Don’t let the recent price movement in gold fool you. The world is waking up to gold’s value… more important now than ever.
As we mentioned a week ago in our Flash Alert…
UBS Tells Clients to Prepare for A Contested Election by Buying Gold (Forbes).
"With Election Day just five weeks away, investors are growing increasingly fearful of a contested presidential election—and UBS is the latest Wall Street firm to warn about increased stock market volatility telling clients to buy safe-haven assets like gold."
This, of course, is sound advice from the Union Bank of Switzerland, especially when you consider the ideological divide that exists at the moment. The camps are so estranged, and so entrenched, I would not be surprised to hear that the word compromise was about to be stricken from our vocabulary.
Then, on Tuesday, this appeared in Chuck Butler’s Daily Pfennig…
But here’s a little talked about fact regarding Gold that needs to be said more…. Gold is not issued by a Central Bank… Therefore it can’t be debased, sent to the printers for copies, and there is a finite amount of Gold in the world…. I heard this yesterday, that the Pension companies, the one’s I’ve been telling you are in deep dookie for a long time now, are saying that they will change their bylaws and start buying and holding Gold… Do you know the size of these potential transactions? If the Pensions made a 1% allocation to Gold, it would put such pressure on supply that it would probably eat the supply away, thus leaving everyone else to scramble for physical Gold… So… if you’ve been waiting, and waiting, and waiting, to buy Gold… I would certainly think about doing it before the Pensions Plans fire up the buying machines!
If accurate, this is BIG news. As Chuck suggests, the demand-side pressure on the relatively tiny and finite gold market would be immense… even at a mere 1% allocation. Legislation has already passed allowing such investments in Self-Invested Personal Pensions (SIPPs) in the UK. For certain, this is something to keep both eyes and ears open for new developments here in the US.
Of course, when you look at the live pricing for gold, it would appear nobody’s listening to UBS, Chuck Butler, or yours truly.
Trust me. They will regret it.
Embrace the Opportunity
Over the past week or two, gold has dipped down to $1,850 per ounce, rebounded above $1,900, only to fall back below again last Tuesday.
The impetus on Tuesday was a tweet from President Trump that a new round of stimulus was off the table. Democrats and Republicans are too far apart, and neither side wants to hand the other a political victory this close to the election.
On the news there would be no more free money in the foreseeable future, the stock market AND precious metals slumped.
To us, the reason is as plain as the noses on our faces (although that may be a bad example with everyone wearing masks). Every time the government expands the money supply and dilutes the dollar, it takes more dollars to buy any asset of value… gold, stocks, real estate, etc.
When the patient is cut off from the free money drug, assets slump. In this day and age, the addiction to free money is so pervasive, all it takes is a belief free money is coming to make asset values rise. Conversely, all it takes is a belief free money is drying up to cause assets to fall in value.
The addiction is that powerful.
So, you will hear me say this plenty as we move forward in this bull market in precious metals… Buy the dips… Embrace the dips.
These are the times when you can buy well in a rising market. Who wouldn’t want to pay a smaller premium for the same wealth insurance coverage? Who wouldn’t want to buy for-profit gold and silver at a lower price, offering them a larger profit potential?
Keep What’s Yours!
When it comes to protecting your wealth, there is no better option available than gold. It has flawlessly performed its job for millennia.
And, in my opinion, there is no substitute for owning the real thing.
You can buy proxies like an Exchange Traded Fund (ETF), whose job it is to mimic the gold price, but, in the end, you own no gold. Worse, although the trust behind the ETF is well-protected, you, as an investor, are not.
You can buy shares in a mining company to participate in the current strength of the sector. But, you need to understand you own no gold. Best to invest in these companies with funds allocated to equities. They are not gold.
You can buy your gold from the television advertisement or the company with the glossy, four-color catalogue. But, be careful. Whom do you think is paying for that TV ad or fancy catalogue? You guessed it. You are… with the oversized premiums they charge you.
