Gold vs Bitcoin: Are they competitors?

Mike Gleason* of Money Metals Exchange interviews Frnak Holmes of U.S. Global Investors

Mike Gleason: It is my privilege now to welcome in Frank Holmes, CEO and Chief Investment Officer at US Global Investors. Mr. Holmes has received various honors over the years, including being named America’s Best Fund Manager for 2016 by the Mining Journal. He is also the co-author of the book The Goldwatcher: Demystifying Gold Investing and is a regular guest on CNBC, Bloomberg, Fox Business as well as right here on the Money Metals podcast. Frank, welcome back and thanks for joining us again. How are you today?

Frank Holmes: Excellent. Thank you, my friend. Thank you.

Mike Gleason: Well, to start out here, Frank, I know you recently attended and spoke at the Denver Gold Show and I always like to talk to insiders like yourself following those sorts of events because you can always glean some good insights on the mood of the industry and how things are really going in the precious metals community. Now the mining industry has taken a pretty good beating over the last few years and it continues to struggle a bit even as we seem to be in a new bull cycle that began in late 2015. You’ve got your new gold fund now, GOAU, so you’ve got lots on insights into the mining industry and know lots of gold bugs. So, what did you glean from the conference Frank? What was the mood in general? Give us some highlights there if you would.

Frank Holmes: Well I think my presentation was well received when I explained how the quant world and data mining, and these other what they call alternative investment research companies, are providing new insight the way investing is taking place. Understanding the paradigm shift on that data collection and that analysts love their old reports on mid asset value, are irrelevant. They’re not relevant to picking stocks today. And you have to go with the forces of physics either as electromagnetic rebounding to the mean is a cheap stock and math says it will rebound or has strong momentum. And you can take a universe of 88 gold stocks and take it down to 28 and far outperform the GDX or GDXJ.

Using data that was foreign to a lot of these analysts and recognizing … the other thing I think worth commenting on was gold and this whole thing on Bitcoin, is it a competition for bullion? It is not. First of all, without electricity Bitcoin is not worth any money. It needs electricity. Gold is always gold. It conducts electricity and it will always have its materiality for currency in addition to being jewelry. But I think that’s really important is to recognize that it’s so much easier, this idea of crowdfunding, to go and open up an exchange and trade 24/7 all these different currencies all around the world than it is to open a brokerage account. And I think that this excessive regulations is basically seeing people migrate over to angel investing, crowdfunding such as into cryptocurrencies, et cetera. And I think that’s the bigger danger is to overall investing in trading in the capital markets. So they’re the comments that I made and that seem to have come back with many written messages to me regarding the quants and how they’re changing the landscape.

But I think the other part that’s important for your listeners is that there were 1,100 people there. Now they don’t allow investment bankers in. Research analysts, traders, CEOs, gold analysts from the buy and sell side, they’re allowed to participate and there were 1,100. The week before there was a big event for the juniors (junior miners) but this event is the premiere event of the world. And I was impressed with it. The conversations looking for companies that are going to be taken over. What’s the probability. Because the seniors are desperate for future production and where is that growth going to come from because they’re just not finding the gold as fast as they’re mining. So, the Newmonts of the world have to go and strike deals like they did with Continental in Columbia to get a foothold into high grade big geographic footprints. So I thought that was interesting. I think that in the next 12 months there’s going to be lots of M&A work. And the other part was the royalty companies seem to get a new sort of respect for how their positioned in the capital markets in that gold space.

Mike Gleason: Yeah definitely. Sounds like there is a wave of optimism there and some good things ahead. Now I wanted to get back to some of the cryptocurrency conversation here. Your firm, Frank, US Global Investors, recently made an investment in HIVE Blockchain Technologies and you have been appointed chairman of the board there. Given you are heavily involved in the cryptocurrency space now, we’d like to get your take on a topic of growing interest in the metals community. You alluded to this a moment ago but cryptocurrencies, Bitcoin in particular, have been seen by many as another form of honest money. You’ve obviously maybe shot a little bit of a hole in what it is that is needed in order to continue the cryptocurrency world, that being electricity. But since you’re a fan at least in part of both metals and blockchains. What are your thoughts on how metals might fit in with this emerging technology, Frank?

