Tag Archives: precious metals

John Rubino: Now We Can Finally Start Buying The Gold Miners

By John Rubino, Feb 26, 2016

For most of the past few years it was easy to make the case that precious metals mining stocks were cheap. They’d suffered through an epic bear market, and in some cases were down 90% or more from their 2011 highs. How much more could they fall?

But through it all, Sprott Asset Management’s Rick Rule — a voice of reason in this frequently-unreasonable sector — was warning investors off of the miners, saying that “capitulation” hadn’t yet occurred and until it did there remained way too much downside risk.

Turned out he was right. The miners just kept falling through 2014 and most of 2015, while a lengthening list of once-promising juniors died quiet deaths, taking 100% of their investors’ capital along for the ride. Here’s a chart of the HUI index of gold miners priced in gold, showing that even as gold was falling the mining stocks were declining faster.

Gold vs HUI Feb 16

But the bottom, says Rule, has finally arrived. In a long interview just released by Kitco, he sounds unreservedly bullish. Some excerpts:

Given the enormous size of the US treasury market and the small size of the gold market, a small transfer of funds from Treasuries to gold — which we are seeing in the last three months — has an outsized impact on the gold market. Gold and gold equities currently occupy between 1/4 and 1/3 of 1% of the savings and investment matrix in the US, while the comparable number in 1980 was 8.

What I am arguing for is a total or partial reversion to the mean which if it occurred would take gold as a part of the savings and investment matrix from 1/4 or 1/3 of 1% up to as high as 1.5%. That relatively small gain in market share would have an absolutely dramatic impact on gold and gold stocks. Will it occur immediately? No. Might gold retest support before it continues? Yes. But I believe that we are beginning to witness a little tiny bit of disintermediation out of Treasuries in favor of gold, and I think that is extremely bullish.

Another thing to remember is that the certificated gold products, the ETFs, GLD in particular, have witnessed dishoarding. That is they have witnessed really substantial selling for 18 months. But lately there has been an absolutely incredible influx of cash into GLD. The consequence of that is that GLD has to take on gold or has to take on gold depository receipts.

Remember that for the last six or seven years the paper market has driven the physicals market and the paper market itself has been driven by the ETFs. ETF demand is positive now rather than negative, so the ETFs are stocking rather than destocking gold. I am inclined to believe that the paper markets will now take gold up the same way the paper markets took gold up in 2009 and 2010 rather than taking gold markets down.

The gold mining industry had a very close brush with capital inadequacy and the increase in demand for gold equities is going to be met by an absolute rush of bought deals among the seniors and intermediates. I think the offer that you saw the other day of Franco Nevada is indicative of what you are going to see. [So] no hurry on the big and intermediate miners. Longer term (a year or year and a half), gold miners at all levels I think will be relatively attractive.

I expect the mining industry to avoid making disastrous mistakes for at least two or three years. The consequence of an increasing gold price and increasing free cash flow per share that is not wasted for two or three years should be an increased cash flow on a per share basis. I suspect that an increasing gold price and increasing corporate performance will have a very good impact on gold equities.

Remember that when gold moves, the first thing that moves is gold itself. Listeners underinvested in gold need to address that and begin to buy.

The second place that you go is, of course, the high-quality senior producers with balance sheet flexibility that can generate free cash and growing revenues. It is important that you do not buy the waterfront; that instead you buy the best issuers. I would draw your attention to names like Franco Nevada, Goldcorp, Randgold; companies that have a history of operational efficiency, capital discipline, good balance sheets, and relatively low costs. One then can apply the same discipline in the intermediate size producers which generally come up after the big producers.

Of course, the most spectacular moves are always going to be in the speculative stocks. I suspect that we will not see a move, a real move, in the speculative stocks for as much as nine months. Of course, extra caution is required buying the speculative names. But for those listeners who have been in the game as long as some of your listeners have, who have paid the tuition, who pay attention to the numbers with regards to the juniors rather than the narratives, I think this will be a spectacular market. It is really important to understand the depth and severity of the bear market and what that means for the bull market.

In the juniors, measured by the TSXV [Toronto Venture Exchange], is a market that fell by half and then it fell by half again and then it fell by half again. This is a market that is down by 90% in real terms which means it is precisely arithmetically 90% more attractive than it was in 2011. This is a market that can double and make up as a consequence of doubling 15% of the decline that it suffered. This is a market that has a long, long way run if you select your stock correctly.