And, it is often the case that they won’t buy back either. They’ll give you a fancy explanation as to why, but there is really only one correct answer… they don’t want you to discover how much they charge you when they pay you so little to buy back. So, rather than expose their horrendous margins, they shuffle you off to an auction with a hope and a prayer.
You can buy from the first dealer that you run into, but be careful there too. Just like the last bull market (2001-2011), or the bull market before that (1971-1980), greedy players will enter this market with a smooth pitch and no concern for you whatsoever. They make it easy for you to buy at a staggering premium, and they make it easy for you to sell at a fraction of your gold’s value.
Or, you can call with an advocate like Asset Strategies International. A firm that…
- Does not pay commissions to its sales representatives
- Always asks why you are buying or selling to understand your needs
- Sells AND buys back
- Offers a variety of options so you are not forcing a square peg in a round hole… from bullion coins and bars, to rare U.S., world, and ancient gold and silver coins, to the government guaranteed safety of the Perth Mint Certificate Program
- Has an unblemished track record of client satisfaction for nearly four decades
- Knows firsthand the ins and outs of precious metals IRAs
- Makes it JOB #1 to help you Keep What’s Yours!
I do not see, at present, an alternative path. The next few months will be contentious, unnerving, uncertain, and volatile.
Let us help you secure your golden anchor until the waters calm. Now, more than ever, you need gold in your portfolio.
We are just one call away... (800) 831-0007. Or, email us.
"Michael, Rich and the team are not only my own personal go-to provider for gold and other precious metals, they are wonderful colleagues, friends and experts for discussion and insight into what's happening in the global markets.” Doug Casey // Founder, Casey Research
"Michael, Rich and the team are not only my own personal go-to provider for gold and other precious metals, they are wonderful colleagues, friends and experts for discussion and insight into what's happening in the global markets.”
Doug Casey // Founder, Casey Research
Editor's Note: With more than 20 years of experience, Karim has mastered the subtle art of options trading. Beyond his expertise in options trading, he is also the author of the best-selling book Where in the World Should I Invest? He publishes weekly about smart speculation in his latest free e-letter, Trade of the Day.
Get Paid to Buy Gold at $1,500 an Ounce
By Karim Rahemtulla
That’s not a typo. One of the criticisms of gold is that it pays no income. It costs you money to hold bullion (you can reduce your costs substantially by using a program like Perth Mint). It’s been a reason that investors like Warren Buffett has used to explain why he hasn’t been a buyer of gold…until now.
You may have heard that Buffett took a small position, about half a BILLION dollars in Barrick Gold. He doesn’t invest for fun, so he must be seeing what we are seeing – unlimited quantitative easing and money printing by governments across the world.
So, how do you get in on the action? You may already own some gold and silver, maybe some precious metals stocks as well. But, you are probably wishing, right around now, that you bought a lot more gold when it was cheaper… $1,800…$1,500, $1,200?
The chart below shows some nice support levels for gold. The current support level is right around $1,850. You can see that by that “W” formation on the chart.
But, even that may be a little aggressive during a correction. Gold prices could blow through that level in a day.
So, let’s take a more conservative approach and try to buy gold at $1,500 an ounce, about 20% below the current price.
You could put an order in with your broker or gold seller and “hope” it falls to that level. Or, you could take an approach where you are either going to buy gold at $1,500 per ounce or get paid for trying. It depends on your conviction. Are you really a buyer of gold at $1,500 or are you just saying that you are? Only you can answer that question. If $1,500 is too high, then you can apply this with a different, lower, price. You’ll just get paid less.
The best thing is that you can do this over and over and get paid each time for trying to do something that you already are trying to do.
The vehicle I like to use is the SPDR Gold ETF with the symbol GLD. It’s currently trading around $179 and it mimics the price of gold, up and down. The ETF owns actual bullion which backs the shares. So, if the price of gold were to fall 20% to $1,500, the GLD would fall by 20% to $143.