Frank Holmes: Well let’s just focus on this emerging technology. We go back to the internet and it was actually very boring when it first come out because it was very slow and it used to be a joke that it was just porn and dark things. And now it’s fast porn. No, I’m kidding. But the real catalysts for the internet exploding in usage were emails, AOL. And long before Yahoo came out to give you free email. And then people saw the incredible capacity for this channel of distribution of information. Well I think that the Bitcoin and Ethereum are doing that for blockchain technology and that there’s a huge scramble to be able to apply this so that you’ll be able to trade stocks 24/7.

And when I was doing my research and I went to the largest cryptocurrency event, that used to be where the gold show used to be held in New York at the Marriott. I was just shocked to see how many young people were there. Many more than ever when gold was peaking. And two is that they weren’t drinking scotch and whiskey at the bar and beer, they were drinking Pepsi and coffee. That really threw me off to just watch those young people and how they’re looking at it. And then to find out that the keynote speaker was a CEO of Fidelity. Fidelity is a massive multi-trillion dollar asset management company and they have all their employees on Bitcoin. They have a wallet and you can buy goods in the store. And seeing that she’s the keynote and that the New York Stock Exchange when it was launching GOAU they were commenting that they had put money into Coinbase along with USAA in San Antonio.

So, at Coinbase you can open an account so easily and they will now let your 10,000 or 50,000 or 100,000 of coins show up as an asset over all in your portfolio. USAA and all that should do that at Fidelity. So I said well it’s something really that’s not mainstream and then in the summer it came out in the Wall Street Journal that Fidelity is doing it. But really it didn’t seem to captivate a lot of people’s interest. And I think that the big part with the New York Stock Exchange is just their worry of being Uberized the way taxi cabs were with having stock trading 24/7 and a lot cheaper.

So, I think that that’s the big trend and along I was trying to launch a cryptocurrency, ETF, or a product with that and I just kept bringing up cul-de-sacs. Had to back that car out, back that truck out. It didn’t matter if it was the U.S., the SEC, or Canada with the OSC. They’re just so consumed that AML (Anti Money Laundering) supersedes, even though you can track Bitcoin, supersedes anything else. So that’s why you’ve not seen anything come out directly where you can trade Bitcoin into an ETF.

So I’ve been working on this and then all of the sudden I hear from my friend Frank Giustra saying, “Look, we have this deal. Do you know much about this space?” And I said “Oh, yes. I’ve been working on it. And I just keep running into cul-de-sacs.” And he said, “Well, why don’t you explore it” and explored it and I said, “You know what, I’ll be come your third biggest shareholder, and I will go on the board,” because I think that HIVE is so special and unique because it’s the mining business.

And the company behind HIVE is Genesis Mining and Genesis Mining is the largest cryptocurrency miner in the word. They have a million people give them 500 bucks a year and one of the things I learned was that if you want to do mining of cryptocurrency you need to have cheap energy like two cents a kilowatt hour. So you find that a lot of these big dealer centers are in Iceland where it’s cool and you have cheap electricity. Google is there. Facebook is there and so is Genesis. And you need to have computer graphic cards because the processing power to validate a transaction. So, you found that NVIDIA stock has taken off because the cryptocurrency companies like Genesis have been massive buyers of their computer graphics cards.

And so, with that, I said, “You mean, we’re going to be investing in a company that’s mining and validating transactions all over the world, and we create new coins, fresh coins, mint coins, virgin coins” … however you want to characterize them. We are not trafficking on the silk road. We are not buying and selling a coin that could have been painted et cetera. No. We’re the creator because we validate transactions and you get paid every time you validate a blockchain transaction. So, I became extremely excited about this opportunity and so far we’ve made for our shareholders more than 500% on their money.

