Latest from Brien Lundin
Tuesday, April 18, 2017

The Gold Bull
Market No One
Knows About

Gold’s up about 15% this year, and headed higher.
Relatively few investors realize this…and even fewer understand why.

Dear John,

I recently spoke on a week-long investment cruise and put my reputation on the line.

I made a short-term prediction on the gold price.

I don’t like to do that. Gold is unique among investment assets in that its short-term trend is much harder to predict than its long-term prospects.
Still, very few investors understand the big-picture issues that virtually guarantee much higher gold prices over the years to come:

• Falling gold production. It looks like global gold production will peak this year, and begin falling rather rapidly.
Years of diminished spending on exploration and development, coupled with rising production costs, have taken their toll. There are just not enough new mines being built.
And falling supplies at the same time as rising demand are a potent recipe for higher gold prices.
• Huge debt burdens that have been built up not only by the U.S., but all developed economies around the world.
(As a side note, did you see the news that the CBO is predicting that the Federal debt will double in 30 years? Hogwash! At current rates of growth, it’ll reach $30 trillion by 2021! And I think it’ll double before Donald Trump finishes his second term.)
• Rising inflationary pressures. After years of easy money that was trapped inside the financial system without any impact on prices, we’re finally seeing wage pressures and services inflation carry prices higher.
Inflation has already hit the Fed’s 2% target, and they show no inclination of getting ahead of the trend. In fact, with the enormous Federal debt burden, they can’t.

• Historically low interest rates. Yes, the Fed is trying to hike rates as fast as they can — partly because they know a recession is inevitable and desperately want some room to cut rates once again.

But here’s the rub: Even as they raise the Fed Funds rate, yields are flattening and the important 10-year yield continues to fall.
Most importantly, real rates (adjusted for inflation) are not only still negative, they’re getting more negative.
Over just the last week, in fact, negative yields have extended along the Treasury yield curve out to 20 years! They were at the 10-year point just a few days ago.

As you can see, these trends are long-term — but many are now accelerating.
And that’s one reason why I went out on a limb the other day and made my risky prediction on gold…

Gold Takes Off:
So Far, So Good…

I was really enjoying my stint as a speaker on the Summit At Sea conference put on by my friends Robert Helms and Russell Gray, also known as The Real Estate Guys.
While primarily focused on real estate investing, Robert and Russ expanded the coverage to the economy at large and the role of precious metals as tangible assets.
Thus, they included not only me as a speaker, but also notables such as Peter Schiff, Robert Kiyosaki, G. Edward Griffin and Simon Black.
The information presented at this event was nothing short of incredible, and I highly recommend that serious investors consider opportunities like these to learn more about the metals sector and get the latest insights.
In fact, attendees on this cruise got something from me that I didn’t expect to give: A prediction that gold was about to head higher at any moment.
Why did I go out on a limb with such a bold prediction?
First, it felt like gold “wanted” to rise. I know that sounds silly, but after decades of watching gold like a hawk, I could tell that it was behaving very bullishly.

Even seemingly bearish news was being interpreted bullishly. Investors were looking for excuses to buy, rather than sell.

Secondly, a few technical charts that I’ve followed for years were indicating an imminent breakout.
In particular, the Bollinger Bands on our chart of gold with its 50-day moving average were “pinching” — an indication that the price was going to break decisively in one direction or the other.
Importantly, in my speech on the cruise (and in our April issue of Gold Newsletter), I predicted that gold was going to break higher.

It was a pretty dicey call, because I was going to be proven right or wrong within a few days.

Thankfully, it turned out that I was correct, and gold broke to the upside.

But Can Gold’s Rally Last?

As I reported in our last issue, gold initially took off on geopolitical worries after President Trump sent missiles hurtling into Syria.
But then it bounced even higher once Trump noted his preference for a weaker dollar and low interest rates.
This monetary factor was vital for the staying power of the gold rally.
And in the days since Trump’s statement, gold has remained buoyant. It traded up another $5.00 or so today.
But will this run last?

There are factors we need to worry about, such as the recent underperformance of both silver and the mining shares. They aren’t confirming this move in gold, which indicates that much of the motivation is political, safe-haven oriented.

And that’s not a good sign.
But on the other hand, these bearish factors were well in place before gold’s latest move. Since then, gold’s added nearly $40.
If this keeps up, you can bet that investors will begin plowing into mining stocks and silver, and they’ll play catch up.
Plus, we’ve seen the Treasury yield curve begin to flatten in recent weeks. This is potentially indicative of economic weakness ahead — in fact, Jim Rickards is now predicting that the Fed may have to begin easing rates once again by this summer!

On balance, I think the evidence is powerful that gold’s most recent rally will continue.

And of course, we all know what the long-term trend holds. So in light of gold’s inevitable rise as currencies weaken, we need to buy the metals and top mining stocks whenever the markets give us bargains.
I urge you to attend events like my big annual New Orleans Investment Conference and the upcoming Metals Investor Forum to get the inside track on these high-powered markets.
It is indisputably the best investment you could make.

All the best,

Brien Lundin
Editor, Gold Newsletter
CEO, the New Orleans Investment Conference