Dear Friend,

Investors have gotten spoiled by gold.

From mid-March to early August, it climbed from just under $1,500 an ounce to just over $2,000. But then, the rally fizzled out.

Today, gold is down 10% from its all-time high. What gives?

When the economy stalled last spring, gold buying took flight. But the safe-haven trade faded when COVID-19 vaccines became a reality and the economy started getting back on track.

Risk appetite roared back to life, helped along by a hint from the Fed in its December meeting minutes that it will continue buying $120 billion a month in bonds through year-end.

But gold isn't down for the count. The Biden administration arrived ready to spend $1.9 billion on coronavirus relief, and that's just a preview of all the stimulus that's going to be unleashed. This will only add more downward pressure on yields… and give a boost to gold.

On top of that, gold has one key advantage that recent sellers clearly don't see.

This Is Going to Push Gold Even Higher

That is, gold isn’t just a crisis hedge. It’s also an inflation hedge.

During the 1970s, the inflation rate in the US averaged about 7% per year and the return for gold averaged about 37% per year. For the full decade, gold went from about $36 to $524 an ounce.

That’s a return of nearly 1,400%!

History may be getting ready to repeat itself…

Over the last year, the US government has created trillions of dollars and given it to businesses and consumers. And it isn’t done yet, either.

The Biden administration wants to pass another $2 trillion stimulus package. A lot of that money could ultimately flow into the economy and drive up the price of goods.

That’s called inflation… and we could get a lot of it.

If that happens, real rates will go lower, because those account for inflation.

And gold will break out.

Are You Ready for Gold to Go Higher?

Many investors are looking for the broad market to rise and for gold to lag.

I see it a different way.

We're still in a bull market, but certain sectors will do better than others. A lot better.

Gold is one of them.

I've owned gold for 16 years and I'm in no rush to sell. In fact, every time someone says the gold run is done, that's a signal to me to strategically add to my position.

While everyone is looking out below, I'm looking for gold to go to $2,500 and beyond. You should too.

Jared Dillian
Senior Editor, Mauldin Economics