Mike Gleason: That’s fantastic. Now I’d like to get your take on the U.S. dollar. The dollar had a miserable performance through the first eight months of the year and bottomed in early September at 91.5. The greenback then bounced and has enjoyed a very good rally since then. What is driving this rally in your view and are you expecting the dollar to keep moving higher in the months ahead, Frank?

Frank Holmes: Well, historically it does get a bit of a rally going into the year end. That’s one. Two is the 5-year government bond. The 5-year government bond is positive now, the yield. So, the CPI number is 1.9 and you just take whatever the government is trying to entice you to buy their 5-year government bond, subtract the CPI number… it recalibrates every month and it gives you a good idea for where fund falls are going for real rates return. And whenever the five year government bond and the two year government bond are negative, gold is positive. And so, we went from a 1.4 to 1.5 5-year government bond to a 1.93. Now it’s just slightly positive but that was enough to sort of have the dollar rally and gold come off in the past month.

But I think that unless you really get change, you get fiscal change, trying to get the tax code streamlined and trying to get other parts of the legislation body in its Beltway to streamline regulations. We need to have the TSA preferred, how you can fly much more quickly now, rather than those two hour waits to fly and to go and catch your flight. You know most people in San Antonio were driving to Houston rather than going to wait two hours for an hour flight. And so, you’re seeing now this TSA preferred. That’s just streamlining processes and this has to be done for the movement of money, for opening a trading accounts, for opening up investment accounts, et cetera. If we don’t get those things, we’re going to have to have negative real interest rates to keep the economy going. Or you’re going to have to a very weak dollar to drive exports.

And I think that Trump has been a master disrupter. He’s so disruptive to the Beltway Party, which is the regulatory regime that’s been their professional regulatory. I’ve listened to other people like Bernanke spoke about the difficulty for Jimmy Carter and Trump to take on the Beltway Party. But he’s different and so he’s trying to push for the streamline of regulations. If he can, rates can trade higher and I think that the dollar will just trade with the real interest rates relative to the rest of the world.

But I remain very positive on gold. It’s amazing to see how well gold has done this year. The gold stocks have had a great run until the GDXJ blew up. Basically, they captured 95% of all fund flows. Therefore, they had to be concentrated owning more than 20 companies 20% means they had to do a force takeover. They had to back out of that one and they blew out three billion dollars. They brought in five billion dollars over 12 months and then they did an exit in only a matter of weeks of three billion dollars. And that really damaged the bid side and bruised people. It’s like getting hit by Mike Tyson. You just don’t heal quickly when he hits you and it’s the same thing with the gold stocks. But I think there’s some just fabulous gold stocks out there that are ripe to be taken over, that have very strong positive cash flow. The weaker dollar in the U.S. and the higher gold prices, there’s very strong margins for companies like Klondex.

Mike Gleason: Yeah, certainly can be interesting as we go towards the latter part of the year here to see what might be sustained in this correction in gold or if it can rebound and get back to where it was maybe a month ago or so. We did have a good first half of the year in the metals but the markets obviously have hit some of those headwinds here recently, a rising dollar and so forth that you alluded to. If you would, give us your bull case for metals in near term and then also if you would maybe a bear case as well and then kind of expand more on which side you’re betting on, as we begin to wrap up here.

Frank Holmes: Well, there’s the two drivers for gold: love trade and fear trade. And the fear trade dominates the psychic of Americans and the same thing with Europeans in that’s predominantly negative real interest rates. So whenever the government has to monetize most of their debt, and basically negative real interest rates are losing money and buying their government bonds, gold does well. I don’t think that they can raise rates significantly without a massive streamlining of regulations and the government is doing everything to try to stop Trump from doing that. So, I think we’re going to end up still living with negative interest rates.

Now, the other positive part, for the U.S., is that the dollar is down but the exports are up. So we have our strong industrial base. And it’s showing up in PMI, that’s Purchasing Manufacturer’s Index, which is a forward looking index. It’s not like GDP, which is looking out the rear view mirror. This is like looking with headlights looking down six months. And the one month is above the three month, and that’s really positive for global growth. So I remain positive and constructive towards it. What could derail it? North Korea could derail it. China’s policies could derail it. And I think that if rates were to surge dramatically in the U.S., that could derail it.

