We’re About to Score Another Gold Double

My list of stocks to buy for 2016 wasn’t very long, as you may remember, and it had a particularly heavy tilt toward the precious metals sector. So far that has proven a much more profitable strategy than the “buy and hope” strategy most analysts were peddling at the start of the year.

My mantra has been “buy gold and save yourself.”

Close to six months later, the gold price has gained +15.79%, yet every one of the equity recommendations I made to you has outstripped that gain. One has already doubled in price, and one is fast approaching another double.

If you followed along, you’re sitting on a very nice profit. Congratulations.

That’s worth an update and some new targets…

What’s Driving Gold

While the Fed and mainstream media keep telling us that the U.S. economy is healthy, the facts tell a different story. In the U.S., trade and demand are weak while manufacturing is hovering just above recession levels. Globally the story is much worse – global trade is collapsing, global manufacturing is in recession, and global demand for goods and services is falling. In fact, global trade is at its second-lowest level since 1958 and is falling on both dollar and local currency terms. Eight years after the financial crisis, virtually all of the central banks are still engaging in crisis era policies with little prospect of reviving economic growth.

Of course, when all these factors converge, gold goes up. (In case you missed my profit recommendations for the “Big Five” currencies, including gold, you can get those here.)

Gold (which China, a country that thinks generationally, is buying huge amounts of) keeps bouncing around, but it remains the only way for investors to save themselves from the incompetence and delusions of central bankers. Gold-related investments are long-term picks that can easily take more than one year to work out because gold is a generational play. However, we’ve been seeing consistent shorter-term gains in our gold stocks over the first six months of the year – particularly in our miners.

Here’s How Our Gold Plays Are Looking Right Now

TICKER            PRICE 12/29/2015 PRICE 6/6/2016 TOTAL RETURN
*before dividends*
GLDX $16.79 $34.90 +107.86%
GDXJ $19.64 $38.63 +96.69%
CEF $10.04 $12.75 +26.9%
PHYS $8.76 $10.43 +19.1%

Our first gold double is Global X Gold Explorers ETF (NYSEArca:GLDX), an ETF that holds a basket of about 20 mining companies, mostly based in Canada and Australia. GLDX has gained 107.86% in less than six months. It has paid a year-end dividend in four of the past five years and seems likely to do so again for 2016, given its performance. It charges a 0.65% management fee, which is reasonable. VanEck Vectors Junior Gold Miners ETF (NYSEArca:GDXJ) is almost in double territory. GDXJ is much the same story but has more holdings (49 miners currently) and a more global focus. It charges a 0.56% fee and pays no dividend.

In the past I haven’t typically recommended owning mining companies to bet on gold (if you want to own gold, own gold), but I reasoned that these gold miners are a very leveraged bet on a recovery in gold and are so out of favor that they are worth a shot. Further, I recommended ETFs rather than individual stocks to mitigate the individual operating issues associated with individual companies. So far these picks have worked out well and I continue to recommend them.

The other two gold recommendations I made are the Central Fund of Canada Ltd. (NYSE:CEF) and the Sprott Physical Gold Trust ETV (NYSEArca:PHYS). Both funds own both gold and silver and give you an opportunity to buy these precious metals at a discount to their spot price. Both are up by double digits.

What to Do with Your Profits

Often a good strategy when you’ve doubled your money is to sell half of the position. The idea is to virtually eliminate your risk, because all the capital you had at risk has been returned to you, and what’s left at risk is pure profit. However in this case gold and gold securities are one of the only good places to put your money. I expect gold to shoot up to $4,000 or $5,000 an ounce over the next decade or two – so we still have a long way to go.

Of course, it’s your call whether to sell now or keep holding, but the future looks bright.

Congratulations to all of you who are making money. Leave a comment here to let me know how you’re playing gold.

Sincerely,

Michael

P.S. As always, the very purest way to play gold is to own physical bars or coins – you can get my recommendations here.

 

20 Responses to “We’re About to Score Another Gold Double”

  1. With a Negative Interest Rate Policy on a Worldwide scale why would you keep your money in a Bank.? After Taxes and Inflation you’ve lost money. The only obvious choice is Gold as a currency.It has appreciated not Depreciated like all the Fiat Currencies.Michael has been spot on with his recomendations on December 31,2015 to current date as seen in this article. I’ll add another Gold play that’s the best kept secret. I’ts called BitGold.com. You buy gold and can take deliver of it for only a 1% fee or you can store it with them for free. The best part is if you use it as your emergency cash reserve and a crisis does happen you can convert your Gold into any Currency and they deliver it to you on a Visa or Mastercard and you have cash to buy groceries and gas. BRILLIENT RIGHT. Get some ASAP.!

