How You Can Prepare for Gold’s Rise to $3,000 – and Beyond

Dec 8, 2020

Labels turn to questions when gold heats up… The most important thing to realize about gold… Breaking down the ways to invest in it… Where does gold go from here?… How you can prepare for gold’s rise to $3,000 – and beyond…

The mainstream financial media loves to label precious metals investors…

They call us names like gloom-and-doomers… goldbugs… and doomsday preppers.

That is, until gold starts heating up – and the economy looks dangerous.

Then, the media starts talking more about everyone’s interest in gold. And gold investors like me start to hear from our friends and family again. For example, I (Bill Shaw) was asked a few questions as gold ripped to an all-time high of more than $2,000 per ounce this summer…

“Should I be selling stocks and buying gold?”

“How do I buy gold? And… what should I buy?”

“Do you think gold will keep going up?”

Normally this level of interest might give me pause. After all, I’ve known these folks for years – and they’ve never seemed to care about my thoughts on gold before.

And frankly, gold did cool off after soaring so quickly to its new high in early August. Over the past few months, it has trended back down to roughly $1,870 per ounce today.

But the thing is… pullbacks like that are normal in a healthy bull market. And as I’ll explain in today’s Digest, I don’t believe the gold trade is even close to getting overheated.

If you’ve been investing for long, you’ve probably heard plenty from gold’s detractors…

The arguments are always the same…

Gold doesn’t pay interest or dividends. It just sits there. It’s a “barbarous relic,” as legendary investor Warren Buffett has put it in the past, that has no place in today’s world. As Buffett said in a speech at Harvard in 1998…

Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.

So the finance world was shocked to learn over the summer that Buffett’s holding company Berkshire Hathaway plowed more than $500 million into gold miner Barrick Gold (GOLD).

The news made headlines across the industry, even though it’s a relatively small position for Berkshire’s overall portfolio. And it came just days after the price of gold broke through $2,000 per ounce for the first time.

Suddenly, everyone was interested in gold. And while there are still plenty of staunch gold skeptics, my guess is that most folks fall into the same category as my friends and family… They understand that gold holds some sort of importance but may not understand why.

That’s what I’d like to explain in brief today…

The most important thing to realize about gold is that it’s the only real money…

By that, I mean it’s the only currency that isn’t someone else’s liability. It stands on its own.

Gold has been used as a medium of exchange for more than 5,000 years. Meanwhile, every single fiat (paper) currency in world history has failed. Governments simply cannot resist printing more and more fiat money until it becomes so watered down that it’s worthless.

But governments can’t print gold. That’s why they hate it as a form of currency.

Gold’s value comes from its scarcity. And it takes an intense amount of capital, labor, and time to dig it out of the ground and process it.

Historically, during times of financial crisis or political uncertainty, gold has proven its value as a “safe haven” asset. That’s why today – perhaps more than ever – it’s critical that your portfolio has some exposure to gold…

The economic fallout from the COVID-19 pandemic and ensuing lockdowns is incalculable…

But the Federal Reserve and the U.S. government are doing everything they can to prop up the markets. That means the printing presses are running hot.

Already, the Fed has pumped $3 trillion into the markets, on top of the $2.2 trillion stimulus package from Congress that sent $1,200 checks to most adults earlier this year. Both political parties (and the Fed) have signaled a “whatever it takes” approach to fend off an economic crisis.

Of course, none of this money is real. It wasn’t earned… It was created.

That doesn’t bode well for the value of the U.S. dollar. But it will be great for gold. That’s why it’s so important to place a portion of your investment portfolio in gold… and soon.

But what’s the best way for you to get prepared today?

You can essentially invest in gold in two ways…

The first is simply buying physical gold. By that, I mean gold bullion and gold coins.

This is the ultimate form of crisis insurance.

Gold is a way to store your wealth and preserve your purchasing power. If we do experience a complete economic collapse, gold will still serve as a medium of exchange.

Nobody likes to pay for insurance. We don’t ever expect our houses to burn down. But we buy fire insurance just in case… and hope that we’ll never need to use it.

Physical gold works the same way…

Try to buy a small amount of physical gold (and silver) each year and stow it someplace safe. Then forget about it. Don’t watch the price and don’t sell it unless you must. Trust me, you will sleep better at night knowing that you have this financial insurance.

If taking physical ownership of gold isn’t a viable option for you, consider buying a gold-bullion-backed exchange-traded fund (“ETF”) – such as SPDR Gold Shares (GLD) or the Sprott Physical Gold and Silver Trust (CEF).

The other primary way to invest in gold is to buy gold stocks…

This could be gold miners, precious metals streaming and royalty companies, or various gold-stock ETFs. Gold stocks allow you to “juice” your gains as the price of gold rises…

During a bull market in precious metals, like the one we’re in the early stages of right now, gold stocks can soar much higher and faster than the spot price of the metal.

Because these companies’ costs stay the same as the price of gold rises, the extra revenue goes straight to their bottom lines… So buying these stocks gives an investor leverage to the price of gold.

My favorite gold stocks are streaming and royalty companies…

These companies have a fantastic business model…

Mining is an extremely risky business. It requires a ton of capital up front, and miners are at the mercy of cyclical price fluctuations. That makes banks leery of lending them money.