But I don’t think that’s going to happen. We’re in a very constructive mode and it’s a great opportunity for stock picking. I just spoke at a conference in Vancouver yesterday, and I commented on … By the way, I commented on HIVE. I was asked and I said, “You know, if you’re a value investor, HIVE is extremely overvalued.” But if you are a first mover advantage in the first public company where funds can go by and get exposure to crypto-mining. It is not. It’s like Tesla, it’s like Amazon. They will always trade at lofty valuations. And so, it’s extremely attractive that way when you look at it as being first mover advantage.

Mike Gleason: Well that’s great stuff as usual. Thanks as always for joining us. It’s a real honor to hear your thoughts and we appreciate your time as always. Now before we let you go, please tell our listeners a little bit more about your firm and your services and then also mention the Frank Talk Blog so people can learn more about that if they’re not already checking it out.

Frank Holmes: Well, we are USfunds.com, makes it so easy, just go to USfunds.com, sign up for investor alert. It’s right in the middle of the page. And we write every week and we do a game film analysis, three strengths or weaknesses for last week and opportunities and threats that can come out next week. Sort of forward looking like game film and looking back.

And the Frank Talk is my global travels and I try to be insightful and learn about how we’ve applied quant math. What’s called quantamentals to stock picking. And especially we launched our GOGO Canadian gold ETF and we’ve launched one here in the U.S., which we’re really proud of because the ten year index based on those smart factors, both performs of GDXJ say 94% of the time are rolling 12 month periods. So we think that GOAU, we’ll write about it, we’ll tell you about the changes. And we also have unique products like JETS which is also an ETF listed on the New York Stock Exchange.

Mike Gleason: Yeah, it’s great stuff. Certainly the Go Gold fund is looking very good from what I’ve been reading about. Obviously performing just as you were hoping it would and continued success there. We always appreciate it and good luck with the other endeavors that you have going on and keep up the good work on those market commentaries and we’ll certainly look forward to our next conversation. Take care, Frank.

Frank Holmes: Take care, my friend.

Mike Gleason: Well that will do it for this week. Thanks again to Frank Holmes, CEO of US Global Investors and manager of the recently launched GOAU Gold Fund. For more information, the site is USfunds.com. Be sure to check out the previously mentioned Frank Talk blog while you’re there for some of the best market commentary you will find anywhere on gold and other related topics. Again, you can find all that at USfunds.com, and you can also go to GOAUETF.com for more information on that new gold fund.

And check back here next Friday for our next Weekly Market Wrap Podcast. Until then, this has been Mike Gleason with Money Metals Exchange. Thanks for listening, and have a great weekend, everybody.

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Metals Focus’ Precious Metals Investment Focus still sees gold averaging $1,400 next year

I recently attended Metals Focus’ launch of its latest publication on Precious Metals Investment and while its overall conclusions were somewhat mainstream the group’s analysts are looking for the gold price to AVERAGE US$1,400 next year which suggests at times spot prices will go higher than this.  I published an article on this on the Sharps Pixley website on this which is set out below:

Metals Focus still sees gold hitting $1,400 average in 2018

Yesterday saw the launch of London-based precious metals consultancy Metals Focus’ second annual Precious Metals Investment Focus publication which, in its 90+ pages, goes into considerable detail on the current prospects for gold, silver, platinum and palladium.  The consultancy also yesterday published its latest Precious Metals Weekly newsletter, which emphasised some of the findings of the longer report and, perhaps, what it sees as the potentialimpact of the increased likelihood of a U.S. Fed small interest rate rise at its December meeting.  However some others – notably Jim Rickards in a recent interview – would disagree feeling that the most recent U.S. economic data would scare the Fed into delaying any further rate increases into 2018, if then.