As for the royalty and streaming companies, remember that they have no sustaining capital requirements, so their margins are incredible. They are in one sense better, pure vehicles with less operational and implementation risk. But what is much more important is the once in a generation opportunity, an arbitrage opportunity. The base metals mining industry is producing virtually every commodity that they produced at a loss right now. The need for capital in the base metals mining industry is extreme and their cost of capital is extraordinary.

Precious metals by-product streams in a base metals cash flow wrapper, a wrapper like Freeport or Vale or Vedanta or Teck, command a six or seven times cash flow multiple. But that same cash flow stream stripped out, made into a precious metals stream, in a company like Royal Gold or Franco Nevada or Silver Wheaton commands a fifteen to seventeen times multiple. The base metals mining industry needs to find $10 or $12 billion in equity for sustaining capital investments and debt pay downs, and the lowest cost of capital available to it is by selling these precious metals streams. At the same time that the sale of this stream is accretive to the base metals company, it is also accretive to the precious metals streaming company by giving them access to sustainable visible cash flows for very long periods of time on very high quality mines.

The recent success you saw in the bought deal by Franco Nevada and the upcoming, I believe, debt issuance by Franco Nevada, herald a period where as much as $10 or $12 billion worth of by-product precious metals streams passes from base metals mining companies to precious metals streaming companies which will set up the visibility of per share cash flows and per share dividends in the streaming companies almost irrespective of the precious metals price. If you get this increased quality and increased visibility of a revenue stream and you combine that with the upside in precious metals prices, both in terms of the free cash flow that these companies enjoy from the mineralization that is already economic and combine it with the optionality of mineralized material in these mines that is not economic at $1,100 but would be economic at $1,500, this has the potential to really transform the streaming business which is already very attractive in an absolute sense and particularly attractive in a relative sense against other mining companies.

I love optionality. It has treated me so well. Just to acquaint your listeners with why the subject means so much to me, I think back to the last cycle, 1998 to 2002, and, frankly, to the cycle before that, 1991 to 1992, I can think of optionality companies like Silver Standard, $0.74 to $45; Pan American Silver, $0.50 to $45; Lumina Copper, $0.65, if my memory is correct, to $160. This is not a typo. It is pretty simple. At the bottom of the cycle there are very large deposits that were drilled off with the application of tens of millions of dollars that have no net present value at the then prevailing commodity prices. These deposits are occasionally sold for some amount of money that at least resembles the net present value which is zero.

The right thing to do right now for these companies is to acquire additional ounces and do nothing else. Develop the projects later as the commodity price rises and the attractiveness of the deposits is obvious to the markets and the cost of capital goes down. I suspect – I do not know because past is never completely prologue – but I suspect that the easiest and the most dramatic upside that we will experience in this market other than the occasional discovery will be from optionality, provided that the management team really understands how to deliver the benefits of optionality to the owners of the company, the shareholders.

I was at Roundup, a technical conference in Vancouver, and there was a couple of issuers there, Kootenay Silver and Northair Mines, that announced an amalgamation. I think the combined market caps of the companies were about $8 million, and a $30,000 buy order took the price of Kootenay Silver from $0.20 to $0.32. We are in a market where, yes, the buyers are exhausted but the sellers are exhausted, too. You will see evidence of $3 and $4 million market capitalizations in companies that used to be $70 million market capitalizations getting outsized moves simply because there is a bid of some sort.

This article is written by John Rubino of Dollarcollapse.com and with his kind permission, Gecko Research has been privileged to publish his work on our website. To find out more about Dollarcollapse.com, please visit:

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John Rubino: Here’s What We’ll Try – And What Will Fail – Next

By John Rubino, Oct 11, 2015

The UK’s Guardian newspaper, of Edward Snowden leaks fame, just published a good overview of the world’s recent financial missteps titled The world economic order is collapsing and this time there seems no way out.

Some excerpts:

The heart of the economic disorder is a world financial system that has gone rogue. Global banks now make profits to a extraordinary degree from doing business with each other. As a result, banking’s power to create money out of nothing has been taken to a whole new level.

The emergence of a global banking system means central banks are much less able to monitor and control what is going on. And because few countries now limit capital flows, in part because they want access to potential credit, cash generated out of nothing can be lent in countries where the economic prospects look superficially good. This provokes floods of credit, rather like the movements of refugees.

