What’s the REAL driver behind gold’s price breakout?

The answer could cause a re-run of the 1970s ‘granddaddy’ gold bull — which spawned AVERAGE gains of 2,313.7% over two years…

Some questionable things came out of the 1970s.

Disco…shag pile carpet…David Cassidy.

For stock investors, though, the main question was:

Where did my returns go?

You’re supposed to get rewarded for staying in stocks.

But if you’d white-knuckled that decade of double-digit inflation, oil price shocks, recession and political instability…you’d have ended up with basically zilch.

Unless, that is, you stuck solely to gold stocks…

Take a look:

Through the 1970s, major stock indices went nowhere.

While a ferocious bull market took place in the background…

Gold mining stocks rose an AVERAGE of 652%.

As the S&P returned a drab 22%.

The Dow Jones industrial average did even worse, gaining just 4.8%.

4.8%!

For 10 years in the market!

In the 1970s, your average gold stock investor did 125-times better.

But that was just your average investor.

What if you’d taken a bit more risk…been a bit more selective…and bought smaller gold explorers that did better than average?

If you did that, you could have entered the 1980s with serious coin.

During the end ‘blow-off’ stage of that boom alone, in 1979 and 1980, many gold miners became 10-baggers (1,000% or more).

Here’s a chart of just some of those giant price hikes, compiled by Casey Research:

Look hard at those percentages.

An average gain of 2,313.7% over just two years.

With one of those plays, Copper Lake, breaching 13,000% in that 24-month period.

Look, I’ll be blunt:

I’ve put together this white paper because I believe there is the potential for a 1970s repeat in the gold market over the next 12–24 months.

And I've selected four little-known gold producers I believe could see 1970s-style gains. If you’re a speculator I believe you should take a position in each of them NOW. 

Keep in mind: those returns in the table above are real.

In fact, they may just be a small sample of what occurred.

The chart above is by no means comprehensive.

Casey Research put it together after microfiche research in The Wall Street Journal and also included ‘information we’ve had from Scott Hunter of Haywood Securities; Larry Page, then-president of the Manex Resource Group; and the dusty archives at the Northern Miner.’

It’s super hard to get non-electronic data from that period.

Especially on the junior explorers.

So we could assume there were more nutso gains made in that two-year period that have been lost to time.

The 1970s gold bull was NOT an outlier

There’s historical precedence for really, really big gains being made during gold up-cycles.

The tricky parts are: predicting that cycle, and owning the RIGHT stocks with direct exposure to a discovery area.

Take the 1990s gold bull…

As that decade kicked off, the 1978/79 mania was a distant memory.

But The Market Oracle takes up the story from there...

‘…Another series of gold discoveries in the mid-1990s set off one of the most stunning bull markets in the current generation.

‘Companies with big discoveries included Diamet, Diamond Fields, and Arequipa…

‘By the summer of ’96, these discoveries had sparked another bull cycle, and companies with little more than a few drill holes were selling for $20 a share.

‘The average producer more than tripled investors’ money during this period.

‘Once again, these gains occurred in a relatively short period of time, in this case inside of two years.’

Here’s how some of the small-fry players performed…

That average return of close to 4,000% tops the late 1970s!

It’s easy to pick out these gains in retrospect. Much harder to identify them before their run-up. But you can see how much money you could have made here if you bought and sold at the right time.

So what’s my point here?

It’s that booms like the 1970s granddaddy gold bull…as well as the one in the mid-1990s…are exceedingly rare.

But they are FORTUNE MAKERS. If you anticipate them. And play them correctly.

So, if there’s even a tiny whiff of one brewing once more…you’re a smart cookie if you AT LEAST look into it more carefully. You agree?

…And if you own the right small players before the bigger companies move on them.

We’ll get to my stock selections for the new gold bull market later in this white paper.

First, let’s ask an obvious question…

What the heck’s going on with gold right now?

Gold is back. It’s impossible to ignore.

The price is, in the words of Bloomberg columnist John Authers, going ‘crazy’.

In June it leapt out of a long-term trading range and breached US$1,400 an ounce — a six-year high. At the same time, the Aussie dollar gold price smashed through A$2,000 an ounce, an all-time high.  

Investors are clearly flocking to gold.

