Yearning for sunnier skies for your gold investments? How's this sound.
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Gold in a decisive bull market, with the price steadily rising
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Silver soaring and outpacing gold's gains
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Gold stocks rocking, erasing underwater positions and racking up the profits
That's not pie in the sky wishful thinking-it accurately describes the next stage of the gold market, something that will soon visit your portfolio.
With the price of gold currently stuck in place, like a stain on the front of your best shirt, and the stocks only teasing us like Lucy holding the football for Charlie Brown, how can I be so sure?
Because that's exactly what happened after every other bear market. For example.
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1976. Bear market ends, and gold begins a 701% run in less than four years.
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1985. Bear cycle ends, bull cycle begins. Gold gains 71.8% over the next three years.
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2001. Monster gold bull cycle delivers a 630% advance over the following 10 years.
As I pointed out last month, markets cycle. The current range-bound price for precious metals won't last forever, for the simple reason that they never have, especially in the resource market.
If you set your sights on the big picture, you'll see that in spite of today's negative emotions, gold's future prospects will render them a distant memory.
Consider some of the likely changes on the horizon and how they will transform the gold market from flat and listless to exciting and profitable.
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Stock market reversal. The performance of the broader equity markets is probably the biggest reason gold hasn't attracted the mainstream. But stock markets cycle, too, and a correction is due, perhaps overdue-the S&P is up six straight years and nine consecutive quarters. Margin debt is higher now than it was preceding the 2008 crisis, and corporate profits saw the biggest drop in four years last quarter. Gold will be the benefactor in the reversal, especially since it's already corrected.
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Recession. The probability of a future recession is 100%. The only question is when and how big. GDP last quarter was barely positive. Any unexpected surprises to the downside for the economy will be especially positive for gold.
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Currency war backfire. This "race to the bottom" being pursued by global central bankers won't work long term. At best, countries steal growth from their trading partners. At worst, it can disintegrate into inflation, recession, retaliation, and even war. Currency wars have happened before-twice in the last century alone-and they've always ended badly. One guess what asset performs well in a crisis.
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Higher interest rates. We're skeptical that the Fed will actually raise rates, but eventually the market will force rates higher regardless of the Fed. This, in turn, will hurt the real estate market. Meanwhile, those analysts that blindly assume rising rates are negative for gold forget that real rates (nominal interest rate minus inflation) are positive for gold-an almost certain outcome because of.
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Inflation. The emergence of inflation feels far off, but already there are signs it's picking up. Wages have started to move higher, what is normally the starting point for inflation. Ground beef prices are now at record highs and have more than doubled since 2010-increases like this can't go unaccounted for indefinitely. Remember, we don't have to wait for high inflation for gold to move; it's the onset of inflation, or an unexpected jump in inflation, that will spur gold.
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US dollar reversal. If you've grown tired of the dollar's "strength," don't leave the theatre early. Its rise is certainly not sustainable long term, and in time will be forgotten. Nothing stays standard deviations above the norm forever. And eventually the dollar will collapse, because the trajectory of our debt isn't mathematically sustainable.
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Bond market turmoil. As my colleague Dan Steinhart pointed out in The Casey Report, there are currently $3.6 trillion in negative-yield government bonds outstanding today, mostly in Europe and Japan, giving investors zero chance of making money or even breaking even. The sad outcome here is that inflation will massacre the average bond holder.
My point is that any reasonable big picture view of the political, financial, and economic trends show that virtually all of those changes will be very positive for gold-and aren't that far off.
It will be a new day for the gold market, one full of rising prices and profitable investment statements.
But despite all this evidence, there are those in our industry still calling for gold to fall.
Among the loudest is my colleague Harry Dent.
He says gold will drop to $700/oz.
Of course, I think he is dead wrong.
And I bet Harry bullion from my private stores that gold will never drop to that level.
He took the bet. And to help you decide who will win (hint: it's me), Harry and I each put all the research we've assembled to form our predictions into a special 18-page report titled Gold: Dead or Alive?
For anyone who owns an ounce of gold or single share of mining stock, this is a must-read. And it's completely free. Click here to get your copy.