty of upside ahead of us. Here Comes Silver In the past couple of weeks, silver blew through $40 per ounce like a hot knife through butter. A week later, it did the same through $45. I cannot believe $50 per ounce silver is far away. As expected, it is taking less ounces of silver to buy an ounce of gold. Your Gold/Silver Ratio (GSR) has worked its way down to 84. That is significant. The GSR has spent most of this past year between 100 and 90. But in the past two weeks, the GSR fell rapidly from 89 to 84. I believe this is significant. For the past few years, central banks have been buying gold like it is out of style. They purchased over 1,000 metric tons per year each in 2022, 2023, and 2024. This year, it looks like they will do it again. If not, they will get very close. But investors have not been buyers in this market. Here is why this is important. Central banks do not buy silver. Retail investors do. The fact that the GSR is moving down suggests that retail investors are starting to wake up and get into the game. This is the change in the wind I am sensing. What Does It All Mean? Gold has a long way to go yet. You are not too late. You still have an opportunity to secure your wealth insurance at premiums much lower than they will be three to five years from now. The profit potential for silver is even better. The chart above shows silver in an extremely bullish 45-year cup and handle formation. And we have recently broken out to the upside. Now, I am not a chartist. But I know some very competent chartists. And they tell me, based upon the parameters of the cup and handle and the recent breakout, they expect silver to reach $90 to $100 by the end of this bull market. That is extremely compatible with my commonsense analysis. Based upon the previous bull market highs in gold, I expect gold to reach somewhere between $3,800 and $5,700 per ounce. That would be two to three times the previous bull market high. At the end of the bull market, I would further expect the GSR to get down to somewhere between 35 and 50 to 1. $5,000 gold and $100 silver will yield a GSR of 50 to 1. So, as we mentioned last month, if you need to sell here, do so. That is what gold and silver are for. But if you do not need to sell, I encourage you to consider buying here. Wealth insurance (gold) is cheap here at all-time highs. Profit potential (silver) is incredibly strong here as it approaches all-time highs. Buying gold and silver right here and right now is the best way I know to Keep What’s Yours! Brian, Alicia, Cristian, and Tamara are ready to take your orders. Email us or call us toll-free at (800) 831-0007. Mark Your Calendars… Join Adrian Day and me at 7PM EST on Wednesday, October 8th as we welcome none other than John Doody for our fifth On the Move webinar of the year. The webinar is free, but you must register to attend. Editor's Note: John Doody is the featured guest for our upcoming webinar on Oct. 8th at 7 pm ET. You can register here. To learn more about his Fave5Golds newsletter, visit https://www.johndoodysfave5.com/presentation/. They're offering a special $500/year discount to ASI investors. Click this link: https://buy.stripe.com/3cI6oH1TM6EF98s9nr4wM0q. Feature My post–graduate studies included an MBA in Finance and Ph.D. work in Economics, both at Boston University. These led to an Economics Professorship for 20 years at Bentley University before leaving to write Gold Stock Analyst in 1994. I believed in gold enough to leave the ivory tower. My trust in gold is based on what I see as politicians #1 objective: Get reelected. It doesn’t matter their party. They will run budget deficits and promote loose monetary policies to curry favor with voters and get reelected. Tax laws and investors consider machines as depreciating assets that wear out, using up their useful life. What’s left is sent to the junk yard as it’s too costly to fix. Mines are similar depleting assets. When the ore for which it was built to extract is gone, it’s closed. But some worn out assets can eventually be salvaged and end up being worth more their initial price… like an antique car. And as we will see, also true for some gold mines. Gramps got me started on gold, and bullion coins are still the foundation to my personal portfolio. But my interest shifted to gold mining stocks as they have leverage to gold price. Every $1 increase in gold price falls through to a company’s profits. The best miners have ten times or more their annual production still in the ground as Reserves for the future. So the $1 gold price increase translates to a 10X increase in their Reserve value. This Reserve value increase is what gives the gold miners leverage to the Metal. Some portion of the value increase shows up in stock price and allows carefully selected gold stocks to outpace the Metal. My GSA Top 10 stocks portfolio had been independently audited results for 23 years, from 2000 to end-2023 (when I retired). The Top 10 had an average annual gain of +19.3% for the period, double that of gold (+10.1%), S&P500 (+9.7%), and 5 times more than the gold ETF, GDX (+3.4%). To my knowledge, no gold newsletter or mutual fund has had better audited results. How did I do this? By focusing on producers with data and near producers with Feasibility studies that show a mine would be profitable if built. No explorers are covered as most are losing lottery tickets. All gold miners produce