Why Gold Is A Superb Investment Strategy

Why Gold Is A Superb Investment Strategy
  • A permanent bull market
  • Permanent value for investors
  • Real investing security with strong growth potential



How do investors make money? It’s a simple question with a simple answer.

Buy low; sell high. The Golden Rule of investing.

In contrast, most of today’s pseudo investors are momentum-chasing gamblers. They buy high and hope to sell even higher.

This article is not for those people.

The Golden Opportunity

For real investors, wouldn’t it be nice to be able to put your money into an asset class that you know will rise dramatically over the long term?

To make things even better, what if this same asset class frequently dipped to irrational lows – regularly presenting investors with excellent buying opportunities?

Introducing gold.

Investors know that the price of gold will rise dramatically over the long term. The numbers are unequivocal.

Price of gold in 1971: $35 per ounce.
Price of gold in 2000: $275 per ounce.
Price of gold in 2020 (year high): $2070 per ounce.

What is the significance of the year 1971? That is the year that the United States “closed the gold window”.

This effectively abolished the last remnant of the gold standard. Of equal importance, the price of gold was (at least in theory) now able to float freely.

Why the price of gold ALWAYS rises over the long term

Gold has appreciated by roughly 5800% since 1971. The world’s best-performing asset class over the past half-century.

Why has the price of gold risen so dramatically? Because gold is a monetary asset.

In fact, gold is the premier monetary asset in our monetary system. Even in the absence of a formal gold standard, it is regarded by central banks themselves as a superior monetary asset to their own fiat currencies.

This is why central banks have been accumulating gold over the past decade. This is unprecedented since the end of the gold standard.



Because gold is a monetary asset, gold rises in price as central banks dilute the value of their fiat currencies through serial over-printing.

Gold rises in price versus these paper currencies because its supply is (relatively) stable. No dilution.

As serial currency-diluters, central bankers know that gold will continue rising higher and higher in price over the long term. That’s why they are dumping their own currencies to acquire gold.

When will the price of gold stop rising? When our currencies are no longer serially diluted.

When will our currencies cease to be serially diluted? When the world no longer has central banks.

Simply, as long as the world relies upon the (dubious) monetary entities known as “central banks”, the price of gold will rise relentlessly and dramatically over the longer term.

Why the price of gold frequently hits irrational lows

If gold is an asset class guaranteed to rise over the longer term, why do we see so much “volatility” with the price? More specifically, why do we frequently see sharp, irrational drops in the price of gold?

Ask Alan Greenspan.
 
“Central banks stand ready to lease gold in increasing quantities if the price rises.”
-  Testimony of Federal Reserve Chairman Alan Greenspan, November 1998

Imagine you’re a central banker.

Your entire career is spent destroying the fiat currencies that you “manage”, through excessive money-printing.
 
Since the Federal Reserve was made the steward of the U.S. dollar in 1913, the dollar has lost more than 99% of its value through serial dilution. The vast majority of this damage has been perpetrated by the Federal Reserve since the end of the gold standard.

As noted above, gold is a monetary “canary in the coal mine”. As currencies are serially diluted, the gold price rises in response. If you’re a central banker (wanting to hide your monetary crimes), you don’t want this canary to be ‘singing loudly’.

What do you do? Suppress the price of gold.

Gold “leasing” is the surreptitious and illegitimate means by which Western central banks suppress the price of gold.

Western central banks have openly declared they will suppress the price of gold via gold leasing. But these anti-gold bankers also have other allies: the Big Banks.

The Big Banks are the chief beneficiaries of all the central bank money-printing: an endless gravy train of free ‘money’. They are also (literally) partners in crime with Western central banks in suppressing the price of gold. More specifically, the Big Banks have been criminally convicted of perpetrating almost every form of precious metals fraud imaginable.

The central banks and Big Banks regularly attack the gold market with various forms of illegitimate price suppression. This delays (but does not prevent) the rise of the price of gold – as we have seen for 50 years.

It also regularly presents buyers with superb buying opportunities.

Perversely, as one of the most suppressed markets on the planet (silver is suppressed even more than gold), investors know that gold is never overvalued.

Put another way, as a result of the constant market attacks from the central banks and Big Banks, gold is never able to reach its full monetary value.

It is not only an asset class that is guaranteed to rise dramatically over time. It is an asset class that (for obvious reasons) will never be allowed to be overvalued to the point of a bubble. In an era of horrifying asset bubbles – caused by central bank monetary policies -- this is a rare prize for true investors.

The rise in the price of gold is never more than a fraction of the rate of dilution of our fiat currencies. A permanent bull market.

Permanent value for investors.

The virtues of wealth preservation

The reality is that the “gain” realized with the price of gold is actually only wealth preservation. Avoiding the losses that most people suffer by storing their wealth in ever-depreciating paper currencies. Paper currencies are leaky buckets for storing wealth.

Why would any sane individual store their wealth in a leaky bucket? Gold doesn’t leak.

For individuals who don’t think wealth preservation is ‘sexy’ enough for their hard-earned investor dollars, consider a hypothetical example.

A person is born who will live for a full century. At his birth, he is given a million dollars – literally. $1,000,000 in U.S. cash.

Foolishly, this person trusts in the Almighty Dollar and keeps all his wealth in cash.

Paper currencies now pay no interest. Assuming the Federal Reserve doesn’t increase the speed at which it is destroying the dollar, how much will this “millionaire” have left the day he dies?

In real dollars: $10,000.