Metals Focus has a dedicated team of analysts looking at all aspects of the Precious Metals sector – and also nowadays provides the statistical element of the World Gold Council’s regular quarterly analysis of global gold supply and demand.  The group was initially put together as a break-away from the longstanding GFMS analytical group when the latter was acquired by Thomson Reuters in 2011 and a number of its analytical team previously worked for the latter and some of the methodology of its analysis mirrors that of GFMS, although the conclusions do sometimes differ slightly.

Looking at gold as the prime driver of the precious metals complex – although increasingly the other precious metals are to a major extent dependent on their demand as industrial metals particularly in the case of the platinum group (pgms) – the report does see potential for further positive price growth given the supporting underlying macroeconomic and geopolitical outlook.

In his presentation at the launch of this latest publication, Neil Meader, the group’s Research and Consultancy Manager, reflected on a slightly disappointing performance for the complex, despite great promise earlier in the year.  The report thus suggests only a 2% average rise in the metal price this year compared with 2016.  An earlier 5 year analysis of the precious metals complex by the consultancy had predicted $1,400 gold this year, and while this has not been totally ruled out, the latest analysis suggests that this price level may now not happen until next year unless some worrying geopolitical event (North Korea looks to be the most likely instigator) causes the metal price to spike again.

Writing here a week or so ago, we had suggested keeping a close eye on the largest gold ETF (GLD) to see the trend in institutional investment in gold in North America, which seems to be a great indicator of U.S. investment demand and thus of the overall trend in the global gold price level.  After a strong couple of months, the past two days have seen 10.35 tonnes withdrawn from the ETF which is perhaps indicative of weak institutional demand for gold in the light of the recent price falls, although much of these can be put down to some recovery in the dollar index over the past few days.

In today’s trading gold is, so far, up a few dollars from yesterday’s low point although has not retained some of its earlier price gains seeing a degree of profit taking (or an engineered decline depending on who one believes) after it moved briefly back above $1,280.  Silver is pretty flat while platinum and palladium are trading at broadly similar levels after the latter’s high flying move of last week. In later trading palladium again moved slightly ahead of platinum, although not significantly so.  Thus so far this week platinum has moved up a little and palladium down a little more.  Metals Focus favours platinum over palladium into next year.  We may disagree given the latter’s better current fundamentals but all the North American precious metals markets are managed by the big money to a greater or lesser extent and, ultimately the markets each tend to move in the way the bullion banks and major institutions determine as the prime players in these market.

What the Metals Focus Investment Focus publication does do is set out its price forecasts in the light of what it sees as the supply/demand parameters for the current year and next.  For gold it sees a surplus, albeit a slightly smaller one of 22 tonnes in 2018 and an average price for that year of $1,400 as against a $1,275 average for the current year, itself up from $1,251 in 2016.

Silver is seen as outperforming gold next year, as it usually does in a rising gold market and again sees a supply surplus of 72 tonnes this year and 66 tonnes in 2018.  The consultancy analysts see silver, like gold, benefiting from a recovery in investor interest in safe haven assets.  Here the analysts are looking for a $20.60 average price for the year which some may see as optimistic, but if you are a silver investor optimism usually rules.

The analysts also see some kind of recovery in platinum, despite a 450 million ounce projected surplus. leading to  an average price of $1,090 in 2018 – due largely to platinum’s historic correlation with the gold price.  However it sees palladium as underperforming its fellow pgm despite a 1.44 million ounce projected deficit and are predicting an average price of only $880 an ounce.  That is around $30-40 below where it is at the moment, although the 2017 average price is seen as only $830 an ounce.  We would probably disagree here with, in our view, palladium having the distinct possibility of maintaining a premium over platinum given the disparities in fundamentals supply/demand data.

 

How to factor fear and greed into gold investment

A Short Course on Fear and Greed: Successful Investors Wrote the Book

By Guy Christopher*

We might have been by now, had we better understood the finer points of “fear” and “greed” during our investing lives.

“Greed, for lack of a better word, is good,” said fictional corporate raider Gordon Gekko, played by Michael Douglas in 1987’s “Wall Street.” The quote became a rally cry for the 13-year stock market surge following the October ’87 crash.