The false boom that follows seems to justify the lending. Property prices rise. Companies and households grow overconfident about their prospects and borrow freely. Economies surge well above their trend growth rates and all seems well until something – a collapse in property or commodity prices – unravels the whole process. The money floods out as quickly as it flooded in, leaving bust banks and governments desperately picking up the pieces.

The result, says the Guardian, is a crisis in three acts. Act one was the 2008 bursting of the housing/derivatives bubble that nearly wiped out the global banking system. Act two was the 2011 euro crisis in which the idea that Greek, Italian and Spanish bonds were equivalent to German paper was abruptly discredited, again nearly wiping out the big banks.

Act three, now in progress, is the bursting of the emerging markets bubble, led by China (great stat: “China manufactured more cement from 2010-13 than the US had produced over the entire 20th century.”)

China’s banks are, in effect, bust: few of the vast loans they have made can ever be repaid, so they cannot now lend at the rate needed to sustain China’s once super-high but illusory growth rates. China’s real growth is now below that of the Mao years: the economic crisis will spawn a crisis of legitimacy for the deeply corrupt communist party. Commodity prices have crashed.

Money is flooding out of the EMEs, leaving overborrowed companies, indebted households and stricken banks, but EMEs do not have institutions such as the Federal Reserve or European Central Bank to knock up rescue packages. Yet these nations now account for more than half of global GDP. Small wonder the IMF is worried.

So far so good. But then the Guardian ruins its perceptive analysis by proposing more of the same:

The world needs inventive responses. It needs a bigger, reinvigorated IMF whose constitution should reflect the global balance of economic power and that can rescue the EMEs… It needs western governments to launch massive economic stimuli, centred on infrastructure spending. It needs new smart monetary policies that allow negative interest rates.

This isn’t surprising but it is instructive because it represents the thought process at work in the upper echelons of virtually all the major economies: What we’ve tried has failed, but the fault is with the execution rather than the concept. We didn’t go big enough. We didn’t borrow enough money, we didn’t build enough roads and bridges, we didn’t push interest rates down far enough. So let’s hit the emerging market crisis with everything: bigger multinational institutions making vastly larger development loans, rich-world governments ramping up spending and paying for it with borrowed money, and central banks pushing interest rates down to negative mid-single digits.

For those who view this as the financial equivalent of a junkie doubling the dose of heroin to ensure a permanent high, the question isn’t whether some mutant strain of easy money will save us, but what dosage will turn out to be fatal. And of course which asset classes will benefit from the intervening high.

At the risk of sounding like a broken record, the negative interest rate/high debt/rapid money growth world envisioned by the Guardian looks like a precious metals paradise.

 

This article is written by John Rubino of Dollarcollapse.com and with his kind permission, Gecko Research has been privileged to publish his work on our website. To find out more about Dollarcollapse.com, please visit:

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Sprott’s Thoughts: “Scary Times Are Upon Us – Capitulation Is Beginning in This Market” – Rick Rule

By Henry Bonner, Aug 28, 2015

Is the recent market sell-off good for gold?

How will it affect the precious metals and natural resource sector?

Rick Rule, Chairman of Sprott US Holdings Inc., believes that a sell-off in the months ahead might signal the end of the resource bear market.

Click here to access Rick’s recent call – and submit your questions for his follow-up call next week to contact@sprottglobal.com.

Capitulation Ahead

“The capitulation we’ve been talking about for a couple of years is beginning to occur,” Rick warns.

“I suspect that this capitulation will be over by the end of October. And it could get much worse before then. The point is – any ‘junk’ you have left, sell it if you can.”

Fear is returning to the broad market, says Rick, and it will affect resource stocks too.

“Volatility had been eerily quiescent over the last 2 or 3 years,” says Rick. “The VIX was consistently between 10 and 15,1 which meant that there was very little fear in the market.

“With the VIX back up to 30 this week, we can safely say that fear is back in the market.”

What to Do Now?

“Scary times are upon us – capitulation is beginning in this market. It’s going to be terrifying. But based on similar experiences in the past, I believe it could mark the end of the bear market for the resource and precious metals sector,” says Rick.

Prepare to take advantage of a bottom in natural resources and precious metals stocks over the coming months.

“Hold lots of cash,” he suggests. “Cash gives you the means and the courage to take advantage of poor market conditions and the mistakes of others.