That number, $143, is what we will focus on. Let’s say you want to build a $30,000 position in gold at levels 20% below the current price over the next year or so.
You could engage in a trade called a put sell. That is a trade that obligates you to buy the underlying vehicle at a specified price if that underlying price closes at or below the price that you contracted. In English, that means if you agree to do the trade, you must come up with the cash to buy the shares at the price you agreed upon. Of course, you can reverse the trade by buying back the put at any time and absorb the loss or gain at that time.
In this case we would sell to open the January 2022 $145 puts on GLD. The current price is around $4 per contract. So, for $30,000, you would sell 2 contracts which obligated you to buy 200 shares for $145 per share. Those two contracts would pay you $800 right now (approximately) which is yours to do with as you please. That payment obligates you to buy the shares at levels 20% below where they are now (think gold at $1,500 per ounce).
The return on this trade is measured as follows. To sell a put you use a formula that uses margin as the broker will allow you to do the trade based on 20% margin of the underlying price. In this case the margin would be $29,000 (200 shares times $145) or $5,800. Your return in margin would be $800/$5,900 or 13.5%. So, the equation is as follows: either you will make 13.5% on the trade (just over a year) or own gold at $1,500 per ounce (approximately). Who says gold doesn’t pay?!
For trades like the one above and many others, in REAL TIME, join me and my partner Bryan Bottarelli, at Monument Traders Alliance. You can sign up here for a free video presentation about what we do and sign up for our free e-letter. So far this year, we’ve enjoyed a success rate of over 75%! Just click on this link for more information.
"Whether you believe international diversification is a necessity because the U.S. dollar is headed for collapse, or you just want the added security of owning physical gold, Asset Strategies has the knowledgeable staff and the resources to meet these needs." R. Hughes // Satisfied ASI Client
"Whether you believe international diversification is a necessity because the U.S. dollar is headed for collapse, or you just want the added security of owning physical gold, Asset Strategies has the knowledgeable staff and the resources to meet these needs."
R. Hughes // Satisfied ASI Client
Editor's Note: Omar Ayales is the Senior Trading Strategist & Editor at GCRU (Gold Charts R Us). If you have any questions, you can reach him at email@example.com or visit www.goldchartsrus.net.
Can Inflation Rise to its Expectation?
By Omar Ayales
For as long as I can remember, growing government deficits and debt were to blame for asset price inflation due to currency debasement. An increase in the money supply in any currency threatens the value and purchasing power of that currency.
It’s adding water to the punch bowl.
Since the financial crisis, it has become standard for central banks across the board to debase their currency by printing money.
Competitive currency devaluations has been the tool for central banks and governments to lure in investors, buyers and spenders across the board.
And the game continues…
Consider in the U.S. alone it took 100 years to amass 3 trillion U.S. dollars in debt through 2013. This is the same amount of money used by the government to try and bail out the economy from the pandemic-led lockdowns, and it's about half the amount the Federal Reserve has pledged to inject over the next 3 years…
Heck, the yearly U.S. budget deficit is reaching a trillion dollars a year already!
The cash injection and overall accommodative monetary policy has fueled bubbles in many assets such as real estate, stocks, gold and others.
However, sovereign debt to GDP ratios continue to swell…
This means the liquidity plugged into the global economic system has not really contributed meaningfully to productivity…
This suggests the problem we face today is deflationary, not inflationary.
A close look at the U.S. 30-year yield since the early 1980s provides a glimpse…
Back then, inflation spiked in reaction to the oil supply shocks of the Seventies.
Inflation rose to the point where interest rates on long-term U.S. government bonds offered yearly double-digit returns.
U.S. government long term rates peaked in 1981.
And it was only until the Federal Reserve ‘conquered inflation’ that rates started to decline, entering into a mega bear market that is alive to this day.
From the peak in interest rates in 1981 to this day, dis-inflationary policies have been engrained at the heart of the global monetary system.