Now, I believe (at the time of writing), that gold has run up too quickly.

But this is the nature of bull markets. You’ll see periods of overextension. And you’ll see pullbacks.

But I think these pullbacks should be BOUGHT.

And I believe you should start accumulating an unloved and undervalued portfolio of small mining explorers NOW. Before the mania reaches their share prices.

In my view, something REALLY big has begun.

And now several other analysts are envisaging a much, MUCH bigger move ahead.

Martin Place Securities Executive Chairman Barry Dawes, for instance, recently went on record predicting a gold price push to A$10,000/oz in the next decade.

DoubleLine Capital Chief Executive Officer Jeffrey Gundlach (known as the bond King) says he is ‘“certainly long gold,” given expectations the dollar, which stands to take a hit if the Fed lowers interest rates, will close the year weaker.’

‘“Trade of the century”: Buy gold, sell stocks,’ says $25bn hedge fund, Crescent Capital.

Paul Tudor Jones told Bloomberg in June it’s now his favourite trade in the next 12–24 months.

‘[Gold] has everything going for it,’ he said.

After a long and deep bear market, US gold mining stocks (as measured by the GDX and GDXJ indices) made multi-year highs in June.

And you’re seeing countries themselves now joining the gold rush…

‘Russia Is Dumping US Dollars to Hoard Gold’ — BNN BLOOMBERG

‘China's gold-buying spree continues as central-bank market booms’ — BUSINESS INSIDER

‘Central bank gold buying hits highest level in half a century’ — CNBC

What makes this breakout even more significant is the amount of time it’s taken.

Check this out…

As you can see, gold has been trading in a massive range for nearly six years.

SIX YEARS!

Prolonged sideways moves in an asset or stock price — especially when the sideways moves are a part of a bottoming pattern — are always interesting to observe.

In technical jargon, this pattern is referred to as accumulation.

That is, investors accumulate whatever stock or gold is offered at lower prices. This helps prices form a bottom.

This is clearly what happened with gold.

Now, based on my observations of charting, the longer a stock or asset spends in the accumulation phase, the bigger its move will be when it finally breaks out.

That breakout occurred in June. That’s why I believe you’re set to see a very big move in the gold price in the months ahead.

But the thing is: I’m now not alone in this view.

Gold’s return to prominence is now a mainstream story.

And you generally don’t make supersized returns following the flock, do you?

You need a NON-mainstream way into this story.

And I’ve found one for you.

See, I believe mainstream commentators are missing a crucial piece of the puzzle.

I believe they’ve got the root cause of the recent gold price uptick wrong.

At least partially wrong.

Yes — the short-term thinking of central bankers is setting the platform for yet another mega gold bull. Like the ones that have come before — in the 70s and the 90s.

But…

If the research I’ve spent the last several months collecting is correct…something entirely new is in play in the gold market.

Something that has never presented itself before.

It’s got very little to do with Fed interest rates.

Or trade tariffs.

Or a possible war with Iran. 

It’s been almost completely missed by mainstream financial media.

And when it HAS been reported, it’s been quickly dismissed as ‘fake news’ by some reports.

But I just HAVE to fill you in on it.

And also share details on four potential ‘screamer’ stocks I think might benefit most from it.

My name, by the way, is Greg Canavan

I’m Editorial Director at Port Phillip Publishing.

Long-time readers will know I spent much of the 2000s researching and talking in the media to anyone who would listen about gold and gold stocks.

Gold was in a resurgence after years of stagnation.

During this period, I was a regular guest on CNBC, ABC and BoardRoom Radio. I gave my analysis on to publications as diverse as  LewRockwell.com and had a regular column in The Sydney Morning Herald.

By the time the top came in 2011, gold had hit a record high of $1,900 an ounce.

And gold slept on…

But since September last year, gold has stirred… 

And in the last month or two, it’s started to really roar.

According to Kitco News, money managers are hiking up bullish positioning.

Retail investors, too, are turning back to bullion.

As you’ve seen, big name investors are talking about gold with a straight face again.

We’re also seeing big takeover action and elbowing between gold mining giants like Barrick, Randgold, Newmont, and Goldcorp.

So, what’s the deal?

Why gold and why now?

Well…

Here’s what the mainstream press is telling you…

We’re entering a 1970s-like era of uncertainty.

