What You Need to Know About Gold’s Price Melt-up

For many years, I’ve been careful to describe gold as a “way to preserve wealth.”

But lately, I’ve caught myself saying things like, “gold is a way to make serious gains over time.”

Decades of experience have taught me that too much optimism can be a dangerous thing.

Whenever a situation seems “too good” is typically when the hammer falls.

Indeed, as July ended last week, it looked like recently rising gold markets were in for a smack-down.

Except this time, it didn’t happen. Traders and short sellers failed to move in for the kill.

Yes, prices fell a bit on Thursday, July 30 — but nothing like what we usually see when the sell-side attacks.

On the other hand, the precious metals markets have never quite had the set-up that we’re looking at today.

So you still have time to ride this gold train if you haven’t climbed aboard.

And in a minute, I’ll tell you the easiest and most affordable way to get a ticket.

But you’ll need to hurry, because — to stretch this metaphor to its limit — the train is most definitely leaving the station!

Let’s dig in…

The entire landscape has changed for gold.

Take the most obvious issue — COVID, which is affecting the fundamental issue of gold supply.

Over the past six months, hundreds of mining operations across the world have scaled back or closed due to COVID.

Some gold comes from pure-play gold mines. But much other gold is a byproduct of mining silver, copper, lead, zinc, nickel and more. As Coronavirus spread this year, many mines in many places have had problems.

Many governments issued shutdown orders, if not for mines then for ports, roads, rail lines and other kinds of travel, movement and haulage.

Shutdowns can be far more impactful than workers unable to show up at the gates. In some cases, trucks cannot bring food, fuel, chemicals, concrete, steel or other supplies to mine operations. One way or another, the mine must scale back or close.

Then inside mine gates across the world, people practice “social distancing.”

Keeping apart may not matter so much to a truck driver, working in a climate-controlled cab. But productivity can decline in a mill or refinery when fewer people are on site to work.

Then there’s the ongoing issue of reduced international travel, as I discussed back in March.

Months into the global pandemic, it remains difficult to cross borders in most parts of the world. Airline flights are still restricted, and it’s still tough for gold miners and processors to move product, aside from expensive air charters.

It still matters that several key gold refining operations in Switzerland spent the winter and part of spring shut down entirely, with reduced operations even now in mid-summer. These sites are the source of many “.999 pure” bars used in much international commerce.

Meanwhile, the world has only a handful of facilities that mint large numbers of bullion coins like U.S. Eagles or the Canadian Maple Leaf.[1]

They, too, aren’t running at full capacity.

Not long ago, for example, the U.S. Mint announced that it is scaling back production of gold and silver coins due to COVID-related issues. (Although I suspect there may be other reasons too, which I’ll explain below.)

Other nations with smaller precious metal mint operations are affected as well.

So right away you see the issue of supply problems with gold.

Then there’s the demand side.

In June, I discussed America’s “New Gold Rush,” in which wealthy individuals, family offices, cashed-up funds and institutions are acquiring physical gold.

Millions of ounces of physical gold are moving to long-term storage in isolated, well-guarded vaults. This gold is likely not available for “short selling,” which reduces the power of speculators to slam the price down.

This new bulk-buying is on top of growing gold reserves in central banks across the world.

According to the World Gold Council (WGC), central bank buying is strong and expected to increase as 2020 unfolds.[2]

According to WGC, “These shifts [i.e., increased gold accumulation] may suggest a re-evaluation of gold’s role amidst ongoing financial and economic uncertainty, while also reflecting long-term concerns about fiscal sustainability as government stimulus is deployed to cushion the global economy.”

As this is happening, exchange-traded funds (ETFs) are increasing their collective gold stash as investors de-risk currency holdings via the yellow metal.

According to Nasdaq.com, “Global gold-backed exchange-traded funds (ETF) had a stellar first half, closing with a record net inflow of 734 tons or $39.5 billion, per the World Gold Council.”[3]

Meanwhile, the U.S. Commodities Futures Trading Commission (CFTC) has reported startling numbers in what’s called the “commitment of traders” (COT) reports.[4]

In essence, more and more gold “traders” are holding contracts to expiration and demanding delivery. This withdraws even more physical gold from the overall market flow.

And it serves to increase risk for speculators who attempt to move the “paper gold” market downwards. They might get caught in a delivery squeeze and have to pay through the nose to “cover” their play.

Anecdotally, I’ve reviewed many web sites of companies that sell gold and silver online. Availability is almost nil. Sure, you can buy a few coins here or there, or small numbers of ingots or bars.

But large volumes of precious metal are simply not for sale at retail. There’s not enough product. And many items come with “delays” in shipping.

I recently spoke with numerous companies that sell and buy gold coins and bullion. Everyone said that they have gold buyers ringing off the hook, with almost no sellers.