That process has been enhanced considerably by technological innovations and more recently the internet of things…
It’s being further enhanced by Covid-19 and what lies in its aftermath…
Consider it was until recently that monetary policy has started to shift to try and drive inflation higher. It started with targeted inflation at 2% about 10 years ago…
Even more recently, the Fed turned up the heat by eliminating the 2% target altogether.
Not surprisingly, inflation expectations have been running wild, justified entirely by the money printing scheme the world has unleashed.
But when will inflation catch up to expectations?
More importantly, what happens if it doesn’t?
The simple answer to the first question is deflationary pressures could become more evident and it could eventually push traders, investors and money managers to adjust their portfolios accordingly.
As for the second one, it could mean stronger days for the U.S. dollar despite conventional wisdom. A stronger dollar would mean downside pressure in commodities and global currencies across the board.
Consider, the U.S. dollar has held strong on a longer-term basis, despite the constant attempts to debase it.
A main reason is that compared with global counterparts the dollar remains among the strongest. It's the world reserve currency, accounting for 80% of all global foreign reserves.
You could argue the U.S. dollar today is weaker compared to itself 20 years earlier, but it still remains stronger on a relative basis against other currencies. On a relative basis, the dollar is stronger today than it was 20 years earlier too.
Consider much of the upmove in gold over the past 2 years has been on rising inflationary expectations given the amount of liquidity being plugged into the market.
Very similar to what happened from 2009 thru 2011.
Back then however, inflation didn’t rise to the expectation, giving way to deflationary pressures pushing commodities and global currencies into a bear market that lasted through 2015 and into 2016.
It pushed the U.S. dollar higher…
Will this time be different?
Covid-19 seems to have pushed the economic reset button on a global scale.
This global reset has seen businesses and entire industries disappear, pushing unemployment to levels not seen in a long time. For most, 2020 will prove to be ground zero…
But uncertainty is poised to ebb lower and productivity to inch higher as time goes on.
A longer-term ratio between gold and copper shows it best…
Remember gold is sought as a store of value. It’s held as a hedge against inflation and uncertainty. When it’s favored over copper, it means money is being put aside.
When copper is favored, it means money is being put to work. Remember copper is a barometer of the global economy given its broad use.
You’ll notice the chart has favored gold over copper in recent years. But it also shows the relationship has reached an extreme and it could be poised to bounce back to favor copper.
That is, just like it did noticeably during the financial crisis in 2009 as well as during gold’s peak in 2011 and during the first Fed rate hike in 2015.
The leading indicator below the chart is also showing momentum could be starting to shift to copper… This doesn’t necessarily mean copper rises and gold falls; it simply means copper could have an edge over gold in the medium term. And this would be good for silver going forward.
The chart could be telling us an economic lift-off from ground zero in 2020 is likely and inevitable, yet not necessarily imminent…
It tells us this process could take time and doesn’t discard dollar strength short term.
Make sure you adjust your portfolios accordingly as the next mega trends develop!
Good luck and good trading,
"If there's anything you need in terms of handling your bullion - buying, storage, certificates, etc. - The staff at ASI are the folks you want to do business with. That's the truth." Porter Stansberry // Stansberry & Associates
"If there's anything you need in terms of handling your bullion - buying, storage, certificates, etc. - The staff at ASI are the folks you want to do business with. That's the truth."
Porter Stansberry // Stansberry & Associates
The Inside Story
Editor's Note: Kim has nearly 25 years of experience as a stock analyst, hedge fund manager, political risk consultant, and financial commentator in more than half a dozen emerging and frontier markets. This article originally appeared in the October 2nd, 2020 column "Chaos Chronicles" in American Consequences.
Is Your Retirement in the Government's Crosshairs?
By Kim Iskyan
America's national debt has soared more than $4 trillion this year alone...
