Why Doug Casey Is Buying Gold Stocks

 

Louis James here, sitting in for Justin Spittler. And it’s good timing, too: Gold just went vertical again.

As I write, gold just hit a new 13-month high of $1,280.

There is much debate on the “what,” “how,” and “why” for this move. It may never be possible to truly know the full answers to these questions. Doug Casey and Paul Krugman will have very different explanations going forward, that’s for sure.

But what matters the most to us as investors is…what comes next?

If we can be sure the bottom really is in for gold this time, then it’s time to buy. But if gold’s surge this year is just another doomed rally before gold crashes to new lows (as Harry Dent keeps saying it will), then this is a chance to sell while there are still buyers.

The differences in what to do couldn’t be more opposite.

So, which is it? Well, only a time traveler could say for certain, but I do think the bottom is in. I’ll tell you why.

•  5 Reasons Why I Think the Bottom is in for Gold

It’s no surprise that I side with Casey rather than Krugman. But consider this; Doug tells me he bought another $1.5 million worth of precious metals stocks in December because he was sure gold would rise this year. That’s already worked out quite well for him, but he’s still massively long, anticipating much higher prices ahead.

I wonder if Krugman has placed any such bets on his predictions…

At any rate, in no particular order, here are the main reasons why I’ve been buying gold and silver as well.

  1. India. Every year, there’s much ado about fluctuations in demand from India. What doesn’t change is that it’s always huge, based on powerful historical forces. India’s population continues growing, as does the country’s role in the modern global economy. Fluctuations aside, India will remain a strong source of demand for years and years to come. And now India appears to be joining the War on Cash. As the noose tightens, I expect Indians, who have already spurned many government efforts to get them to stop buying so much gold, to buy even more.
  1. China. China’s decelerating growth has been making headlines for years, but the stock market crash that started last year has made it a source of fear in financial centers around the world. China has been burning through its foreign reserves at a furious pace trying to prop up the yuan. That’s unsustainable, adding to the fear. The latest is that the Chinese government is lowering bank reserve requirements to stimulate growth. That has caused a small rally on the Shanghai exchange, but it’s still down by almost 45% from last year’s peak. All of this has me thinking that more worried Chinese will seek safety in gold. So will people in other countries around the world who worry about the spreading impact of the problems in China. Best of all, if the Chinese government does kick off a new reflationary boom, that will put more money in the pockets of the world’s biggest gold buyers. China is a win-win factor for gold.
  1. Europe. Three words: negative interest rates. Three more: not changing soon. These six words are pushing lots of money into dollars but some has, is, and will go into gold.
  1. The U.S. I am skeptical that the recovery here is as strong as the powers that be would have us believe. Take corporate earnings, for example; they can rise because companies stop investing in their future and cut other necessary spending. So far, the best news seems to be the lower unemployment numbers, though it’s hard to take those seriously when we know the government doesn’t count many under- and unemployed people in its figures. Still, let’s say the recovery is real, and things in the U.S. are, in contrast to the world’s other major economic powers, are looking up. That leaves us with a nightmare election this fall. If either frontrunner, Trump or Clinton, wins, major policy changes and shocks to the U.S. economy will follow. This volatility looks like one of the surest bets in the world today, and that’s bullish for gold.
  1. The charts. Gold is not just up over a year ago, the breakout is visible in the long-term charts. This marks the first change in the series of “lower highs” since the slide began in 2011. Whatever happens next, this time already is different.

•  Nick Giambruno, of International Man, has a slightly different take…

I'm a big fan of gold. I think it's quite cheap right now and is headed higher.

But besides seeing gold as an investment, or a speculation, or as money, I think gold has another important function. An essential one: freedom insurance.

Unlike digital fiat currency in a typical bank account, gold cannot be easily confiscated, nationalized, frozen, or devalued at the drop of a hat or with a couple of taps on the keyboard.

Owning gold is a big part of any strategy to reduce your political risk. It places some of your savings outside the immediate reach of thieving bureaucrats. It gives you a measure of privacy in a world where financial privacy is otherwise dead.

I also like the fact that gold has always been an inherently international asset. It has served as money for centuries and across many different civilizations. There is nothing at all particularly American, Chinese, Russian, or European about gold. Take a gold coin to any country in the world—from Canada to North Korea—and its value is recognized.

Buying gold is very important right now. Not just for the large profits, but also as a form of insurance against an out-of-control government. For more on this, I suggest this popular free guide we recently put together. Click here to download the PDF.

•  E.B. Tucker, of The Casey Report, is planning to buy gold stocks as well…

The price action is not just interesting, it's signaling a change in trend.

Consider this chart in the February issue of The Casey Report. It shows the S&P 500 vs. gold since the beginning of 2016.

Gold’s decline over the last five years was so powerful, it barely offered a month of relief. That means the flip in direction could be very powerful and leave a lot of people behind.

Gold stocks like Newmont Mining (NEM) and Barrick Gold (ABX) already sell for twice what they did over the holidays.

We have two large gold stocks we're watching right now for The Casey Report. We think the overall market will decline between now and May. It will take gold stocks down with it...although temporarily.

This major change in trend means we'll pick up two large, high-quality gold mining stocks and hold them for the next year or two as the market watches gold shoot to new highs.

As for me, I’ve put my money where my mouth is and backed up the truck for gold and silver bullion. I’m looking for gold majors to buy in parallel to the ones I recommend in Casey Resource Investor. I’m even keener to add to my holdings of gold and silver juniors, such as those I recommend in the International Speculator. That’s where the real leverage is.

Buying small gold and silver stocks is the single best speculation on my radar. Our opportunity right now is similar to the year 2001, when the gold stock index went on to rally 602%. The best individual gold stocks gained 1,000%, 2,000%, or more.

These gains are possible because gold stocks are extremely cyclical. This means they go through big booms and busts. The 602% rally came just after a major bust that saw gold stocks drop by 83%.

Today, we’re coming off the longest and most devastating gold bear market in the past forty years. With valuations near extreme lows, small gold stocks are like coiled springs, ready to leap higher. Now is the best time I’ve seen since I started this business to position yourself for potential 10-baggers (1000% gains).

Because it’s urgent to act on this opportunity now while prices are still down, we’ve opened a limited time offer for my advisory International Speculator. If you join today, we’ll take $500 off the price of the subscription.

And when you sign up, you’ll get immediate access to my brand new report, 9 Essential Gold Stocks to Buy Right Now.

My team and I wrote this report for one simple reason. There are around 3,000 small gold stocks trading today. On average, they’ll likely rise 200% or more in a gold bull market. But the very best gold stocks, as I mentioned earlier, have potential to rise 10x, 20x, or even 30x. I’ve seen it happen. You can read more about the incredible opportunity in gold stocks here.

Happy hunting,

David Stockman's Contra Corner is the only place where mainstream delusions and cant about the Warfare State, the Bailout State, Bubble Finance and Beltway Banditry are ripped, refuted and rebuked. Subscribe now to receive David Stockman’s latest posts by email each day as well as his model portfolio, Lee Adler’s Daily Data Dive and David’s personally curated insights and analysis from leading contrarian thinkers.

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