It’s a Great Time for Gold

It’s a Great Time for Gold

This week is the week.

More than a decade of experience, 12 months travelling the world, missed planes, new faces, and hauling four kilos worth of camera gear through major international airports…

All boils down to this.

It’s been a long time in the making…but for good reason.

What you’re going to learn about this week, is something completely different.

It was around this time last year, my boss threw out a question to me as I was leaving the office late one night…

He asked me:

If there was anything you could do to change how people see the markets right now, what would it be?

Simple,’ I answered. ‘I’d change how they look at gold. Gold isn’t an alternative investment — it’s money. And it’s been that way for thousands of years.

And we left it there. Or so I thought…

If you could tell people one thing, what would it be?

Only a couple of days later, planning was underway.

What you’re going to see this week, is about how I can bring my extensive network of contacts to you.

See, I have access to the sort of people the wealthy hire for professional advice. If you’re lucky you catch their latest insights on YouTube…

…whereas I’m bumping into them at seminars and after function scenes drinks.

The thing is, I didn’t realise how unusual this was. This was my normal.

More to the point, I didn’t realise just how much information I gathered by these casual chats…and how so few people had access to it.

Off the cuff comments enabled me to research unloved sectors and pass that information on to subscribers…before the rest of the market caught on.

That’s what this week is about.

So over the next few days, I’m going to share exclusive excerpts from some of my interviews.

Show you what my network looks like…

…and what you can learn from it.

Although it wouldn’t be insider access, if we didn’t start things off with my friend and colleague, Jim Rickards.

Below is only a snippet from an interview I recorded with Jim in Vancouver earlier this year.

His view? It’s a great time for gold

Source: Fat Tail Media

A sneak peek from our interview

Shae:Now, we’ve probably only got time for [one] more question today, but I will be hung and quartered back home if I don’t talk to you about gold. We have got gold over US$1,400.

In Australia, it’s over $2,000 per ounce.

What happens from here? We know it’s going up, but what should we be looking for? Are there big moves coming in the gold market? Are there bigger price swings to come?

Jim:Yes. I mean, gold’s always a little bit volatile.

But I would say, first of all, just to put it in [the right] context, [that] speaking in US dollars, from May to mid-July, it went from about $1,270 to $1,440.

That’s a big jump in a very short period of time, number one. Number two, it broke solidly through that old $1,360 ceiling, which had been around for years.

We just crashed through that ceiling. [It] seems to have a new floor around $1,400, so it’ll fluctuate now between $1,440 and $1,405, up and down.

But it’s holding that $1,400 floor, which is very significant.

It’s what I call an asymmetric trade. Not too much downside, lots of upsides. Very attractive, in that sense.

But we’re in a new gold bull market, and I know the old bull market ended in August 2011.

In US dollars, gold was $1,900 — that was the all-time high.

Then we had a painful crash for about four years, but it did hit bottom on December 17th, 2015.

Have a look at a chart.

It was $1,050 an ounce, and it’s up almost 40% since that.

We’re in a new bull market.

Again, people who lost money between 2011 and 2015 don’t want to hear it.

But, look, we were in a bear market from 1980 to 1999.

And then we had the greatest bull market in history, from 1999 to 2011, then a bear market. Now we’re in another bull market. So that’s the bigger cycle.

That’s the secular move, but on a cyclical basis, yeah. What’s happening is real rates are coming down, [so we have] lower real rates.

Don’t focus on the nominal rate.

Focus on the real rate, because you have to take out inflation. Or add inflation, as the case may be.

I was just last week up in Bretton Woods, New Hampshire, site of the 1944 international monetary conference, the so-called Bretton Woods agreement, and it was the 75th anniversary.

And I was there with a lot of top names.

Larry Summers, or former Secretary of the Treasury, was there, and many others.

But one of the panels I attended, it was technically off the record, so I can’t tell you the names of the people who were there, or exact quotes.

But suffice to say, [there were] two very senior Fed officials, and one very senior European Central Bank official.

These people were the real deal.

They were top policy makers, and they were very relaxed.

And it surprised me [when they talked] about lower rates.

They said, ‘Yeah, rates have to come down.’ Because real rates have to come down.

So, if your nominal rate is at 2%, let’s say, and inflation is 2%, well, the real rate is zero.

But what’s happening is that inflation has been coming down, from 2% to 1.9.

Right now, it’s about 1.6. If you keep the nominal rate the same when you lower inflation, the real rate’s going up. They’ve got to chase inflation down.

They’ve got to lower the nominal rates, so that the real rates get close to zero, or even go negative.

And the Fed officials were talking about negative interest rates.

They were not saying we’re going to do it. The US has never done it. I don’t want to overstate that part of the discussion, but I was surprised at how relaxed they were about discussing it at all.

And Europe, no problem …My takeaway was pretty straightforward, which is rates are coming down. Which means real rates are coming down, which means gold’s going up.

There’re geopolitical concerns, or supply-demand concerns.

There are several vectors that move gold, but the number one vector, at least in short, is real rates. And real rates are coming down.

So, gold is going up.

Shae:

So, it’s a good time for gold?

Jim: 

Exactly.

Of course, Jim isn’t the only gold expert in town.

Join me tomorrow, and I’ll share a snippet of my interview with Rick Rule. Not only is Rick a sound money advocate, but he also understands the commodities price cycle driving gold…

Remember, we are just getting started.

I’ll be sharing a BIG line up of names this week…

Until next time,

Shae Russell Signature

Shae Russell,
Editor, The Daily Reckoning Australia