Even though gold fell sharply in the second half of 2016, if history is any guide there is still potentially a lot further it has yet to rise…
By Justin Spittler
Gold is on the rise again…
It’s climbed for two straight weeks, and it’s now up nearly 5% since December 15.
Many precious metals investors couldn’t be happier about this.
You see, gold stormed out of the gate last year. It had its strongest first quarter since 1986. By the end of June, it had risen 25%. Things were looking up.
Then, the market changed course. Gold plunged 18% in just four months. Last month, it hit its lowest level since last February.
• The sharp pullback spooked precious metals investors…
But regular Dispatch readers knew that gold would rebound.
After such an explosive start to 2016, it was only natural for gold to “take a breather.”
As we often remind you, gold’s a safe-haven asset. Investors buy it when they’re worried about the economy, financial system, or politics.
And right now, investors have plenty of reasons to be worried, even if some are still enjoying the “Trump Honeymoon” phase.
• Louis James thinks gold will keep rising…
Louis is our chief resource expert. He is the editor of International Speculator and Casey Resource Investor, our advisories dedicated to resource stocks with big upside.
According to Louis, gold has struggled recently because investors expect interest rates to rise. They have good reason to think this, too.
After all, the Federal Reserve just raised its key interest rate… but for only the second time since 2006. It also said that it plans to lift rates three more times this year.
Conventional wisdom tells us that this is bad for gold. Since gold doesn’t pay interest like a bond, most investors don’t want to own it when rates are rising or are likely to rise.
• According to Louis, the market has already “priced in” higher interest rates…
This means gold shouldn’t fall if the Fed sticks to its plan and raises rates three more times this year.
Of course, that’s a big “if.” Heading into last year, the Fed said it wanted to raise rates four times. But it only raised rates once last year, and it waited until the eleventh hour to pull the trigger.
We wouldn’t be surprised if the Fed sits on its hands again. If that happens, investors will know something is very wrong with the economy. Many folks will start buying gold hand over fist.
• But that’s not the only reason Louis is bullish on gold…
Last week, he gave his subscribers several reasons why gold should keep rising:
➢ Rumors of new gold curbs in India have not panned out.
➢ Fear of the fall of New Rome [the EU] is driving Europeans into [U.S.] dollars and gold.
➢ The escalation of the “other” Cold War with China increases uncertainty in global markets.
➢ Even Trump’s best ideas (cuts in taxes and regulations) will cause disruptions that will have to work through the economy before things can improve.
• Gold is incredibly cheap, too…
Gold needs to rise another US$900 or so to hit a new inflation-adjusted high. Given the trillions and trillions of new dollars, euros, yen, yuan, and so forth printed over the last 45 years, it should do much more than that.
Right now, gold is trading for about $1,180. In other words, it would have to climb about 75% to reach its previous inflation-adjusted high.
But Louis thinks gold could race well past that in the coming years:
Many analysts see the current market as analogous to the great gold bull of the 1970s, only bigger and longer. Adjusted for inflation, gold rose about 353% from its mid-1970s trough to its 1980 peak. If that pattern repeats itself, gold would have to rise from its December 2015 low to just above US$5,200 per ounce by October 2022.
If gold does anything close to what it did during the ’70s, precious metals investors could see explosive gains in the very near future. Just take a look at the chart below.
• Louis is so convinced that gold’s headed higher, he just made a giant bet on it…
He wrote last week:
I’m so sure, I put my money where my mouth is last week. As advised last month, I entered the market during the peak of Tax Loss Season. I’m not allowed to buy the same stocks I recommend (to avoid possible conflicts of interest), so I bought ETFs instead. In fact, I put about twice as much of my own cash into these proxies for gold stocks than I ever put into gold stocks before.
Louis also plans to buy more gold at the first chance he gets:
I think that 2016 was an overture for what’s ahead. I intend to profit from it. And I’m not worried about any fluctuations in the near term. If prices drop, I’ll hope to buy more. If prices rise, it’s off to the races.
• You, too, can make huge profits from rising gold prices…
The key is to buy gold mining stocks.
Gold miners are leveraged to the price of gold. This means gold doesn’t have to rise much for them to take off.
During the 2000–2003 gold bull market, the average gold stock gained 602%. The best ones soared 1,000% or more.
Of course, not every gold company is a winner. In fact, many gold stocks are total duds. That’s because gold mining is an incredibly difficult business.
To protect your capital and make monster gains, you have to own the right gold stocks. Unfortunately, most folks have no clue what to look for in a gold stock.
That’s where we can help…
You see, Louis is a true industry insider. He’s visited mining projects all around the world. He’s on a first-name basis with many of the world’s top mining CEOs. And he understands the geology inside and out.
Louis also has a proprietary system for finding the best gold stocks. Casey Research founder Doug Casey actually taught Louis this system… after he spent decades perfecting it.
You can learn more about Louis’ system by clicking here. As you’ll see, it’s delivered giant gains over and over again.
Just don’t wait too long. Gold probably won’t stay cheap for much longer… meaning you’ll want to take action soon to have a shot at truly life-changing gains. Click here to learn more.
Chart of the Day
Gold stocks are dirt cheap, too.
Today’s chart compares the NYSE Arca Gold BUGS Index (HUI), which tracks large gold stocks, with the price of gold. The lower the ratio, the cheaper gold stocks are relative to gold.
According to this ratio, gold stocks are cheaper today than they ever were during the dot-com bubble. They’re also cheaper than they ever were during the last housing bubble.
Keep in mind, stocks were trading near record highs during these periods. Most investors were extremely bullish. They owned too many mainstream stocks and not enough gold stocks.
Right now, this key ratio is lower than it was during either period. This tells us that today could be one of the best times to buy gold stocks since the turn of the century.
If you would like to add gold stocks to your portfolio, we encourage you to sign up for International Speculator. As we said earlier, this is our publication dedicated to gold stocks with the most upside. Click here to begin your risk-free trial.