Gold is wrapping up its best year since 2011, but gold stocks made me vomit in 2017.
The endless selling caused them to trade at 52-week lows, and they even brushed up against the 2015 historical bottom valuations.
Some companies trade for less than their cash on hand. In other words, if the business dissolves today, shareholders will get paid big – that is unheard-of.
Markets can stay irrational for longer than most investors have patience for. That’s the cause of the liquidation by gold investors in 2017 – they got tired of waiting for inflation.
The verdict is clear, though: with tax cuts approved and consumer confidence at all-time highs, America is back in business, but global governments aren’t so happy to pick up the tab and fund this ever-increasing debt.
That’s why bond yields are rising fast!
Global governments realize that the USD standard is an antiquated system and that China and India are the future of international power – the East is planting the West in the ground.
Unlike the West, which abhors and shies away from gold and silver (commodity-based backing), the East (particularly the world’s 2 biggest economies in 15 years: China and India) are gold powerhouses.
Go back to the time before the Bretton Woods agreements of 1944, which made the USD a reserve currency, and you won’t find a time in which gold stocks were cheap like today – it’s an anomaly.
Gold has outperformed gold stocks for close to 7 years, so it’s important to understand that not only are mining shares are insanely undervalued, but the physical metal itself is also historically a bargain.
Put differently, CEOs of junior resource companies need to get aggressive right now with acquisitions and growing their mining capabilities because the entire industry is about to flip.
Take a look at the chart above – it marks every generational gold bottom since the infamous 1971 Nixon speech. It shows the level of fiat currency backed by gold – right now, we’re at a risky low point, which sophisticated investors are aware of. There’s a lack of gold to cover credit.
When it comes to gold stocks going forward, the key is jurisdiction because environmental groups are making it harder to put mines into operation.
The other major theme is connections and established relationships with deal-makers and strong players in the mining industry. For 35 years (since 1982), young people have not gone into the fields of geology and mining – there’s an acute shortage of high-quality individuals, so only 5 supreme groups have developed, and they control the junior mining world.
I have just spoken with a high-level entrepreneur at the heart of one of these groups, who I’ve been communicating with for several weeks and I asked him point blank: “Is gold your top priority for 2018?” He said that for the first time in 5 years, it is.
My next question was related to their growth strategy. I want to see mergers while these other companies trade for next-to-bankruptcy type valuations and have no money to make moves – they’re in survival mode.
The call became very interesting at this point because he indicated that they’re going to implement a grand-scale consolidation – as he put it, they’re “assembling rare Lego pieces to create a one-of-a-kind Lego structure.”
This company has been on my radar for 5 months. I know everything about it, and it’s now breaking out, just as gold is nearing $1,300 again.
This is classic price action for gold when leading up to a FED interest rate hike – it goes down hard prior, bottoms, and then begins heading higher into January.
Just as bond yields surpass stock dividends and I smell a correction coming (7%-12% for S&P 500), gold looks healthy.
Junior gold stocks can snap to the upside the second the general indices go RED, and I plan to be invested with this company.
Next week, Portfolio Wealth Global will release their merger blueprint, as well as all the research we’ve compiled for months.