“I will also keep cash available for ‘issuer capitulation,’ which tends to occur after the resource market sees investors drop out. Junior resource companies seek to raise money through private placements and are willing to accept terms that are more favorable to new investors, because they no longer believe that an imminent recovery will take share prices higher.

“If you don’t want to wait for ‘capitulation’ – or you aren’t able to take part in private placements — then you can still find oversold, high-quality names, where you can enter at an attractive price,” Rick believes.

A “Make it or Break It” Time for Gold

Gold, as a store of value in times of uncertainty, will have a chance to sink or swim. We should be getting close to the “make it or break it” moment for gold, says Rick.

“Fed Chairman Janet Yellen has broadcast her intention to raise interest rates, and this is setting up a critical situation for the US dollar and gold,” says Rick. “I think that an increase of interest rates by 0.25% is ‘baked into the cake’ – everyone is expecting it.

“So a 0.25% rate hike would not generate any particular change in the US dollar, bonds, or the stock market.”

A further rise in interest rates, however, would be a surprise, Rick believes.

“If she manages to follow up with a second rate hike, it would be very bullish for the US dollar,” says Rick. “It would be good for bonds and large-cap stocks.

“It would say that the US economy is back.”

Rick believes that a second rate hike has only a “dim probability” though.  In Rick’s view, it’s more likely that the Fed will back away from raising rates. It might even announce a new quantitative easing program. The Fed would begin to purchase bonds in order to keep yields low and “goose” the stock market higher.

“If the Fed cancels a rate hike or announced ‘QE4,’ it would damage the US dollar. It would be good for gold and precious metals,” says Rick.

Would this boost gold stocks? Not necessarily.

Rick reminds that “in the near term, gold stocks might decline along with the broad stock market – even if gold rises or holds steady. In the 1987 crash, gold stocks fell when the broad stock market crashed.”

What about Commodities and Natural Resources?

Rick warns that most commodities are linked to real economic growth – and right now, it’s not looking promising.

“Oil and gas, minerals used in energy and agriculture, and base metals are seeing weak demand globally,” he explains.

Past quantitative easing and stimulus programs are part of the problem behind weak demand for commodities.

“When you lower interest rates, you bring demand ‘forward.’ We encourage people to spend today, through borrowing, rather than save and spend later.

“But we’ve been launching programs to stimulate present demand since 1998. That’s how we responded the Asian crises and the housing bust. We’ve stolen demand from the future.

“How much more liquidity can Yellen pump into the banking system? How much more demand can she take from the future when we’ve already been doing that for 15 years?”

Stimulus programs are likely to become less effective going forward, Rick believes, which doesn’t bode well for most commodity prices in the near term. But it could be very good for gold.

Watch for Rick’s follow-up discussion of the current market volatility, coming soon. E-mail us at contact@sprottglobal.com to hear Rick answer your question during this call.

1 Bloomberg

The Risky Investment that Could Make You Millions in the Next Financial Crisis

By Brian Hunt, Aug 24, 2015

You wake up in the morning, turn on the news, and get a sick feeling in your stomach…

The stock market is crashing again.

Another big Wall Street bank has failed.

Your 401(k) has lost another 25%. It’s bleeding value every week.

Your dream of early retirement is history. You’ve lost so much money in stocks that even a “regular” retirement is in jeopardy. If you live a long life, there’s no way you’ll have enough money.

This is the financial-disaster scenario that terrifies a lot of investors.

It’s what kept people up at night during the 2008 credit crisis.

These days, everyone likes to read and talk about the dangers of another financial crisis.

Could something like 2008 happen again? Could another crisis cause the value of the U.S. dollar to collapse? Could the banking system seize up overnight?

Many brilliant people say the answer to these questions is “yes.”

Fortunately, I don’t need to know the answer to these questions…and neither do you.

The good news is that it’s very easy to buy insurance against financial disasters like these. I personally own this insurance.

Many of the smartest, wealthiest people I know own it, too. It could mean the difference between a comfortable, early retirement…and just barely getting by. And part of owning this insurance – and potentially making millions of dollars in the next crisis – involves owning one of the market’s riskiest investments.

It’s a strange turn of events that I’ll explain shortly…

The Ultimate Insurance Against Financial Disaster

• First, let’s agree on what “insurance” is…

In my book, buying insurance comes down to spending a little bit of money to hedge yourself against a disaster.

