Today, gold is in a full-fledged bull market.
The metal blew past $1,700 an ounce in April – a gain of 45% in a little more than 18 months.
I see no end in sight for these price gains. Bull markets end when there’s no one left to buy. And as the coronavirus pandemic rages on, investors have several reasons to keep buying gold.
So what’s driving this gold bull market? Let’s find out… And I’ll show you a better way to profit than simply buying physical gold.
Gold price increases are typically due to three interconnected fears – collectively known as the “Fear Trade”…
1. Fear of War
Whenever war breaks out, the loser’s currency becomes worthless – German marks and Japanese yen at the end of World War II, for example. (Less recognized is that the winner’s currency also suffers from the inflation brought on by the deficit spending required to fight the war).
2. Fear of Recession
Economic recessions bring low interest rates. This means there’s less competition from income-yielding assets that “barren” gold has to overcome for price gains.
3. Fear of the Unknown
The value of fiat money – the printed paper that governments declare to be legal tender – is based on confidence in the issuing nation’s economy. The unknowns can influence confidence. These can be internal unknowns: How much inflationary paper will be printed to fund the government? Or they can be external: How will the spread of coronavirus hurt a nation’s economy?
Currently, war may not be an immediate concern… but Fear of Recession and Fear of the Unknown are driving gold higher.
The Federal Reserve has lowered interest rates to near zero. Investors looking for a safe haven don’t have much reason to look any further than gold. Meanwhile, no one knows yet how severe or long-lasting the pandemic’s economic damage will be.
And that means this gold bull market can last longer – and rise higher – than anyone expects.
But instead of simply buying bullion today, you can make far bigger profits by investing in high-quality gold stocks.
Gold stocks are tied to the price of gold… But they move more than the percentage change in the metal’s price. That’s because every $1 increase in gold’s price boosts a company’s profits equal to $1 times the annual ounces produced.
Gold bull markets can have even bigger impacts on a company’s value because:
- They increase the value of reserve ounces still in the ground, which are often 10 times a company’s annual production.
- Marginal ounces that were not cost-effective to produce at lower prices are now profitable to mine.
In my Gold Stock Analyst (“GSA”) advisory, we take advantage of these trends. You can see how this worked out last year in our Top 10 portfolio, where we recommend the 10 best gold stocks for investors… Gold itself was up 19%. Meanwhile, the GSA Top 10 model portfolio was up 62.3%.
With fear running rampant in the markets today, the price of gold could ultimately soar to $3,000 per ounce or more. And the right gold stocks could outperform gold hugely in the months ahead.
That’s why you need to seize this moment… and own the best gold stocks in the industry today.
— John Doody
A powerful market bubble in America is setting up a collapse that could soon send the S&P 500 plunging 50-70%. And investors could be in for a decade (or more) of negative returns from here. You don’t need a crystal ball. You just need this plan.
Source: Daily Wealth