And gold is stirring because it’s seen as an uncertainty hedge.

Trade tensions between the US and its partners. Oil tanker attacks in the Middle East.

News flow like this creates additional buying.

And the resulting price break higher generates more technical-chart momentum.

A self-perpetuating process.

Also, people are worrying about the end of this mega-stock bull market.

Central banks are signposting that the end could be approaching. They bought up more gold in 2018 than in any year since 1971 — 651 tonnes of the stuff. At a time when global gold production increased just 30 tonnes from 2017 to 2018.

And look what’s happened to the gold price since the end of 2017…

It’s not rocket science.

When demand outstrips supply, you get a price breakout.

That’s what you see above.

Now…

That’s the STANDARD and OFFICIAL explanation for what’s happening in the gold market right now…

‘Ian Telfer, chairman of Goldcorp Inc., is the latest industry magnate to predict the world has reached “peak gold,” saying that from here on out, mine production will continue to decline because all the major deposits have been discovered.

‘“If I could give one sentence about the gold mining business … it’s that in my life, gold produced from mines has gone up pretty steadily for 40 years,” said Telfer. “Well, either this year it starts to go down, or next year it starts to go down, or it’s already going down.”

‘“We’re right at peak gold here,” he added.’

Few took him seriously at the time.

Many who put the word ‘peak’ in front of something tend to be labelled scaremongers or cranks.

The term Peak Gold is an offshoot of the more famous concept of Peak Oil.

This was invented by a famous geologist/geophysicist called M King Hubbert in 1956.

He said oil production would peak in 1970, and never reach that level again.

He was right…for a while. The monster oil fields of the United States did peak.

But, 47 years later, they reached that peak again. And now America is producing more oil than ever.

So I get the cynicism when referring to Peak Gold.

Predicting the maximum production date of a resource is fraught with difficulty.

And can make you look very silly if you’re wrong.

However, with the right investments, I believe it could make you some very juicy potential returns if you’re right. Provided you make your move before most regular retail investors cotton on…

And that’s the purpose of this white paper.

Technically speaking, Peak Gold is a specific time.

A date when the maximum amount of gold we take out of the earth is reached.

After that, gold production declines. Eventually to zero.

That’s the rigid definition.

Sunshine Profits defines Peak as ‘the point of greatest development, value or intensity’.

The problem is…people have claimed we’ve reached this point before. And each time mining production recovered and ramped up again. See here…

World mined-gold production peaked four times since the last century or so: in 1912, 1940, 1971, and 2001.

Who’s to say that won’t just continue on?

What evidence is there that we could be, finally, reaching Peak Gold?

And that it could could AMPLIFY and ACCELERATE the next gold cycle…possibly creating the biggest gold bull run of all time?

I’ll lay out everything I’ve discovered on the topic during the rest of this white paper — as clearly as I can. And then you can make your own decision on what kind of shadow — if any — Peak Gold will cast over the next bullion up-cycle…

‘Imagine the world without the production of gold. The end of the mining of the yellow metal. The termination of all gold mines. No more gold nuggets, no grain, no flakes…’

Sunshine Profits

With Peak Gold, the world isn’t going to collapse, as it would according to the Hubbert Peak theory for oil. Gold, unlike oil, doesn’t keep the world running.

Unlike oil, which can’t be reused once burnt, gold can be recycled. 

If we HAVE reached Peak Gold (and I’m going to make that case in this white paper) it doesn’t even mean gold production is going to fall off a cliff overnight.

But what it DOES mean is this…

When the normal cycle of a gold bull market comes around…miners, in general, will have less capacity to ramp up production to take advantage of the higher prices.

So if you own stock in the few miners who DO have that capacity…you could potentially (absolutely no guarantees) put yourself in the running for 1979/1980-level gains.

And those gains, remember, were absolutely crazy.

The stuff of investment folklore.

As Casey Research pointed out in March 2014 (my highlighting added):

‘If you had bought a reasonably diversified portfolio of top-performing gold juniors prior to 1979, your initial investment could have grown 23 times in just two years. If you had managed to grab 80% of that move, your gains would still have been over 1,850%.

‘This means a junior priced at $0.50 today that captured the average gain from this boom would sell for $12 at the top, or $9.75 at 80%. If you own ten juniors, imagine just one of them matching Copper Lake’s better than 100-bagger performance.