Throughout our lives, we spend a little bit of money on insurance and hope we never have to use it.

For example, home insurance costs a small fraction of your home’s value. You buy it and hope you never have to use it.

The same goes for car insurance. It costs a fraction of your car’s value, so you buy it and hope you never have to use it.

It’s the same with “wealth insurance.”

You can buy wealth insurance and hope you never have to use it.

There are hundreds of wealth-insurance policies out there. They involve intricate details, lots of forms to sign, and payments of big fees to advisors and salesmen (which are often the same thing).

But I’d rather keep things simple and keep money in my pocket instead of putting it in a salesman’s pocket. You might be in the same boat.

Here’s how we can do it…

Put a small portion of our wealth in gold bullion.

That’s it.

That’s all it takes to get wealth insurance…and protect your family against a financial disaster.

You don’t need complicated insurance products. You don’t need to pay big fees to a salesman. Just pay a small commission to a gold seller, store the gold in a safe place, and you’re done.

• Here’s why this “insurance” is important…

Some very smart people are predicting a global depression, a collapse in the dollar, and a huge increase in the price of gold.

For example, Seth Klarman is a legendary investor. He’s probably the smartest financial mind you’ve never heard of. Klarman is warning that the Federal Reserve’s low-interest-rate policy has distorted the financial markets…and is setting us up for disaster.

Klarman and others bring up good points. The U.S. government is spending way too much money on wars, Obamacare, welfare, and other programs. Europe’s and China’s economies could decline and trigger a global recession. These are all real risks to your retirement account.

Even if you’re more optimistic and think things will be fine, I think you’ll agree that it makes sense to own some insurance in case a financial disaster strikes.

People would likely flock to gold in a global financial disaster…and cause its price to soar. For example, the decade from 1970 to 1980 was marked by war, recession, and very high inflation. This made the 1970s a terrible decade for stocks and bonds. But it was terrific for gold owners. As people fled stocks for precious metals, gold gained more than 2,000% during decade.

That’s why it makes sense to buy gold as a form of insurance.

The good news is that you don’t have to buy a huge amount of gold to have a good insurance policy. You can place just 5% of your portfolio into gold.

Its place in your portfolio could mean a huge difference in your family struggling to get by…or doing well.

How a Gold Position Could Make You Wealthy During a Crisis

• Let’s say you have a $100,000 portfolio with 95% of it in blue-chip stocks and income-paying bonds.

You place the remaining 5% of your portfolio into gold. This gives you $95,000 in stocks and bonds, and $5,000 in gold.

If the predicted financial disaster doesn’t strike, your stocks and bonds will increase in value.

Your gold will probably hold steady in price or decline a little. Since the bulk of your portfolio is in stocks and bonds, you’ll do just fine.

But what if the financial disaster strikes? I’ve heard some top analysts say gold could climb to $7,000 an ounce in a financial disaster scenario.

Let’s say a financial disaster sends the value of your stocks and bonds down 50%. That would be a massive decline. Throughout history, only the worst, most severe bear markets sent stocks down this much.

This epic financial disaster would cut your $95,000 position in stocks and bonds by 50%, leaving you with $47,500. But let’s say this disaster also causes gold to rise to $7,000 an ounce. Right now, gold is $1,150 per ounce. A rise to $7,000 would produce a more-than-sixfold increase in the value of your gold. It would cause the value of your $5,000 gold stake to rise to about $30,435.

Post-financial disaster, you’d be left with $77,935 ($47,500 from stocks and bonds + $30,435 from gold).

The disaster still would hit you, but not nearly as hard. Your insurance would play a big role in limiting the damage.

But what if you think the chances of financial disaster are higher than “unlikely”?

What if you’re more worried than the average Joe?

If you are, simply increase the “insurance” portion of your portfolio. Instead of a 5% position in gold, you could increase it to 20%.

If the previously mentioned financial disaster were to strike your $100,000 portfolio weighted 80% in stocks/bonds and 20% in gold, the math work out like this:

The 50% decline in your $80,000 stocks/bonds position would leave you with $40,000. Gold’s increase to $7,000 an ounce would increase your $20,000 gold position to $121,739

Your large gold-insurance position actually would produce a net gain in this scenario. You’d be left with $161,739…an increase of over 60%.