  2. Great Picks Michael! GDXJ is the only mining ETF that you mentioned that has 2018 options available. 2018 40 GDXJ call options are around $8.50 … this stock was > $170 five years ago in 2011! If you are an options trader and do the math you can see what the significant upside is if Gold takes off …

  3. Darrell Pedersen

    I have invested in JNUG and GGN. JNUG is very high risk for sure, it moves every day, I have bought and sold, for the past few months, last one was May 27th, bought at $100.00 and sold June 3rd at $146.17. For longer hold I have GGN, average price of $5.68, pays dividend of 0.07 per month, yield is 13%. I respect your opinion Michael, can you comment?

  4. Hi Michael, Thanks for the great picks. I needed them as somebody else had been managing my account and i needed a big hit. Anyway, I collected the profits back at 10% at a time until gold leveled off. Once I saw it going south I sold everything. Then when I saw the unemployment reports start to drive it up I jumped back in over the weekend which might have been bad timing. Thus the question, what do I do now? My portfolio is now back to 20% gold. So do I hold, sell, or buy?

  5. Giancarlo Nicoli

    I have some gold bullion ETF; some GDX; some GDXJ; some AUY; then sold some AUY puts and bought some AUY calls. 15% of my portfolio so far, but I keep buying GDX every two months. I sell puts and buy GDX with the proceeds. So far, the puts are expiring worthless.
    Rationale for owning GDX: it’s diversified amont large cap miners.
    Rationale for the AUY play: good management, shrinking debt, among the lowest cost producers, its mines are in the developed world.
    Thanks for the heads up. Regards.

  6. I really like GLDI and SLVO. They use a covered call strategy so the upside is capped (3% and 6% respectively), but the 12-18% dividend helps me sleep at night. If your 5 year duration for gold to hit $5000 is accurate, one might as well pick up some income on the way. These instruments work really well when there is a slow and steady rise in share price.
    Michael: I really appreciate your recommendations… they have been a beacon of light and reason in a unique investment environment.

    I would love to hear more justification for your recommendation for bank preferred shares. Also, do you prefer rate resets for these securities?

  7. Giancarlo Nicoli

    On another note, I would like to have your take about Valeant (results published today), bad but not horrible, cash flow looks good enough to pay interest and possibly a bit of capital.
    TSLA also is making headlines as Ron Baron is bullish on it. Just curious. What is he seeing that I don’t (I’m short TSLA)?
    Thanks again. Have a nice day.

  8. Your money will go much farther if you use options.
    Buy call spreads (or sell put spreads) on very liquid stocks & ETFs such as GDX, GDXJ, GLD, SLV, etc….
    One call is equivalent to 100 shares.

  9. Michael, I’m surprised RGLD has disappeared from your reports. I jumped in when you recommended a buy below $30 and that was the last I saw you speak of it. I purchased at $29 and kick myself for not buying twice the amount of shares.

  10. Yamaha has been one of my favorite gold companies. It has run up a lot already, on the Toronto exchange from below 4 to over 6 now. I regret not staying in for the full run. Anyone thinks it can go higher from here?

  11. Harry de Bruijn

    Dear Michael – I 100% agree with your vision on gold and other precious metals, however, neither you nor your colleaugues mention about the fact that we are in the hands mainly of the WallStreet
    Mafia – people who have the financial market in their hands. Manipulating the markets one way or the other, either throwing in huge amounts of capital, HFT dealers, hedgefundsmanagers etc. etc. Which has nothing to do with the simple law of “offer and demand” .If this kind of people, which I call “criminals” will not disappear from the market and that your Congres take tough measures than we will continue facing
    artificial markets.. Hopefully that soon somebody in the U.S.A. will step up to fight these delinquents.
    For the rest a lot of success to you.

  12. I bought gold about 2011 made two grand, which I withdrew…..reinvested 35k,,,,,,,,, this year gold moved up, Michael Lewit reccomended gold.
    I felt he was the only person that gave me confidence to invest further, I increased my gold to 20% of my cash funds. I’m showing a twenty two k sterling
    Gain. I haven’t got near a double yet, but if I do I might just take some of the profit. Does this sound a sensible option, or is this a once in a lifetime chance
    To stay the course fully invested.
    I found Bullion vault UK to be most helpful.

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