It now totals $26.7 trillion. That's $81,000 for every man, woman, and child. It's around the value of every residential dwelling in the country. It's about 130 of Jeff Bezos' fortunes. It's an astronomically large figure...
And it could be paid off tomorrow if the U.S. government raided one of the biggest pools of capital on Earth... one that partly belongs to you.
Right now, Uncle Sam can get all the money he requires with a few keystrokes at the Federal Reserve. That's thanks to the virtually insatiable and (for now) guaranteed demand from governments and investors around the world for the U.S. dollar, the world's reserve currency, for its usefulness as a medium of exchange, store of value, and unit of account.
The U.S. dollar enjoys "exorbitant privilege" – a term coined by French politician Valéry Giscard d'Estaing – as the world's reserve currency. Without dollars, nations are essentially frozen out of international trade and the global economy. So the Fed can sell unlimited volumes of U.S. Treasury securities to fund the government – and there are plenty of buyers.
Until those buyers disappear, that is. Over the past six centuries, there have been six different reserve currencies – each lasted for around a century, give or take a decade or two. Depending on how you measure it, the U.S. dollar is in the last inning or two of its dominance of the global financial system.
There may come a time – sooner than you think – that the dollar falters. And then, even the heroic efforts of Fed Chairman Jerome Powell won't be able to deliver the U.S. government the cash that it requires.
Don't forget... the national debt is just part of the picture. There's also $1.2 trillion in state debt and $2 trillion in local debt. The real fun, though, comes in unfunded liabilities, which are future expenses that Uncle Sam has committed to paying but doesn't know where he's getting the cash from, like $20.7 trillion for Social Security and $32 trillion for Medicare...
Add it up, and America's total unfunded liabilities stand at $154 trillion.Faced with a still-escalating debt burden, the U.S. government might then go "where the money is" – to paraphrase 1930s bank robber Willie Sutton, when asked why he robbed banks.
One very obvious destination: the $28.7 trillion in Americans' retirement assets, including around $8.3 trillion in individual retirement account ("IRAs") and in employer-sponsored 401(k) plans, according to the Investment Company Institute. It wouldn't be difficult for the U.S. government to get its hands on your retirement assets.
We can hope that this never happens. But it's far better to be prepared. Right now, there's still time to put a Plan Z in place.
It's not clear exactly how the dollar's dominance will end, or what comes next. But if history rhymes, the chances are good that for our children, the greenback won't be the global financial traffic-stopper that it is today.
And then, Uncle Sam's seemingly endless borrowing extravaganza will crash to a halt. Short of a debt jubilee of biblical proportions – or a wholesale repudiation and default of the U.S. government on its debt, which would reduce the global financial infrastructure to a smoldering dumpster fire – the American government would have to do what everyone else on earth must eventually do: make ends meet.
Americans' retirement assets are potentially more than just a source of cash – to be used for debt repayment, or whatever else the politicians of the moment feel like spending it on – for the U.S. government. As a significant portion of retirement funds are invested in stocks and other assets, the nationalization of these assets would dramatically increase the government's role in, and control over, the corporate world.
But wait, you might say... back up. The American government can't just take your 401(k) and your IRA. It's your hard-earned wealth, held in your name. Laws protect you. The government can't just barge in and take what's yours. Right?
That's what people thought in Argentina (2008), Ireland (2009), Hungary and the U.K. (2010), Portugal (2011), and Poland (2013). In each of these countries – and many others – the government nationalized and/or confiscated pension assets, and individuals and investors were disadvantaged by bureaucrats under the dense fog cover of the greater good.
And it's not just "over there"... It's happened in the U.S. before, too. From Executive Order 6102, signed on April 5, 1933:
I, Franklin D. Roosevelt, President of the United States of America, do declare that said national emergency still continues to exist and... hereby prohibit the hoarding of gold coin, gold bullion, and gold certificates... All persons are hereby required to deliver... to a Federal Reserve bank or a branch or agency thereof or to any member bank of the Federal Reserve System all gold coin, gold bullion, and gold certificates now owned by them.