Wall Street

Fear, on the other hand, can be just as influential in charting investments.

“I have only two positions right now – cash and fetal,” wailed investor Jeff Mackey, staring wide-eyed into CNBC’s cameras on October 2, 2008. The subprime mortgage crisis was in full cascade mode, as the stock market meltdown washed banks and balance sheets over the cliff.

Greed was clearly not Gekko’s best idea. He went to prison for insider trading, alongside a couple of the very real characters he was based on.

In hindsight, Mackey was terrified of losing money one year too late. Stocks had started tanking exactly 51 weeks earlier, from a high of 14,164 on the Dow, ultimately suffering a 53% disaster. That was peanuts compared to the 90% losses to the Dow stretching over the years of The Great Depression, but for modern investors, bad enough.

Obviously, market tops and bottoms are recognized only in the rear view mirror. It takes time for hard facts to illustrate the equations, which means this stuff is never that easy.

After a five-year fall from the highs of 2011, metals have been rising in dollar terms since mid-December, with a headline-grabbing hike the night of Great Britain’s historic Brexit vote to leave the European Union.

This week, both gold and silver took hard hits in dollar terms, causing stress for some precious metals stackers. And that’s the perfect classroom for today’s lesson, where we have some excellent teachers lined up.

Watching Wall Street

British commodities trader Andrew Maguire is the fellow who demonstrated bullion bank price manipulation to the world with his testimony to the Commodity Futures Trading Commission (CFTC) in 2010.

Maguire correctly identified intricate price changes hours before they happened, because he knew where the fix was in.

He now says the dollar-price take down earlier this week was artificially engineered by bullion banks to cover losses in the paper metals markets.

In other words, gold and silver were brought down in dollar terms through greedy, political manipulation, not by a loss of intrinsic value, and not by a loss of trust in metals.

Maguire’s advice today: This is a physical buying window for gold and silver that will not last long.

The classic lesson of fear and greed comes from The Battle of Waterloo, where French Emperor Napoleon Bonaparte was whipped by the British in 1815.

Nathan Mayer Rothschild had bankrolled much of Great Britain’s war against Napoleon, and had everything to lose if Napoleon won. Early reports from the battlefield convinced the London stock market Napoleon had been victorious, which led to widespread panic selling. But Rothschild had his own observer watching the battle, and reporting privately to him.

Knowing the British had won, he mopped up everything at sacrifice prices from terrified sellers.

The story, which some historians believe has been embellished, gave us the adage “buy when blood is running in the streets.

What is undisputed – of all the wealthy investors of that era, the one name surviving 200 years as a modern household synonym for massive wealth is “Rothschild.”

Buying low isn’t easy. It means going against the crowd. But it you think that’s hard, try selling high, when everything looks just great, before blood runs in the streets. Either strategy makes you a “contrarian,” which means your intellect has overcome the emotional clutches of fear and greed.

We know today the stock and bond markets have been stitched together and driven higher by free money from central banks funneled to Wall Street, all in a government effort to make the economy seem healthy when it’s not.

As Money Metals has been reporting for months, disciplined movers and shakers, one after another, are taking their money and leaving the stock and bond markets, dropping well-reasoned warnings of economic catastrophe along the way.

And incidentally, many of them also report they are stocking up on gold.

Is there a way to corral fear and greed? The answer is yes, if you’re talking about gold and silver.

See metals for what they really are – as solid savings in the only intrinsically valuable currency – and not as financial investments. Fear only enters the picture when you count gold and silver in dollar terms.

As for greed, that depends entirely on how many ounces and grams you can get for your paper money.

A reliable teacher in buying low and selling high is China, the world’s leader in reshaping the modern gold story.

The Chinese have patiently been buying low for perhaps decades, as other nations and investors lost interest in gold. As for selling – the Chinese are still hanging onto their gold. They aren’t selling.

So, how should sellers approach fear and greed? If you see gold and silver as investments, then sell when you’re ahead in dollar terms.

