The velocity of the moves in the precious metals space is accelerating as I anticipated it would.
Gold has now made a new all-time high and silver - which typically overshoots to the upside or to the downside - has now breached the $20.50/oz. line I felt was critical before a real sustainable breakout could happen.
If history serves as a guide, silver has a lot of catching up to do and while $50 to $100 moves in the gold price will become the new normal, outsized 5% to 8% moves in the silver price are going to become the new norm.
The simple reason is volatility.
Volatility in everything. Volatility in China-U.S. relations, volatility in the streets of America, volatility in the bond market, and volatility in the currency markets.
Throw in an election that is shaping up to be as divisive and contentious as any in recent history and you have the perfect storm for a shift away from government assets into private assets.
Private assets like gold. Like low-tax real estate. Like stock of companies with hard assets in the ground that we need to make everything.
Oh yeah, more than 50 million people have filed for unemployment here in the U.S.
Another $1 trillion stimulus - I mean relief - package is on the voting block.
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Another bill will pass. Maybe it's a trillion, maybe a little more. The one thing you can always count on both sides to agree on is how to counterfeit more money as long as everyone gets their fill.
The 10-yr note here in the U.S. is sitting at 0.575% and headed lower while the dollar has now plunged to lows not seen since February 2019.
Mortgage rates are at historic lows. Heck, even Bitcoin is back over $10,000.
The reckless spending isn't just here in the U.S. In Europe, the ECB announced a "Pandemic Emergency Purchase" program which takes the ECB's total announced monetary stimulus package to 1.35 trillion euros.
With this comes a warning. The promoters in the space that have always cheered the death of the dollar will eventually be correct as the paper currency will go the way all currencies eventually do.
But it's not happening before some serious dislocations in the currency markets. Dislocations that will benefit the dollar and send the dollar much higher for a while. Not next month but maybe by year-end. That could present short-term pressure on gold.
It won't last, as I fully expect for stock markets, the dollar, and gold to hold hands together higher.
There are enough sources for everyone to see where we are in getting the COVID-19 situation under control. Short version is regardless of what or how you feel about COVID-19, the response has been a debacle.
Socially, economically, and policy-wise. Governments and individuals have not only abdicated responsibility for something that should've been manageable within 30 days had some common sense been applied, but governments around the world have used (and you wouldn't be wrong for thinking manipulated) it to push through legislation and spending bills that continue to widen the gap between those with lobbyists and those without.
I say all that to say that economic policy around the world is now a race to the bottom.
Who can spend what and how quickly.
Central banks will buy everything they are legally allowed to and create even more special purpose vehicles for what they can't.
The precious metals are going higher. So are most precious metals stocks. But there are a lot of names that are starting to overheat in an unsustainable way.
There are also a lot of stocks that haven't fully participated in the recent run-up.
Knowing the difference and why will separate those who know what they're doing in this space and those who don't.
To your wealth,
Gerardo Del RealEditor, Junior Mining Monthly and Junior Mining Trader.
For the past decade, Gerardo Del Real has worked behind-the-scenes providing research, due diligence and advice to large institutional players, fund managers, newsletter writers and some of the most active high net worth investors in the resource space. Now, he is bringing his extensive experience to the public through Outsider Club, Junior Mining Monthly, and Junior Mining Trader. For more about Gerardo, check out his editor page.