- Fundamentals for higher precious metals prices are more extreme than any other time in history
- Central bank policies and economic conditions now ensure a permanent bull market for precious metals
- Precious metals mining stocks are the best way to leverage this bull market
The price of gold began 2020 slightly above $1500 per ounce. Barring a significant move in the last few days of the year, it will end 2020 close to $1900 per ounce. Roughly 25% higher.
Silver began 2020 below $18 per ounce. It currently sits at $26. More than a 40% jump.
With both gold and silver trading off of their 2020 highs ($2070 per ounce for gold, $29 per ounce for silver), it’s easy to forget what a good year it’s been for precious metals investors.
It was even a better year for precious metals mining stocks. Even with share prices well below their 52-week highs, multi-bagger returns have been plentiful for gold and silver mining stocks.
While 2020 was a good year for precious metals, expect 2021 to be a great
year. To understand why expectations are so high, it’s first necessary to understand the real drivers of higher precious metals prices.
Low interest rates drive higher prices
Low interest rates are considered to be one of the ultimate investment drivers for gold and silver. Gold and silver have been humanity’s premier Safe Haven assets for thousands of years.
These metals are real money
in an ocean of debauched fiat currencies
After already a decade of record-low interest rates, in 2020 Western central banks took interest rates even lower. And then these monetary witch doctors promised to leave rates at these reckless levels
– effectively forever.
When paper instruments (bonds and currencies) provide zero yield, there is zero incentive to hold paper instead of gold or silver. But the significance of record-low interest rates in the West goes well beyond this.
The central banks of Western governments and Japan have manipulated interest rates (on sovereign debt) to near-zero. To keep interest rates at those fraudulent levels, these central banks are currently printing up TRILLIONS
of dollars each year – for the sole purpose of buying up each other’s bonds.
What if they didn’t?
Most Western economies are hopelessly insolvent – with debt-to-GDP ratios well past the Point of No Return. If Western economies were forced to pay a legitimate “market” rate of interest on their gigantic debts, most (including the United States) would be quickly driven into outright bankruptcy
Tens of trillions of dollars in Western bonds are currently propped up by nothing except this central bank/Big Bank Ponzi scheme. Got gold?
Excessive currency creation drives higher prices
Excessive currency creation is ultimately the greatest driver of higher gold/silver prices. We can demonstrate this, conceptually.
The supply of gold and silver is effectively flat. Meanwhile, the supplies of these fiat currencies are increasing exponentially (i.e. at a hyperinflationary rate).
If the supply of gold is stable while the supply of U.S. dollars doubles, what should happen to the price of gold expressed in dollars
It should double. That’s elementary supply and demand.
The U.S. dollar currency-holders have no more wealth
backing the fiat currency. Just twice as high a stack of paper. Twice as many units – each worth half as much.
If a corporation splits its shares, the stock doesn’t stay at the same price. The share price falls proportionately with the degree of dilution. Currencies work no differently.
The alternative? Believing that central banks have magic
printing presses that can not only manufacture currency, but can conjure wealth into existence
Supposed monetary alchemy. Fairy tales that you tell to children.
If the fairy tale was true, why wouldn’t the Federal Reserve print up $1 quadrillion – and make the United States truly “wealthy”?
Pay off the $10s of trillions of government debt. Slip some money into the pockets of millions of COVID victims so they don’t get evicted from their homes at Christmas
. Provide relief for the 10s of thousands of small businesses being driven into bankruptcy by COVID lockdowns.
Properly fund U.S. schools. Fix U.S. roads and bridges.
The Federal Reserve doesn’t do this because it can’t
conjure wealth. It can only conjure illusory wealth
. And the more it indulges in this monetary con, the quicker the Chumps (that would be us) wise-up to the scam.
What happens then? The same thing that has happened to every fiat currency, for one thousand years.
The scam ends. The Dollar loses all value and goes to zero. Got gold?
High inflation drives higher prices
Why does gold (and silver) do well in a high-inflation environment? First readers need to understand what inflation really is.
In economics, the official definition of inflation is to increase (or “inflate”) the supply of money. Diluting
What happens when you dilute anything? The value goes down.
When central banks inflate (dilute) our fiat currencies with their psychopathic currency creation, they reduce the value of our currencies – and prices rise as a result.
Rising prices are not “inflation”. Rising prices are the consequence of inflation.