“Some days I’ll get a lawyer who calls because a client died and they have to liquidate coins to raise cash for the estate,” said one dealer. “But that’s about it. Nobody calls to ask about liquidating metal just because the price is up by 35%. Nobody!”

Meanwhile, even the normally gold-averse Financial Times has written favorably about gold. In a recent article, the Times talked to old friend Peter Grosskopf, CEO of precious metals investment house Sprott, in Toronto.

He told them, “I think it is the story of the year in financial markets. Gold has finally come on to Main Street as an asset people actually need to have.”[5]

There’s one other “explanation” for gold strength making the rounds as well…

There’s a strong possibility that many gold players — from retail to government banks — are accumulating out of concern that the world’s major central banks are setting up for some kind of move to a new global reserve currency, if not a gold-backed cryptocurrency.

We already have the looming threat of a dollar crisis, which I’ve recently discussed in terms of the new economic depression and baked-in inflation. The global banking system must do something, lest the world economy seize up.

Another angle is that a major monetary reset — moving from the present state of international currencies to some sort of international electronic currency — will help bail out the near-bottomless debt of nations across the globe.

There’s simply too much debt to repay out of any semblance of national productivity, economic growth and/or taxes from the current way of doing business. So why not just install a new currency and wipe the slate?

Of course, governments everywhere tend not to like cash. Most governments have long discouraged people from holding large amounts of it.

For example, dealing with anything over $10,000 in the U.S. requires filing paperwork with the Treasury Department. Out on Main Street, law enforcement loves to confiscate cash during traffic stops and airport searches. (It beats writing traffic tickets.)

Also, there has long been a push towards “cashless” banking. Banks and utility companies want you to pay bills online. Or look at the political and banking power of credit card companies. They want online transactions and disdain cash.

Then we have the current “shortage” of metal coins in the U.S. (pennies, nickels, dimes, quarters). Blame Coronavirus, of course.[6]

Considering all of this… Would you be shocked to awaken one day to news that the government is phasing out “cash” and requiring everyone to conduct business via electronic means?

My colleague Jim Rickards (author of five bestselling books with a sixth on the way) has mentioned this scenario. Among other aspects of going “cashless,” it will force pretty much all savings out of people’s piggy banks and mattresses and into bank accounts, where it can be monitored, if not taxed.

Now, impose “negative interest rates” on that money in the bank. The looming cashless world will be perfectly set up to intimidate and control pretty much everyone.

But through it all, gold (and silver) remain a store of wealth. If you hold physical metal, it’s no one else’s liability.

And in a world where cash is dead, the underlying value of precious metal will soar. There’s your long-term gain, just on this basis alone.

So… Precious metal supply is tight, demand is strong and there’s no telling what’s going to happen with the dollar.

Hopeless, right? No! Here’s what you can do.

Protect your wealth with physical gold and set yourself up to gain as the situation tightens up.

And that brings me to a group I’ve discussed before… the Hard Assets Alliance.

I’ll say up front that Agora Financial has a financial relationship with this group. But that’s because we’ve checked it out and are impressed with the way they conduct business.  It’s straight-up…

Hard Assets Alliance offers a way for you to buy gold (silver too…) and take delivery with relatively low costs.

Or with a single click, you can buy and store your metal in your choice of five audited vaults worldwide.

This is among the easiest ways to get started with gold.

It’s also a good time to start with gold, even after the recent run-up in prices. That’s because there’s more to come, for all the reasons I’ve described.

All you have to do is complete the short application process to open a FREE account, and right away you’ll be able to shop for the type of gold you want.

You’ll have access to the inventory list and be able to make an informed decision.

If you’ve been sitting on the sidelines, unsure of what to do…  Ok, we get that.

But don’t wait for the overall situation to get worse.

And don’t expect that “the government” is there to protect you.

You do not want to awaken some day and learn that you have a calendar deadline — say, 20 days — to hand in your cash at the bank and set up a “savings” account that pays negative rates.

To start your FREE account, click here before it’s too late.

On that note, I rest my case.

That’s all for now… Thank you for subscribing and reading.

Best wishes,

Byron King

Byron King
Managing Editor, Whiskey & Gunpowder
WhiskeyAndGunpowderFeedback@StPaulResearch.com

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[1] The six largest mint complexes are in the U.S. (at West Point and Philadelphia), Canada, Britain, Austria, South Africa and Australia.

[2] 2020 Central Bank Gold Reserve Survey, Gold Hub

[3] Gold ETFs Hit Record Inflows, Nasdaq.com

[4] For example, see here

[5] Gold Price Hits Record High as Investors’ COVID-19 Fears Escalate, Financial Times

[6] Pandemic Leads to National Coin Shortage; Federal Reserve Task Force Created to Help, NBC News

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Byron King

A Harvard-trained geologist and former aide to the United States Chief of Naval Operations, Byron King is our resident gold and mining expert, and we are proud to have him on board as the managing editor of Whiskey & Gunpowder.

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