That wasn't outright confiscation. Gold was swapped for fiat currency (which was soon thereafter devalued). Every American was allowed to keep the equivalent of $100 in gold. But whatever the qualifiers, the government took assets from its citizens for its own purposes.
There are plenty of ways today that Uncle Sam can raid your retirement. Here are the three most likely...
- Tax retirement account balances that are more than a certain level. This would be a "wealth tax" wearing plaid slacks and eating dinner at 5 p.m. Alternatively, the government might remove the tax-deferral element of certain retirement programs and make taxes due on gains earlier.
- Require that a certain portion of retirement assets be invested in government bonds. That would create a new, guaranteed, and permanent market for Treasury securities. And if interest rates are pushed below zero – so that savers pay the government interest, rather than vice versa – all the better (for the government... not for your retirement).
- Print more and more (and more) dollars in serialized quantitative easing programs... This is already happening in ongoing COVID-19 stimulus programs. The classic tin-pot dictator way of getting rid of local currency-denominated debt is to inflate it away – print currency to pay debts, and soon enough the currency won't be worth much. (I carry the bill in the photo above in my wallet, a memento from a trip to Zimbabwe several years ago.) That's not dissimilar to what's happening in the U.S. now.
What can you do to protect yourself? One option is to go Greek, as explained by none other than the Social Security Administration...
For the ancient Greeks, economic security took the form of olive oil in amphorae. Olive oil was very nutritious and could be stored for relatively long periods. To provide for themselves in times of need, the Greeks stockpiled olive oil and this was their form of economic security.
An olive oil 401(k) might have worked as a Plan Z a few thousand years ago. But retirement needs – Botox visits, cryogenic freezing payments, Chardonnay-of-the-Month Club subscriptions – are a lot more diverse today.
But the Greeks had the right idea by going analog: In a world where it takes just a few keystrokes to turn what's yours into something that's theirs, one way to protect yourself is to convert at least a portion of your retirement savings into real assets.
One way to keep your retirement assets away from Uncle Sam is to buy silver, gold, and other precious metals somewhere safe and far away, like Silver Bullion, a vault and much more in Singapore that's run by my friend Gregor Gregerson. Closer to home, Maryland-based Asset Strategies International is a good first stop for gold coins and other precious metals.
Buying retirement-oriented real estate can serve two Plan Z purposes: It can put some of that retirement cash to work... while also removing it from the clutches of Uncle Sam.
That's part of the best way to protect yourself against sticky government fingers in your retirement plan: a Plan Z that spreads your risk across banking systems, currencies, citizenships, countries, cultures, real estate markets, and languages. Being forced to convert your IRA into government bonds hurts a lot less if you have other retirement assets elsewhere.
None of this is easy or convenient or cheap. But it's a lot less inconvenient than, say, Uncle Sam channeling Willie Sutton... and finding that the money he's looking for is yours.
“As the Publisher of The Oxford Club financial group for over 28 years, I've learned to be very selective in who I recommend to our Members. When it comes to buying precious metals and offering services for offshore diversification and protection of assets, there's only a few groups I would trust. Asset Strategies International is one of the select firms I recommend without hesitation. I've worked with them for decades. ASI is a family-led business that offers the perfect complement of hard asset services and expertise for our Members, with the utmost professionalism and responsiveness." —Julia Guth // CEO & Executive Publisher, The Oxford Club
“As the Publisher of The Oxford Club financial group for over 28 years, I've learned to be very selective in who I recommend to our Members. When it comes to buying precious metals and offering services for offshore diversification and protection of assets, there's only a few groups I would trust. Asset Strategies International is one of the select firms I recommend without hesitation. I've worked with them for decades. ASI is a family-led business that offers the perfect complement of hard asset services and expertise for our Members, with the utmost professionalism and responsiveness."
—Julia Guth // CEO & Executive Publisher, The Oxford Club