That’s where streaming and royalty companies come in… They simply lend the miner money in exchange for a portion of future profits.

A royalty is simply a small percentage (usually 1% to 3%) of overall sales. A stream is the option to purchase silver and gold produced at the mine for a deep discount from the spot price (as much as 75%). Streams are typical in mines where silver and gold are byproducts of base metal mining.

The best part is, after the initial capital is spent, these companies’ obligations are finished… They just sit back and collect checks for decades. That makes them very low-risk investments.

Streaming and royalty companies reliably perform well, even during bear markets in precious metals. Because of that, they’re a great long-term, buy-and-hold hedge for your portfolio.

Buying gold-mining stocks takes a little bit more homework than streaming and royalty companies…

But they can produce incredible gains during a bull market, too.

I separate gold-mining stocks into three categories…

1. Major gold producers are the safest mining stocks to buy. These include companies like Barrick Gold – the one that Buffett bought over the summer.

These “majors” produce millions of ounces of gold per year. They have large mines all over the world with decades worth of proven gold reserves. Given the size of their assets, they can survive cyclical gold booms and busts.

2. The next tier is intermediate producers. These are miners that might only have a few mines – or sometimes just one.

Intermediate producers are riskier than majors, but they can generate much better returns if you select the right ones. However, it takes research and due diligence.

It’s also important to understand the political risk these companies are exposed to in the jurisdictions where they operate. And you must understand a company’s growth strategy and the quality of its management team.

3. Finally, you can invest in junior miners. If you’re new to gold investing, it’s probably a good idea to stay away from these companies to start. They’re extremely risky in most cases.

Junior miners have no revenue. They’re either exploring or developing new deposits. Thousands of these small companies trade on Canadian exchanges – which don’t share the same level of scrutiny to be listed as U.S. exchanges. Most of them trade for pennies and will never come close to opening a mine.

The sector is full of speculators and scams. So you absolutely must be cautious.

Don’t get me wrong… If you do know what you’re doing in the gold sector, these stocks can absolutely soar if you pick the right one. But for me, I need to meet personally with management and ideally visit the projects before I’m comfortable recommending them.

So where does gold go from here?

The thing is, as regular readers know… the Federal Reserve is pushing gold higher.

As a personal rule, I rarely make bold predictions on a price target for gold. But I’m confident that the price of gold will reach $3,000 over the next 12 to 18 months. Here’s why…

When we look at gold prices across history, we typically use the “nominal” price. That’s simply the number of U.S. dollars it would take to purchase an ounce of gold at that specific point in time.

But we also know that the purchasing power of the dollar has been inflated away over time. A dollar today doesn’t purchase what a dollar could buy decades ago.

Meanwhile, the purchasing power of gold has remained relatively constant.

That’s why I prefer to look at gold by using the real price. That means using inflation-adjusted dollars (today’s dollars) to value gold through history.

So for example, in 1980, the nominal price of gold was $800 per ounce. But in today’s inflation-adjusted dollars, the price would be $2,800 per ounce. That means that gold still hasn’t hit its all-time high in real terms. It still needs to rise about 50% from today’s level.

And it’s going to…

Despite the Federal Reserve’s unprecedented amount of monetary debasement, inflation has mostly been kept in check. A few months ago, however, Fed Chair Jerome Powell announced the central bank would no longer lift rates to prevent inflation.

In other words, the Fed wants inflation. My bet is that we’ll get it.

And when that happens, you’ll be glad you own gold.

If you want to add some high-quality gold stocks to your portfolio today…

I’d urge you to start by checking out my Commodity Supercycles publication.

My current model portfolio includes six precious metals stocks. I believe these companies will prove to be some of the “best of the best” when it comes to maximizing your returns as gold surges in the years ahead. And best of all… they’re all still “buys” at current prices.

Plus, Commodity Supercycles is about much more than just gold and silver… It’s your gateway to the best investment opportunities in the energy and natural resources spaces.

Every month, I search the commodities universe for the next supercycle. These are the types of beaten-down opportunities that flash “buy now” to contrarians like us. Then, I put together a full report on the best way to profit… including the current setup, all the key details about the company, why it’s the time to buy, and whatever else you need to know.

For example, just last week, I detailed a developing supercycle in “soft commodities”…

Soft commodities are agricultural crops – like soybeans, corn, and wheat. And right now, I believe we’re on the verge of a multiyear boom in the prices of these products due to a couple of different factors. In short, you don’t want to waste another minute before buying.

I recommended that my Commodity Supercycles subscribers buy shares of a time-tested agribusiness giant. This company has been around for more than two centuries. It operates in several business segments all around the globe. And its shares are dirt-cheap right now.

Unfortunately, I can’t say any more in today’s Digest. I hope you understand… It’s only fair to my paying subscribers. (Existing subscribers can read this research right here.) The good news is, I can offer a great deal if you’re interested…

Right now, Digest readers can instantly access my most recent recommendation, all of my precious metals research, and everything else I publish over the next year… for just $49. You’ll likely never be able to get this research at a cheaper price. Get started right here.