I finished up yesterday talking about our second biggest commodity export — gold.
And I mentioned how my friend and colleague, Shae Russell, over at the Daily Reckoning, thinks there’s a huge investing opportunity for you here.
I’ll explain her thinking in a second.
But, funnily enough, in this matter she actually agrees with a lot of deep-pocketed bankers right now too.
Did you know…
Serbia just bought nine tons of gold.
Turkey finished the quarter buying 71.4 tons of gold.
And China just recently finished a 10-month stint of buying around 105.8 tons of gold.
Most incredibly, Poland just undertook a top-secret mission to repatriate four billion (pounds sterling) of gold held in Bank of England vaults since the Second World War.
The operation took place over eight flights in the dead of night.
With Britain’s current political circus, you can’t blame the Poles for thinking it might be time to get their gold back.
Especially if the gold market is about to explode…
A new bull market in gold
Check out this tweet:
Source: Twitter @DTAPCAP
The chart is pointing out that the index of gold mining stocks is at the same price as it was way back in 1996.
Think about that as you check out this next chart.
The chart below shows that gold, in terms of Aussie dollars, is up around 16% already this year and close to all-time highs.
But the gold equity index doesn’t seem to believe this is the start of something bigger. And where there’s disagreement in the market, there’s opportunity.
Daily Reckoning Editor Shae Russell doesn’t see this as some flash in the pan move. She sees it as the start of a new cyclical bull market in gold.
‘Yes, the gold price has been steadily rising since that low point in August 2018. But when you compare it to the two previous bull markets, the party’s barely even begun.
- ‘The 1970s gold bull market took about four years, from when it really took off, to hit its peak.
- ‘The 2000s gold boom also had a ‘sweet spot’ of about four years when it was really flying.
‘If I’m right — that gold truly IS in its third great bull market…’
There are certainly a number of reasons I think she could be right…
Gold makes sense in this weird world
The central bank buying of gold is symptomatic of a global debt problem that no one wants to really think about.
The world moved off the gold standard in the early 20th century and onto a system of fiat money that relies on trust in central banks.
That’s all fine when government bankers are behaving responsibly. Fiat money works pretty well most of the time.
However, since the GFC in 2008, central bankers have embarked on a series of monetary adventures that are destroying this trust.
In short, they’re printing money out willy-nilly in the form of new debt.
As reported in CNBC:
‘Global debt hit a record high of over $250 trillion in the first half of this year, led by a surge in borrowings in the U.S. and China, according to a new report.
‘The report, released by the International Institute of Finance (IIF) on Thursday, showed that global debt surged by $7.5 trillion in the first six months of 2019. The IIF said the overall number hit $250.9 trillion at the end of this period, and will exceed $255 trillion by the end of 2019.’
It’s unlikely anyone will ever pay off this debt. And it’s getting to the stage where default is the most likely eventual outcome.
On top of that, we’re heading towards a world of negative interest rates.
Which suddenly means for the first time, a bar of gold gives you a better return than money in a bank account. Zero is better than minus after all!
Look, I’ve no tin foil hat on here, but these are very real risks that you need to think about at least.
Like Bitcoin [BTC], a little bit of gold exposure in your portfolio could be a great hedge against total calamity.
So, what’s the best way to invest in gold?
I’ll let the gold expert, Shae Russell, tell you that.
Shae’s spent the last few months talking to industry-leading experts, off-the-wall economists (not the people you read in the mainstream press!) and select gold executives, to work out how best to play this potentially huge opportunity.
Editor, Money Morning