If you see gold and silver as savings, as insurance against calamity, then sell when there’s something you want more than your savings and insurance.

 *MoneyMetals.com columnist Guy Christopher is a seasoned writer living on the Gulf Coast. A retired investigative journalist, published author, and former stockbroker, Christopher has taught college as an adjunct professor and is a veteran of the 101st Airborne in Vietnam.

When the billionaires invest in gold should you do too?

Readers’ attention is drawn to my latest article published on Seeking Alpha:   Billionaires, Gold And Gold Stocks… They Are In For The Long Term, Should You Be Too?  In it I look at what the latest highly-publicised news of some huge investments in gold and gold stocks by some of the USA’s wealthiest elite means in terms of investment guidance for the individual investor.  Obviously this news only comes to light some time after these big investments have been made – and big gains will already have been made.  Is it too late to join them?

But, as a general rule – there are exceptions of course – these mega-investors are looking to the medium to longer term appreciation of their assets.  They have invested because they see the signs that the prospects for precious metals appreciation over the next months and years is positive, and for precious metals stocks perhaps even more so.  There have been huge gains in gold mining majors’ stock prices for example so far this year – a table from the article is appended below showing some of these, the gold price itself and, for comparison, one of the most followed gold stock indices (the XAU) and a junior precious metals stocks ETF (GDXJ):

Company

Price December 31st Current Price – May 30th 2016 Peak to date % below peak % rise since Dec 31st
Barrick Gold

7.38

16.62 19.37 14.2 125.2

Newmont

17.99

31.96 35.55 10.1

77.7

Goldcorp

11.56 16.60 20.15 17.6

43.5

Kinross

1.82

4.23 5.70 25.8

132.4

XAU

45.3

79.41 92.85 14.5

75.3

GDXJ

19.21

32.89 39.20 16.1

71.2

Gold Price 1061.30 1208.36 1292.98 6.5

13.9

 

While the recent slump in the gold price has meant prices have come back from their highs, all are hugely still in positive territory and the recent pullback may well present a great buying opportunity – particularly if you are convinced that the gold price has further to rise in the months and years ahead.

‘Buy gold and save yourself’

New article by me on sharpspixley.com – based on the views of Michael Lewitt of the The Credit Strategist, one of the most prescient observers of the current financial scene who gets behind the bs of the modern spin era.  Virtually any advice which comes out of politicians, central banks and their tame economists and from the corporate sector seems to be largely designed to create a positive interpretation, whatever the actual facts which frequently suggest the complete opposite.

The latest issue of The Credit Strategist – a much followed monthly subscription newsletter – which lays bare much of the economic misinformation fed to us all by compliant mainstream media ends with the following advice to any investor in a country which has a central bank – buy gold and save yourself!

To read the full article, click on SHARPS PIXLEY: Buy gold and save yourself! Lewitt

Gold and the “Oprah Effect”

By Frank Holmes – CEO and Chief Investment Officer, U.S. Global Investors

Oprah bought 10 percent of weight watchers

Many short sellers of Weight Watchers no doubt felt too down to look in the mirror this week after company stock unexpectedly ballooned nearly 170 percent.

You can thank (or blame) Oprah. The influential former talk show hostess bought a 10 percent stake in the weight management company, sending its shares up from $6.79 to $18.25 in as few as two trading sessions.

This is hardly the first time one of Oprah’s endorsements, whether verbal or monetary, has lifted a struggling business or product. There’s even a name for it: the Oprah Effect.

No matter your opinion of Oprah—her politics, her tastes—you have to admit that she’s a phenomenally savvy businesswoman, whose rags-to-riches success has helped make her one of the most powerful women in not just the U.S. but the world. As such, it’s important for investors to pay attention to her and other such “smart money” influencers. Their decisions often have the power to move markets.

So what’s moving gold right now?

Quite a lot, actually, from widespread doubts of a 2015 interest rate hike, to strong seasonal demand in India and China, to Russia’s military action in Syria. Gold also received a huge endorsement recently from billionaire Paul Singer, CEO of Elliott Management Corp., who said that the precious metal “should be a part of every investment portfolio, maybe five to 10 percent.”