exactly the same product: gold ounces. So, with the sales revenue side of the miners set, I look at the production side of the miners seeking those offering the best value based on Reserves and Operating Cash Flow (OCF). The latter is a miner’s net revenues after paying the direct production costs (labor, power, etc.) times their annual production. Example: At $3,500 gold, a miner with a $1,500/oz. cash cost/oz. and 100,000 ounces of annual production will have an OCF of $200 million. We then divide OCF into the miner’s Enterprise Value (Share price X Shares outstanding, plus Debt minus Cash) to get its OCF Multiple. Like a Price/Earnings multiple, it’s how Mr. Market is valuing the miner’s Operating Cash Flow. In the latest issue of John Doody’s Fave5Golds, the average OCF Multiple is 7.6X, with miners ranging from 2.0X to 12.1X. We want to buy stocks that are undervalued, so we focus on those that have a below average OCF Multiple, and then study further to see if it’s reasonable or truly undervalued making it a “buy”. The current Fave 5 have an average gain to date of 134.3%. Thanks to the gold price increase, all are still well below their target prices. The five have OCF Multiples ranging from 2.0X to 5.6X which leaves plenty of room for further upside. As this article’s headline teased, there’s often more gold in depleted mines that’s worth mining at higher gold prices. The best examples are Agnico-Eagle’s Malartic and Detour open pit (OP) mines. Both were shut in the early 2000s when gold was $300/oz. But now they each produce over 600K oz./yr at big profits and are both expanding to 1.0 million ounces per year.
Editor's Note: Dr. David Eifrig is the editor of Retirement Millionaire, a monthly advisory that teaches readers how to live a millionaire lifestyle on less money than they'd imagine possible. Discover 250+ Retirement Secrets with a Trial Subscription to Retirement Millionaire. Start your trial subscription today. Hard Stuff We're about to see a controlled demolition of the existing monetary order. A gold revaluation has happened four times in history already... In 1839, 1933, 1971, and 1973. Right now, gold is valued on the books at just $42.22 per ounce. That was the government's official price for gold in 1973... even though gold is actually worth around $3,600 today. And it could be revalued to anywhere from around $3,000 an ounce up to a shocking $27,533 an ounce... practically overnight. Yes, you heard that right. That's how much currency experts like Jim Rickards predict. Rickards has testified before the House of Representatives, and he advises the U.S. Department of Defense, the U.S. intelligence community, and major hedge funds on global financial issues. Now, I don't want to get too much in the weeds here, but let me share how he came to this number... Rickards took the U.S. M1 money supply – around $18 trillion – and the U.S. gold reserves, which total 261.5 million ounces. Then, assuming a 40% gold backing, a historical norm from the early 20th-century U.S. gold standard... 40% of the $18 trillion money supply equals $7.2 trillion. And $7.2 trillion divided by 261.5 million ounces equals $27,533 per ounce. Luke Gromen, a respected institutional advisor and analyst, calculates it differently... Yet he also predicts gold will jump to around $20,000 an ounce. This revaluation of gold would mean the U.S. government essentially naming a new price for gold... as a way to flush the Treasury's general account – essentially the government's checking account – with billions of dollars of no-strings-attached liquidity. For example, if gold were revalued from its "book value" of $42.22 to near $3,000... that would add up to $900 billion in liquidity. This would achieve their goal of weakening the dollar in the process, too. And look... Whether it's revalued at $3,000... $20,000... or $27,000... the point is clear: Buy gold now. I recently shared how to play the coming boom with my Retirement Millionaire subscribers... It's my No. 1 gold stock that has a history of producing amazing returns during gold bull runs. And I believe it could potentially help multiply your money five- to 10-fold in the next few years. To learn more about why I'm worried about the future of the dollar and how gold can keep your wealth safe, click here. Editor's Note: Alasdair Macleod is an educator for sound money, economics, geopolitics, and everything to do with gold and silver. You can subscribe to his Substack to receive his valuable insights here. The Inside Story In May 2022, the long bond yield smashed through the 40-year downtrend at 3%. The equity bubble continued, with the S&P 500 rising from 4130 to an all-time high of 6700 currently. Admittedly, the headlong rush in the long bond’s yield paused at 5.1% in October, since when it has moved sideways. But as the pecked lines from that period illustrate, this is a consolidation and not an end to the uptrend in yields. And very soon, they will start rising again. That takes it into national bankruptcy territory. Furthermore, the prospect of such a crisis, which is what the chart tells us, is confirmed by gold’s performance. Notice the similar consolidation pattern of the last five months to that of the long bond’s yield. Both gold and the long bond yield can be expected to be rising in synchrony subsequent to their respective corrections:
Gold’s rise confirms this conclusion. If anything, its recent breakout is front running a break above 5.1% yield for the long bond. When that happens, it is bound to collapse the equity bull market. For a hint of how it may play out and the consequences, we can refer to Germany between 1920 —1923 and the relationship between a credit bubble in its fiat currency (the Reichsmark) and the subsequent consequences for its purchasing power. Along with the other European combatants, Germany abandoned its gold standard just before the First World War, financing its war machine by a combination of debt, money printing, and minimal taxation. That the purchasing power of the Reichsmark fell significantly between the end of the war in November 1918 and February-1920 need not detain us. More important was the credit-driven boom between March 1920 and December 1921. Prices steadied, and business and the stock market were booming. The Reichsmark even rose strongly against the dollar, which was still on a gold standard, more than doubling by July 2020 from February that year before ending 70% higher in May 2021. It was the best performing currency at that time. The inflationary excesses of 1918—1920 had died down, to be replaced with a brief period of great prosperity financed by yet more credit and currency expansion but at a more measured and productive pace. This prosperity was unevenly distributed, favoring the wealthy and speculators, with the stock market trebling before it peaked in December 1921. The pause in Germany’s inflation crisis rhymes with the dollar’s current conditions following the post-Covid inflation in 2021—2022. Since then, there has been a speculative boom, with equities rising to record levels driven by credit expansion. As was the case in Germany’s brief boom, Wall Street has created wealth for speculators while Main Street stagnates. To complete the analogy, all we need to see is the stock market crash. It is already wildly overvalued relative to bonds. And for a new round of inflation to commence. As Germany was in 1920—1921, we appear to be in the eye of an inflationary storm. At this point in our analysis, it will be helpful to define inflation properly. It refers to an expansion of credit and debt, not to the consequences for prices. The confusion arises from a fashionable belief that the general level of prices inflates, and not that the purchasing power of a currency declines. It is probably the most misleading error in all economic analysis. What happened in Germany over 100 years ago was a collapse in the Reichsmark’s purchasing power, though it has been misleadingly interpreted as a hyperinflation of prices. Similarly, the fiat dollar’s purchasing power has been declining and rising prices are the consequence. Not even expert economists and analysts would think to make the comparison of today’s credit conditions with those of Germany in 1920—1923. But if Germany’s example is followed, then like the fiat Reichsmark the fiat dollar will collapse entirely. The causes might be different, but the essence of the problem is the same. So what will be the trigger? Convention suggests that financial crises are triggered by an event, systemic or otherwise. But here is an obvious cause staring us in the face: a growing realization that the US economy is not just stalling, as recently revised employment figures indicate, but it is descending into recession. The need for the US government to fund its deficit will escalate accordingly, and unexpected demand for extra funding can only increase bond yields. At the same time, the president’s deliberate policy to weaken the dollar with lower interest rates while imposing tariffs on imported goods will make things far worse. It is remarkable that the US’s creditors haven’t yet appreciated the dangers facing them, but then they are fully committed to the credit bubble. Like investors in the German stock market between 1920 and December 1921, they have become drunk on their good fortune and oblivious of the bear about to pounce. Higher Bond Yields Will End Up Collapsing the Dollar To these dangers, there can only be one response and that is to follow Germany of the early 1920s: turn on the credit pump and reflate like mad irrespective of the consequences for the dollar. Politics demands it, whatever the Fed thinks. Ahead of the forthcoming credit crisis, it is impossible to see how the currency will be stabilized before it has collapsed. In Germany between 1922 and November 1923, the pre-war Reichsmark valued at 23 US cents finally settled at one trillion to one, or over four trillion to the gold-backed US dollar. The economic consequences of a repeat of this performance for today’s fiat currencies hardly bear thinking about. The professional classes in Germany lost all their wealth, and along with the laboring classes faced starvation. The only beneficiaries were magnates such as Hugo Stinnes, the inflation king and Fritz Thyssen, who made their fortunes by exporting and earning gold-backed dollars. Gold, which in all European nation’s common law and that of all their former colonies and dominions by adoption is money without counterparty risk. It is only just beginning to reflect these existential dangers to dollar denominated credit. Unless or until a solution can be magically found to prevent the dollar’s fiat currency value from declining, gold and also silver will be the best refuge from the near-certainty of the ultimate credit chaos. |