Is It Too Late to Buy Gold?
You may be wondering if you “missed the boat” on gold.
After all, the price of gold is already up 15% this year. It’s at its highest level in 15 months.
Gold stocks, which are leveraged to the price of gold, have done even better.
Gold’s 15% jump has caused the Vectors Gold Miners ETF (GDX), which tracks large gold miners, to soar 68% this year. Many individual gold stocks have gained 100% or more.
With massive gains like that, it's easy to think that you've missed your chance.
But if you’ve ever been part of a gold bull market, you know gold stocks could go many times higher.
During the 2000–2003 bull market, the average gold stock rose 602%. The best stocks returned 1,000% or more.
So, if you’ve been wanting to buy gold and gold stocks, know that you’re not too late.
As we'll cover today, this bull market hasn't run its course…it's just getting started.
In fact, with GDX's 11% correction over the past month, now could be the perfect time to buy.
More on that later. First, let's look at why gold is set to move higher for the next few years…
• Casey Research founder Doug Casey thinks gold is in the early stages of a “true mania”…
As you may know, Doug thinks we’re on the verge of a major financial crisis. When it hits, he says “paper currencies will fall part, as they have many times throughout history.”
When the average investor wakes up to this, he’ll rush into gold. That’s because gold is real money. It’s preserved wealth for centuries because it has a unique set of qualities: It’s durable, easily divisible, and transportable. No matter where you go, people recognize gold’s intrinsic value.
It’s also survived stock market crashes, economic depressions, and full-blown currency crises. It’s the ultimate safe haven asset.
Doug believes the price of gold could easily triple in the coming years.
Louis James, editor of International Speculator, also thinks gold is in the early innings of a major bull market. If you don’t know Louis, he’s Casey's resource guru. His specialty is finding gold miners with massive upside.
Last week, Louis told Wall St for Main St, a financial information website, that gold is just getting started:
First, know that it's not too late…
What we have seen so far this year is the beginning of a major move that will run for years.
• “Mainstream” investors like gold again for the first time in years…
According to the World Gold Council, demand for gold funds hit its highest level since 2009 during the first quarter.
Louis says the perception of gold is changing for the better:
You have this mainstream awareness now. I think it's very significant that there are people on Wall Street who now understand and value the safe-haven aspect of gold and silver. These people have received an education…and I think they'll deploy it the moment the conditions seem right to them.
• Wall Street hasn’t paid much attention to gold in the past few years…
Instead, it has focused on U.S. stocks, which have been in a historic bull market. With the S&P 500 more than tripling in 2009, “mainstream” investors saw little reason to own gold…until recently.
• The S&P 500 hasn’t set a new high in more than a year…
Earlier this week, we explained that “dry spells” like this usually appear at the end of a bull market. And that’s just one of many reasons to be worried about U.S. stocks.
Corporate profits are drying up. The global economy is stalling. And many important stocks are already trading like we’re in a recession.
The stock market hasn’t looked this fragile since just before the 2008 financial crisis. Investors are nervous. They’re starting to buy gold.
There’s just one problema…
• There may not be enough to go around…
In March, Doug Casey explained how small the gold-stock market really is:
The combined market capitalization of the 10 biggest U.S.-listed gold stocks is less than 29% of the size of Facebook.
I’ve said it before, and I’ll say it again: When the public gets the bit in its teeth and wants to buy gold stocks, it’s going to be like trying to siphon the contents of the Hoover Dam through a garden hose.
Louis also thinks gold could get a big boost if the mainstream investors “jump on board”:
It could go our way…it could be dramatic…and it could be soon.
• There are plenty of ways to make money in this gold bull market…
The safest way is to own physical gold.
We encourage everyone to hold at least 10% of their wealth in gold. That may not sound like much, but it could keep you from losing a lot of money in a financial crisis. It could even make you a lot of money. Remember, Doug thinks the price of gold could easily triple in the coming years.
• You could make even more money owning gold stocks…
As we mentioned, gold stocks are leveraged to gold. When gold rises 20%, gold stocks can rise 80%, 100%, or more.
You can make a lot of money very quickly owning gold stocks in a gold bull market. But gold stocks are also very risky. They’re extremely cyclical, meaning they go through huge booms and busts.
If you're willing to take on more risk, you can make a fortune in small gold stocks. Here’s Louis:
[Y]our smaller, higher-risk companies have greater potential to double, triple. If you go down in the food chain here to the little nano-caps and exploration companies, you can be looking at 10-baggers or more. If one of these companies makes a significant discovery, the change in real value is enormous.
A “10-bagger” is a stock that rises 1,000%. Again, that kind of gain sounds almost impossible if you’ve never invested in a gold bull market. But experienced gold investors know they are not only possible, but fairly common.
• If you’d like to buy less risky gold stocks, consider gold “streaming” companies…
Gold streaming companies don’t mine gold of their own. Instead, they finance early-stage exploration or production projects. When a mine they finance starts producing, the company gets a cut of the cash flow.
It’s a much less risky business model than gold miners. Louis explains:
The lowest-risk way to play precious metals with some leverage is the streaming companies. They offer leverage to the underlying commodities.
They have a very sound business model. They make money at low prices and regardless of what happens on the ground. Whether a mine makes money or not, these streaming companies still get paid. They only don't make money if the mine actually shuts down.
Louis currently has two streaming companies in his International Speculator portfolio.
• Louis makes his living finding great gold stocks…
Before recommending a stock, he will visit a company’s mines…study rock samples…and grill management with hard-hitting questions.
This “boots on the ground” approach gives Louis an edge over most analysts. It’s helped Louis’ readers make huge gains this year. One of his picks is up 167% since September. Another is up 113% since July.
Louis expects to book even bigger gains in the coming years. Right now, he has 17 stocks in his portfolio that he says could rise 500% or more.
Chart of the Day
Gold stocks have cooled off…
Today’s chart shows the performance of GDX since the start of the year. As you can see, gold stocks had an explosive start to the year before cooling off. It’s now been almost a month since GDX set a new high.
This has some investors worried. Not us.
For one, we think gold stocks have entered a multi-year bull market.
Secondly, bull markets never move in straight lines. This is especially true for miners, which are some of the most volatile stocks on the planet. After gaining 108% from mid-January to late April, gold stocks were due for a pullback.
If you’ve been wanting to buy gold stocks or add to your holdings, now is a great opportunity.
At the same time, we encourage you to use discipline when gold stocks take off again. As Louis often reminds his readers, don’t chase high-flying gold stocks. Let them “come to you” by buying on dips.