(I always recommend 10 percent: 5 percent in gold stocks, 5 percent in bullion, then rebalance every year.)

But as I discuss in a previous Frank Talk, perhaps the most significant mover of gold right now is the weakening of the strong U.S. dollar against other world currencies. Gold and the dollar share an inverse relationship, and for the past year, the greenback has been putting pressure on the yellow metal, not to mention other commodities and natural resources.

Now that the dollar is showing signs that it’s starting to turn, however, gold is starting to turn heads.

Watch my video below for further insight into what’s moving gold.

Follow the Money: Billionaire Investor Makes Huge Bet on Gold

By Frank Holmes
CEO and Chief Investment Officer
U.S. Global Investors

This article is abstracted from a recent posting on the U.S. Global Investors website

I always advise investors to follow the smart money, and one person high on the list is Stanley Druckenmiller.

Second-quarter regulatory filings show that Stanley Druckenmiller, the famed hedge fund manager, just place more than $323 million of his own money into a gold ETF, at a time when sentiment toward the yellow metal is in the basement.

Investors should take note!

Druckenmiller Sees Gold as a “Home Run”

Druckenmiller has commented in the past that if he sees something that really excites him, he’ll bet the ranch on it.

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“The way to build long-term returns is through preservation of capital and home runs,” he said. “Grind it out until you’re up 30 to 40 percent, and then if you have the convictions, go for a 100-percent year.”

While I have always advocated for a diversified approach, this all-in approach has served him well. Between 1986 and 2010, the year he closed his fund to investors, Druckenmiller consistently delivered 30 percent on an average annual basis. Thirty percent a year! That’s a superhuman, Michael Jordan-caliber performance—or Ted Williams, if we want to stick to baseball imagery. The point is that words such as “legendary” and “titan” were invented with people like Druckenmiller in mind.

During his career, the man has made some now-mythic calls, the most storied and studied being his decision to short the British pound in 1992. This bet against the currency forced the British government to devalue the pound and withdraw it from the European Exchange Rate Mechanism (ERM), which is why many people say the trade “broke the Bank of England.” It also made Quantum, George Soros’s hedge fund, $1 billion.

And now he’s making a call on gold. The $323-million investment is currently the single largest position in Druckenmiller’s family fund. It’s twice as large, in fact, as its second-largest position, Facebook, and amounts to 20 percent of total fund holdings.

His conviction in gold can be traced to his criticism of the Federal Reserve’s policy of massive money-printing and near-zero interest rates. Such ongoing low rates push investors and central banks alike into other types of assets, including physical gold.

Concerns over government policy is why prudent investors hope for the best but prepare for the worst. I’ve always advocated a 10-percent weighting in gold: 5 percent in gold stocks, 5 percent in bullion, then rebalance every year. This is the case in good times and in bad.

Trump on Gold

Love him or hate him as a presidential candidate, Donald Trump has the same attitude toward owning gold in today’s easy-money economy. After leasing a floor of the Trump Building to Apmex, a precious metals exchange, he agreed back in 2011 to accept three 32-ounce bars of gold as the security deposit, according to TheStreet.

The U.S. dollar, Trump says, is “not being sustained by proper policy and proper thinking.” Accepting the gold “was an opportunity… to show people what’s happening with the dollar so we can do something about it.”

Trump and Druckenmiller aren’t the only ones adding to their gold positions right now. As I told Daniela Cambone on this week’s Gold Game Film, the Chinese government is now reporting its gold consumption on a monthly basis. In July it purchased 54 million ounces. This is significant in the country’s march to become a world-class currency that’s supported by the International Monetary Fund (IMF) for special drawing rights.

Both of our precious metals funds, Gold and Precious Metals Fund (USERX) and World Precious Minerals Fund (UNWPX), aim to offer protection against the sort of monetary instability Druckenmiller and Trump have warned us about.

Follow the money!