• As you can see, the larger your gold-insurance policy, the better you would do in a financial-disaster scenario.

But if the financial disaster doesn’t strike, you won’t benefit as much, because you hold less money in stocks and bonds, which do well if the economy carries on.

And keep in mind…it would take a serious financial disaster to send stocks down by 50% and gold up to $7,000.

Depending on what you think the chances of a financial disaster are, you can adjust your gold-insurance policy. It all depends on your goals and beliefs.

Think the chances of disaster are slim? Consider a gold-insurance policy equivalent to 1%-5% of your portfolio. Think the chances of disaster are high? Consider a gold-insurance policy equivalent to 20% of your portfolio.

Is financial disaster around the corner? I don’t know the answer.

Nobody does.

But if you buy some “wealth insurance” in the form of gold, you don’t need to know the answer. It’s simple. It’s easy. It’s low-cost.

You buy gold and hope you never have to use it. You’ll do fine if things carry on. You’ll do fine if the crap hits the fan.

And the peace of mind you get from owning gold “insurance” is worth even more than the money it could save you.

How to Amplify Gold’s Power to Create Wealth

You might have heard some advisors say that if gold soars in value during a crisis, the companies that mine gold could soar even more.

That’s because when the price of a natural resource doubles, triples, or quadruples in price, the profit margins of the companies that produce the natural resource can skyrocket.

For example, let’s say you own a gold-mining company. Your company can produce gold for $800 per ounce. Let’s also say the current selling price for gold is $1,000 per ounce. This means your profit margin is $200 per ounce.

Now let’s say the price of gold rises from $1,000 per ounce to $2,000 per ounce. This is a 100% increase in the price of gold. But your company’s profit margin just soared from $200 per ounce to $1,200 per ounce…a 500% increase.

This kind of financial magic is called leverage…and it can produce incredible stock market gains.

For example, from 2002 to 2008, the price of gold climbed from $300 per ounce to $1,000 per ounce.

During this time, leading gold company Kinross Gold climbed from $2.25 per share to nearly $27 per share (a 1,093% gain). Another gold company, Yamana Gold, climbed from around $1.53 a share to more than $19 per share (a 1,165% gain). The gains were so great in this market that a simple gold stock index gained 692%!

These types of gains are impressive. But please keep in mind that these companies are also very risky. They are some of the riskiest stocks in the entire market. That’s because mining is a capital-intensive business. The firms have no control over their product. When gold falls in price, these companies can fall more than 80% in a short time.

But if a financial crisis forces the value of gold much higher, and paper currencies much lower, these companies could rise 500%…1,000%…or more.

That’s why it can make sense to make them part of your “wealth insurance” position.

Stock Options that Will Pay Off Big if the Dollar Crashes

• Around the office, we often say these firms are like stock options that will pay off big in a financial crisis. And they are stock options that don’t expire.

As you may know, a stock option is a type of security that offers massive upside. And we’re not talking about “only 100%” upside.

Stock options can return 10, 20, even 50 times your original investment.

It’s not uncommon for traders to turn $10,000 into $250,000 with well-placed option trades.

• But while buying options gives you the potential to make giant gains, they come with some negatives, too.

The biggest one is that options have finite life spans. For example, you might buy an option contract in January that expires in June. If the outcome you expect doesn’t happen by June (known as the “expiration date”), the value of your option will be worthless, and you’ll lose 100% of the capital you place in the trade.

The best mining stocks have the same upside as stock options. It’s not uncommon for professional mining-stock investors to turn $10,000 into $250,000 by buying the right stock at the right time.

However, these miners are actual businesses. They don’t “expire” like option contracts do. The right miners have plenty of cash on hand to fund their operations…which allows you to hold these stocks for years and get exposure to their incredible upside potential. (It’s worth mentioning that Seth Klarman – the legendary investor I mentioned earlier – owns a large amount of small-cap gold firm NovaGold.)

Because the upside of these stock options that never expire is so great, placing just a small amount of your portfolio in them can produce incredible gains if gold increases in price.

Placing just 1% or 2% of your portfolio in these stocks can result in a huge positive change to your overall net worth.

The Right Time to Buy Insurance Is When It’s Dirt-Cheap

• Finally, we come to the ideal time to buy these stocks.

Buying at the right time is how you set yourself up for 500%…1,000%…even 2,000% returns.

The ideal time to buy these stocks is after huge busts.