Inflation is monetary cancer that eats away at our wealth by destroying the purchasing power of our currency. When central bankers tell us we need more inflation
, they are telling us that they want to debilitate us with even more cancer.
Conversely, gold is the premier wealth-preservation asset. Gold is the antidote to the cancer of inflation
Priced in U.S. dollars (diluted by Federal Reserve inflation), Manhattan residential real estate
has gone up over 10,000%
in the last 100 years.
Priced in gold, prices are only 25%
As Western central banks inflate our currencies at (by far) the most extreme rates in history, they tell us inflation is too low
Look at the inflated
bubble-prices of many leading U.S. stocks. The central bankers even brag about how their money-printing is pumping up these equities.
Look at the inflated
bubble-prices for real estate in most urban markets.
Look at the inflated
prices for food. For the last 15 years
, food producers have been relentlessly “downsizing” package sizes. Why?
To hide (enormous) price increases
. When was the only other time in history where we saw this sort of serial downsizing? During the Stagflation of the 1970s
Look at inflated
healthcare costs. During all the years that the truth-challenged Fed-heads have been telling Americans “there is no inflation”
, U.S. healthcare costs have been rising at an average rate of more than 7% per year
Why do central bankers pathologically lie about inflation?
Why do arsonists lie about setting fires? They don’t want to get blamed for their crimes.
Lying about inflation is also a tactic to hold down precious metals prices. And central bankers have publicly confessed that they are serial gold-manipulators.
“…Central banks stand ready to lease gold in increasing quantities should the price rise.”
- Testimony of Federal Reserve Chairman Alan Greenspan, 1998
“Leasing” gold is a surreptitious and illegitimate means of manipulating the price of gold lower.
Liars and cheats.
Central banks have trapped themselves and us
Western central banks can’t raise interest rates – ever. Or our insolvent nations would be quickly driven into bankruptcy.
To keep interest rates artificially manipulated to near-zero, they need to continue conjuring trillions and trillions of new currency units – to soak up the supply of zero-yield bonds that no sane investor would touch
near-zero interest rates. Permanent
What does it mean when the biggest drivers of higher precious metals prices are permanently frozen at a bullish extreme? A permanent bull market for precious metals
Always the need to shield ourselves from the relentless inflation that central bankers pretend does not exist.
Never an incentive for investors to put their wealth into zero-yield paper instead of the world’s premier Safe Haven.
These are the strongest fundamentals for precious metals in our entire history, unfortunately. Because they lead to only one possible outcome: hyperinflation.
Is 2021 the year that high inflation become hyperinflation?
All fiat currencies always collapse to zero (via hyperinflation).
That was been a Universal Truth in the 1,000 years since humanity began experimenting with these fraudulent paper currencies.
Stating that the U.S. dollar will go to zero is not a “prediction”. It is a guarantee.
Every fiat currency monetary system is simply a variation of the age-old Ponzi scheme. Every Ponzi scheme collapses.
When hyperinflation hits, real estate prices won’t rise 10,000% over 100 years. They will rise 10,000% (or more) in one
As Western economies sit on the brink of the ultimate economic catastrophe, investors still have one final chance to protect themselves from financial disaster by insuring their wealth
with gold and silver.
Expect 2021 (and the years beyond) to be very good years for gold and silver investors. The flip-side to this is to expect the future to be increasingly grim for our nations, our economies and our societies.
Many people are investing in precious metals to make profits.
The Smart Money is insuring their wealth
with gold and silver – as they see this financial/monetary catastrophe approaching.
Leverage gains in bullion with precious metals miners
The primary purpose in holding bullion is financial protection. But for investors who are looking mostly for profit potential, gold and silver mining stocks offer an abundance of opportunities.
Mining stocks generate natural leverage on bullion prices, based upon their ounces-in-the-ground
– whether or not they are actually producing gold/silver yet.
As noted, many of these companies have generated multi-bagger returns in 2020. But they did so from a heavily discounted base.
Even after the rise in mining stock prices this year, valuations are (at best) average – with the price of gold sitting less than 10% from its all-time high
In short, these mining stocks have considerable appreciation potential even with flat bullion prices. As gold and silver continue their bull market, mining stocks are priced to greatly outperform.
A good year for precious metals. A better year to come. A permanent
Precious metals was one of the strongest asset classes in 2020. The sector is destined to do even better in the years ahead.