First of all – I have no clue if the metal miners are going lower in price or if this is the bottom. What I do know is that at today’s ratio of the Gold Miners to the price of Physical Gold, they are very cheap. Very Cheap! Too cheap to wait to buy. Of course, use your preferred strategy to buy. Dollar-cost-average (DCA) into a position or just add some at today’s prices. DCA is a well-known strategy.
In the chart below we have the GDX (Gold ETF) divided by the GLD (physical Gold price) to show the relationship.
The probability that gold miners will rally Vs the price of physical is over-whelming.
Why Gold? Why Now?
The United States has used the US Dollar as a weapon one too many times. The sanctions on Russia seems to have been anticipated and Russia had its reply. They will accept rubles or gold. In oil dealings with India, they are considering accepting rupees. The USA had no plan B.
Both China and Russia have been stock piling gold in their central banks for at least ten years. They have been preparing for the time they will no longer use the US Dollar as the global reserve currency. Other countries tired of the US Dollar as a weapon have been doing the same.
The USA’s hasty retreat from Afghanistan in 2021 sent a message to our “partners” that the USA is not a trustworthy partner. Does more need to be said on this subject?
This nine minute video (below) is worth watching to see Luke Gromen’s frustration with policy makers. He expressed what many of us might have been thinking but have not said out loud. Our policy makers are making “dumb” policy. It is like they never took a history class, or a logic class or an economics class.
I am share this not to criticize policy makers, but to say own some gold or silver. The new basket of currencies being developed will contain gold and perhaps copper. Copper to draw in countries who produce copper like Peru and Chile. Gold because it is gold. Perhaps silver to draw Mexico into the new basket of currencies.
Physical metals are more stable and conservative than owning the miners. The miners will be more volatile but produce high (and lower) returns than the physical metal. Some people suggest Hyper-inflation. Others just say inflation is going to be stronger than what we have experienced in the past four decades. Still others say we will have deflation or a depression. In all four situations Gold has been historically a strong asset to own in each of these situations.
I lean into the “inflation will be stronger than what we have experienced over the past decades.” The only way out of this high debt situation is for the Fed is to raise asset values through inflation to be able to balance our high debt levels. The Super Power cannot default on its debt like Mexico or Argentina. Throw in rebuilding the manufacturing base in te USA, Going electric, and rebuild our road, bridges and damns. On top of that, we are in “War mode,” which is always inflationary. Five to eight years of higher than normal “by desire” from our government.
On June 29, LOTM listed Mining Stocks we like and own in the Blog heading:
Check the article above for our top suggested miners. They are cheaper today than on June 29, 2022.
All metals will rise in this decade. I am including Uranium. Uranium is lower now than it has been. The only way for the world to replace oil, gas or coal for base load power is with Nuclear. This is not a trade for immediate performance. It will take years to build the USA nuclear system. Start accumulating and add on weakness. This is a time of weakness. The Sprott Physical Uranium Trust move similarly with the price of Physical Uranium because that is all they own.
It is a great time to be buying and accumulating the metal miners!
Written July 7, 2022, by Tom Linzmeier, Founder LivingOffTheMarket.com
Key Words: #mining #gold #silver #uranium # inflation #stocks #microcaps #juniorminers
LOTM Research & Consulting Service
* An account related to LOTM holds a position in this security.
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