Gold-mining stocks are cyclical. This means they go through huge booms and busts.

One year, they will advance by 50%. The next year, they will advance another 50%. The year after that, they will plummet by 60%.

This boom and bust price action is in stark contrast with the steadier price action of “non-cyclical” stocks like fast-food chain McDonald’s…or health care giant Johnson & Johnson.

• The only way to make money in the sector is to buy near the bottoms…and sell near the tops.

You must buy these assets when prices are so low that the public can’t stand the thought of owning them (when they are cheap).

As my friend and legendary natural resource investor Rick Rule often says, “You’re either a contrarian or a victim.”

The chart below shows how powerful this idea can be. It displays the past 20 years of the most widely used gold-stock index (the “HUI”).

You can see how it goes through huge booms and busts. The booms are good for hundreds-of-percent gains. The busts result in huge losses…

If you look at the right side of this chart, you can see that there has been a giant bust in gold stocks. Global central banks have been able to make it seem like all is well with the global financial system…and the HUI has lost 79% of its value since its 2011 peak.

Most investors see this and turn away in disgust. But many sophisticated investors see it as a “fire sale” for these assets that could soar during a currency crisis.

If the global central bank experiment ends badly, the value of paper currencies will continue to plummet. The value of “real money” (gold) will soar. And buying these “stock options that never expire” now, while they are dirt-cheap, could end up looking like a genius move.

• In summary, gold is the ultimate form of wealth insurance. I buy it and hope to never have to use it. It’s a vital part of my overall wealth plan. I hope it’s part of yours.

And a basket of carefully selected gold-mining stocks could pay off in a big way if world governments continue to devalue our money.

International Speculator is our advisory focused on the best small gold stocks with huge upside potential. Editor Louis James has extraordinary amounts of experience, know how, and industry contacts. Most importantly, Louis personally investigates the most important projects…and meets face-to-face with management teams.

Right now, you can gain access to a list of the top junior mining stocks to buy today with a subscription to International Speculator. If you’re interested, you’ll need to act quickly… We’re doubling the price of a subscription soon. Click here for more details.

Who’s Next in the Currency Market’s Race to the Bottom?

Bloomberg, Aug 20, 2015

Kazakhstan just intensified the global currency war.

By allowing a 23% plunge in the tenge, central Asia’s biggest oil exporter signaled a new wave of devaluations in developing nations forced to compete against weaker currencies. Egypt and Nigeria look the most vulnerable to John-Paul Smith, the ex-Deutsche Bank AG strategist who predicted Russia’s 1998 crisis and this year’s China’s rout.

To Bernd Berg, a London-based strategist at Societe Generale SA, African currencies like the rand and those of former Soviet Union countries “will be next.”

Developing nations are under increasing pressure from devaluations by China and Russia, plunging prices for commodity exports and the prospect of higher U.S. interest rates. Kazakh President Nursultan Nazarbayev, who earlier this year pledged to avoid any sharp depreciation, said today’s adjustment was essential to avoid a recession.
“The major commodity exporters are the most vulnerable,” Smith, who founded Ecstrat, a London-based research firm, said by e-mail today. “If, as I believe, the oil price is likely to remain at currently depressed levels or even move lower over the medium term, then the main Gulf currencies will come under increasing pressure, although there will be ferocious political resistance to any devaluation.”

Egypt has struggled with a foreign-currency shortage since the 2011 Arab Spring protests sent investors and tourists fleeing. It has attempted to fend off further weakness after this year’s 8.6 percent slump in the pound by limiting access to hard currencies. Egyptian investors are barred from buying shares locally and selling them abroad, for example.

Trading Restrictions

In Nigeria, trading restrictions imposed in February to prevent the flight of dollars have left importers unable to pay suppliers while the black market in foreign banknotes thrives. The naira had tumbled 20 percent in the 12 months to February.

Former Soviet states that may struggle to withstand depreciation pressure include Armenia, Azerbaijan and Georgia, according to Timothy Ash, a credit strategist for emerging markets at Nomura International Plc in London. Most have less ammunition than Kazakhstan, which has almost $100 billion reserves.

“This will shine the spotlight again on a host of regional currencies, including the manat, lari, dram,” Ash wrote in a report to clients. “The Kazakh experience this week will leave an over-riding understanding that one should take what your central bankers say with a very large pinch of salt.”

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