How to Maximize Your Gains During the Gold Bull Market

Justin Spittler



Gold stocks have exploded higher…

If you’ve been following our work, you know we expect the price of gold to soar.

Since the 2008 financial bust, world governments have engaged in a desperate attempt to reinflate the global economy. Acting through their central banks, they’ve created trillions in new currency units.

They’ve borrowed massive sums of money. These reckless acts have set the stage for major paper currencies like the dollar, euro, and yen to lose huge amounts of value.

Humans have used gold as money for thousands of years. Unlike paper money, governments can’t create gold out of thin air. That’s why gold has held its value for centuries through every financial crisis imaginable. And it’s why gold tends to perform well when there’s trouble in the economy or stock market.

Gold is up 13% this year while stocks are falling hard…

The S&P 500 has fallen 9% this year. The Dow Jones industrial average has fallen 8%. The tech-heavy Nasdaq has dropped 13%.

The STOXX Europe 600, which tracks 600 of Europe’s biggest stocks, has fallen 13% this year. The Japanese Nikkei 225 has plunged 16%. And the Chinese Shanghai Composite Index has plunged 20%.

Gold should continue to do well as stocks fall.

• Buying gold stocks can supercharge your gains in gold…

Gold stocks offer leverage to the price of gold. A 10% rise in the price of gold can cause gold stocks to soar 20%, 30%, or more.

As we mentioned, the price of gold has jumped 13% this year. This has sparked a major rally in gold stocks.

The Market Vectors Gold Miners ETF (GDX), which tracks large gold miners, has gained 37% since the start of the year. It’s spiked 51% since hitting a record low in January. GDX is having its most powerful rally since 2011... and it’s likely just getting started.

• Gold stocks are extremely cyclical…

They go through huge booms and huge busts.

Gold miners have been in a huge bust for nearly five years. Since July 2011, GDX has plunged 74%.

But the bust may be over...

Dispatch readers know GDX recently “carved out a bottom.” Gold also set its first “higher high” in five years. Both events suggest gold stocks could go much higher.

• Louis James, editor of International Speculator, expects gold stocks to keep rising…

Louis is our resource guru. His specialty is finding small miners with massive upside.

Louis has helped International Speculator readers earn 100% gains more than 20 times over the past decade. In some cases, the gains have been much bigger. One of Louis’ picks gained 287%... another gained 390%... and one surged 411%.

We’re only six weeks into 2016 and already six of Louis’ gold stocks have gained more than 30%.

Two have surged more than 50%. Those are incredible gains in such a short period.
 
Here’s Louis advice for investors looking to buy gold stocks.

No market moves in straight lines. When a chart goes vertical, as gold’s did last week, you know that’s not sustainable. So, it’s no surprise to see some price correction this week. Two steps forward, one step back—that’s par for the course even in a strong bull rally. And it’s good news for those who missed the initial rush or refused to chase gold stocks while everyone else was piling in. Now that an entirely predictable and reasonable correction is shaping up, it’s time for disciplined buyers to step in and take shares in the best-of-the-best gold stocks off the hands of the nervous nellies and momentum chasers.

Louis sees the price of gold going much higher over the long term.

But might the gold rally really fizzle out? It might appear to in the nearest term, but you have to ask yourself; can negative interest rates really spread across the world with no negative consequences?

Will those who are being penalized for saving instead of spending really go out and invest in economies where governments resort to such tactics? Some will—but many will seek safety in the world’s most enduring form of wealth protection: gold.

Buy low, sell high. Easier said than done, but corrections are just what the doctor ordered to get the job done.

You can learn about Louis’ top gold stock picks by signing up for International Speculator. Click here to begin your risk-free trial.

• Owning gold has never been more important…

Regular readers know major central banks cut interest rates to effectively zero after the global financial crisis. The Federal Reserve has pinned its key rate near zero since 2008. Other major central banks have gone even further to drop interest rates below zero.

The European Central Bank (ECB), Europe’s version of the Fed, became the first major central bank to introduce negative rates in June 2014. Its key rate is now -0.3%.

According to Financial Times, one-quarter of the world’s government bonds now have negative rates. Japan, the world’s third-biggest economy, introduced negative rates last month. Switzerland, Denmark, and Sweden also have negative rates.

• Negative rates might sound bizarre to you…

The point of lending, after all, is to earn interest. With negative rates, the lender pays the borrower. For example, if you lend $100,000 at -1%, you’ll only get $99,000 back.

Central banks hope negative rates will encourage spending. Mainstream economists say spending is what fuels the economy. But Casey Research founder Doug Casey says these know-nothing economists are peddling a dangerous myth.

It’s part of the Keynesian view, in which spending and consumption drive the economy. This isn’t just wrong, it’s the exact opposite of what’s true. It’s production and saving that drive an economy.

You have to save to build capital, and capital is necessary for… everything. What these people are doing is destructive of civilization itself. And when we go into the next crisis, governments will use the disastrous results of their own policies as excuses to enact even more destructive versions of the same things.

• Negative interest rates didn’t exist until a few years ago…

Governments invented negative interest rates in a desperate attempt to boost their economies.

They never considered what kind of damage they could do to the financial system.

For example, negative interest rates have made it very difficult for banks, which earn interest on loans, to make money. Deutsche Bank (DB), Germany’s largest bank, lost €2.12 billion last quarter. Swiss banking giant Credit Suisse (CS) lost €5.83 billion during the fourth quarter.

Major European bank stocks are now crashing. The STOXX Europe 600 Banks Index, which tracks Europe’s biggest banks, has crashed 22% this year.

Europe’s currency (the euro) has lost 17% of its value against the U.S. dollar since the ECB dropped rates below zero.
 
• We’ve been warning about the dangers of negative rates for months…

In September, we said negative rates would push the world deeper into an “Alice in Wonderland” economy.

We use this term to describe the fantasy world that unlimited money printing has created. Eight years of effectively zero interest rates have warped the price of nearly everything. Easy money has stoked stock prices, real estate prices, and bond prices.

For example, the S&P 500 has gained 179% since March 2009. That’s far higher than the average gain of 136% for U.S. bull markets since 1932.

And U.S. commercial property prices have surged 95% since 2009, to an all-time high, according to Real Capital Analytics.

These record highs aren’t the result of a healthy economy. They’re a fantasy created by easy money. Eventually, reality will catch up.

• Doug thinks the next crisis is “going to be much worse, much different, and last much longer than what we saw in 2008 and 2009”…

Negative interest rates and other experimental policies won’t prevent this crisis. They will only make it worse.

Our advice is simple: own gold. Unlike paper money, governments cannot destroy gold’s value with bad economic policies. Rather, as a safe haven asset, gold’s value typically spikes when governments devalue their currencies…

For instance, the euro has lost 17% against the U.S. dollar since June 2014. But the price of gold measured in euros has jumped 14% over the same time frame.

Chart of the Day

Gold stocks have crushed the performance of all other sectors this year.

Today’s chart shows the performance of GDX and the S&P 500. GDX has skyrocketed 37% since the start the year. Meanwhile, the S&P 500 has fallen 9% to its lowest level since October 2014.

As we explained earlier, a small rise in the price of gold can cause gold stocks to soar. Gold has jumped 14% already this year. With stock markets struggling, gold and gold stocks should continue to do well.

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