‘Here’s what returns of this magnitude could mean to you. Let’s say your portfolio includes $10,000 in gold juniors that yield spectacular gains such as the above. If the next boom cycle matches the 1979-1980 pattern, your portfolio could be worth $241,370 at its peak…or about $195,000 if you exit at 80% of the top prices.’

$10,000 into $241,370.

You can see why I’ve pulled some strings to get this research out to you as early as possible.

Because gold is already moving. And I don’t want you kicking yourself for coming late to what could be a monumental party.

HOWEVER…

A couple of points to bring you back down to Earth before we go any further.

Firstly: those gains above would require you to sell at exactly the right time to realise your profits.

You needed to be shrewd and ‘play the cycle’ perfectly.

When the gold bust came, it came hard. Many of the juniors — even some on the list to the right — got blown out of existence.

And many investors who saw thousand-plus percent gains in 1979/1980…but grimly held on and refused to sell…saw pretty much all those gains go up in smoke.

So that’s something you need to be aware of if we’re talking about a potential repeat of that heady time in the next two to four years.

Selling smart is almost more important than buying smart. 

Second, we’re talking small to tiny gold mining stocks here.

Many mining magnates dismiss it.

It’s not in their interests to scare shareholders with stories about all their high-grade deposits getting tapped out.

Lots of resource wonks call it ‘fake news’, like Mickey Fulp for Kitco.com who writes:

‘I strongly disagree with his malthusian view… on the future of gold mining’.

But one expert who’s been a vocal proponent of Peak Gold is Ian Telfer, chairman of Goldcorp. Goldcorp was recently bought by Newmont Mining to become the world’s largest gold miner.

Telfer said last year:

‘In my life, gold produced from mines has gone up pretty steadily for 40 years. Well, either this year it starts to go down, or next year it starts to go down, or it’s already going down…We’re right at peak gold here.’

Is he right?

And here’s the important part…

If he IS right, could Peak Gold be a factor that transforms the next natural up-cycle in gold into a bull-blown 1970s-style mania?

The Peak Oil thesis was defeated by new technologies like fracking and horizontal drilling completely changing the dynamics in the energy markets.

Couldn’t new tech also change the game in the gold mining industry?

I’m now going to present you with some of the research I’ve uncovered.

Don’t worry — I’ll keep it pretty simple.

We’re going to break it into three parts.

PART #1 is where we put some facts on the table, pros and cons, about Peak Gold.

Study them, then make up your own mind.

In PART #2 we’re going to look at the gold market in general right now. Why the price is rising, and the odds of another historic buying mania going into next year.

I’ll show you some distinct parallels to the 1970s.

And why pressure is building towards a massive increase in gold demand.

Again, you can make up your own mind on whether you agree with me or not. And whether Peak Gold is going to insert itself into the story.

But let’s say I at least half convince you that Part #1 and Part #2 are true.

Then the equation is pretty simple:

PEAK GOLD + NEW GOLD MANIA =

POTENTIAL 1970s-LIKE GAINS FROM COMPANIES IN THE EXPLORATION AND DEVELOPMENT PHASE.

And so we’ll get to Part #3.

Which specific explorers, in a Peak Gold World, are positioned the best to take advantage?

Now, this is the intriguing thing, so listen closely…

The return of focus to gold is great for the big existing producers. In Australia at least, their share prices are hitting all-time highs.

But the companies in the exploration or development phase are seeing little to no benefit at all.

Not yet…

I have a list of around 200 ASX-listed gold stocks. I go through the charts of these stocks each week looking for opportunities. That is, I’m looking for prices that are starting to trend higher. It tells me that there is something potentially positive happening, which triggers further investigation. Apart from the producers, I can tell you that most of these stocks are in downtrends!

Given the record high gold prices in Aussie dollars, that is incredible!

But, as I’m going to try and prove to you, that’s potentially about to change.

And, if I’m right, so too could the fortunes of four specific stocks…

We’ll cover these guys in Part #3.

So strap in and let’s get to it. As I say, I’ll try and keep things as streamlined— and OBJECTIVE — as possible…

PART ONE

The Case for Peak Gold

CLICK HERE TO READ ON