Storing your wealth in paper is a great way to turn a large fortune into a small nest-egg. Understand that bonds are denominated in the same paper currencies and thus suffer the same dilution in real value.

Today, Western sovereign bonds represent the worst investment in the history of markets. They pay no yield while steadily and relentlessly losing real value. And they are issued by hopelessly insolvent governments.

For some investors, avoiding financial self-destruction is not enough. They want a real gain – on top of the wealth preservation.

For those investors, introducing gold mining stocks.

Leveraging a permanent bull market

As Dynamic Wealth Research has explained previously, mining companies provide natural leverage versus the commodity they produce.
 
For gold mining companies, this means providing natural leverage on a commodity in a permanent market, which is guaranteed to rise dramatically in price over the longer term.

Making the deal sweeter, even though gold is in a bull market with the price roughly 10% off its all-time high, valuations for mining stocks (versus the price of gold) are average, at best.



While U.S. markets are generally overheated (especially the NASDAQ tech bubbles), gold mining stocks are not overbought at all.
It’s not just producing gold mining companies that leverage the price of gold.

Gold development projects provide even more leverage than producers. And gold exploration stocks provide the most leverage of all – when they make a discovery.

Dynamic Wealth Research has recently presented two exciting gold exploration opportunities to investors: a greenstone opportunity and a brownstone opportunity.

Two hot prospects in gold mining stocks

The best place to explore for gold is near a lucrative, proven deposit. Dynamic Wealth Research has identified two junior gold exploration companies that have staked out large land packages around very lucrative gold mining operations.

Grade is king. High-grade gold projects offer greater upside potential and more downside protection than lower grade gold mineralization.

Both of these junior exploration companies are exploring for gold in districts with proven high-grade gold mineralization.

SKRR Exploration Inc

Regular readers of Dynamic Wealth Research will already be familiar with SKRR Exploration Inc (CAN:SKRR / US:SKKRF).
 
SKRR Exploration went public in early 2020. SKRR is pursuing an exciting greenstone exploration opportunity in Northern Saskatchewan.
It has amassed 5 large land packages around the Seabee Gold Mining Complex, owned by SSR Mining Inc (US:SSRM / CAN:SSRM).

Seabee is a multi-million ounce high grade/high margin gold mining operation. Head grades approach 10 g/t gold. Cash costs are below $500/oz.

Greenstone exploration is speculative. But SKRR is led by two mining veterans who have been honored with awards for previous exploration successes. Both have extensive knowledge of Saskatchewan geology.

SKRR presently has one drilling program in progress, while it awaits assay results from another drill program already concluded.
Two home-run opportunities for investors in gold exploration.

Leviathan Gold

More recently, Dynamic Wealth Research has presented Leviathan Gold to investors. Leviathan is a recent spin-off of Fosterville South Exploration (CAN:FSX / US:FSXLF), about to go public.
 
Fosterville South has acquired 5 large land packages around Kirkland Lake Gold’s world-famous Fosterville Gold Mine. It has spun out two of these highly prospective land packages to Leviathan.

The Fosterville Mine has a multi-million ounce gold deposit in Australia, producing gold from ore with an average grade of 39.6 g/t and with cash costs of $119/ounce.

Leviathan closed on an oversubscribed CAD$12.9 million private placement as its qualifying transaction. It's about to commence its own drilling program.

This is brownstone exploration. These are past-producing high-grade gold properties, but which have laid dormant for roughly 100 years. Unlike greenstone exploration, investors already know there is gold mineralization on these properties.

What remains to be determined is how much gold mineralization is present. With past mining and exploration only proceeding to a depth of 100 meters, Leviathan’s management is very confident that significant quantities of high-grade gold remain to be discovered.

Making money in gold exploration

Greenstone gold exploration is more speculative because it is new exploration. But the largest discoveries tend to come from such exploration as no ore has previously been commercially mined from this land.

To improve the odds, savvy mining companies explore near proven gold deposits. They hire experienced exploration specialists, with a track record of success. They carefully engage in preliminary imaging and sampling in order to select the best drill targets.

SKRR Exploration has done all these things – as it prepares to present investors with the first two sets of drill results from its exploration.

Brownstone exploration offers more certainty regarding gold mineralization, since there is a previous history of commercial mining operations. But (perhaps) more uncertainty regarding the quantity of gold due to the fact that significant quantities of gold have already been mined from these properties.

To improve the odds in brownstone exploration, junior gold companies look for previous mining operations which for one reason or another were never fully explored.

Previous mining operations at Leviathan Gold’s properties (over 100 years ago) were relatively low-tech. Mining at that time could not proceed below the waterline – which is roughly 100 meters below surface.

While Leviathan’s land packages are officially brownstone projects, they are effectively “greenstone” exploration from 100 meters depth and lower.

Two exciting gold mining opportunities for investors. Two different opportunities.

Investors looking to capitalize on the permanent bull market for gold may find room in their portfolios for both of these high-leverage investments.
 
With central bank money-printing at all-time extremes, investors have never been more in need of the wealth protection offered by gold bullion.

At the same time, with yields extremely compressed in several asset classes, investors are also looking for growth potential.

Gold mining stocks offer superior growth potential while producing a commodity that is guaranteed to rise dramatically in price over the longer term.

A superb investment strategy.




DISCLOSURE: SKRR Exploration Inc and Leviathan Gold are clients of Dynamic Wealth Research. The writer holds shares in SKRR Exploration Inc.
 
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