Gold Is Down But Not Out This Year

The yellow metal has not had a good year… especially compared to U.S. equities.

It’s down more than 6% for the year as we enter August, while the S&P 500 is up nearly 20%.

It doesn’t take a rocket scientist — or an economist — to figure out why.

The current and former presidents sent out a bunch of checks. The Fed printed trillions and trillions.

The expectant inflation has materialized everywhere but gold. We’ve seen fast-rising prices for oil, copper, tin, coffee, corn, lumber, and many other commodities.

Indeed, the CRB Commodity Index remains at multi-year highs.

What kept gold down was rising interest rates. It was clear to see coming, and I told you I was selling gold stocks last September as a result.

But today, times are changing.

The narrative that inflation would be “transitory” has been upended by the simple fact that it hasn’t been.

Growth is slowing after ramping up from global lockdowns.

And most importantly, rates have been falling, which is allowing gold to rise again.

The Delta Variant Is Sinking Stocks And Bonds, Pushing Down Rates

The Israeli Health Ministry recently released data suggesting that the popular Pfizer vaccine is only 64% effective in preventing symptomatic COVID-19 infections with the delta variant. That’s a steep drop from its 94% efficacy against the original strain of the virus.

Other studies have since corroborated the notion that most currently-available vaccines are capable of reliably preventing severe illness and death in people exposed to the Delta variant — but that they aren’t great at preventing people from getting sick with it or spreading it.

And indeed, in the last few weeks cases have started to tick upward again — even in heavily-vaccinated countries like the U.S.

As case numbers start to rise again, governments are bringing back lockdowns and mask mandates.

In the last month, Portugal and Sydney, Australia have both gone through lockdowns, and Israel and Los Angeles County have both brought back indoor mask mandates.

All of this — rising anxiety over possible new lockdowns, stock market volatility, and falling bond yields — is good news for gold.

So is the persistent increase in inflation that the Fed keeps trying to downplay…

This Inflation Isn’t So Transitory

In May, the Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) had jumped 4.2% year-over-year in April — its largest annual increase since 2008. Federal Reserve chairman Jerome Powell reassured investors that the uptick in inflation was “transitory.”

Then in July, the BLS reported that the CPI had jumped 5.4% year-over-year in June. Powell again said that the bump was “transitory.”

But just by looking at a chart of the CPI, you can clearly see that its pace of growth has quickened since its pandemic trough…


Periods of prolonged inflation are historically also periods of prolonged gold price increases. As stagflation gripped the U.S. economy in the early 1970s, gold rose from a low of $35 per ounce in 1974 to a peak of $180 near the middle of the decade.

And stagflation is what you’re getting as growth slows and inflation remains… not so transitory.

How To Play The Incipient Gold Bull Market

Investors today have a chance to reap serious gains from the coming turnaround in the gold market — if they pick the right gold stocks.

Gerardo and I have been tracking a set of gold stocks whose gains should lead those of the metal itself in the years ahead.

Check out the video below to learn about this group of stocks and the one we expect to lead. 

Call it like you see it, 

Nick Hodge
Publisher, Resource Stock Digest
 

Nick Hodge is the co-owner and publisher of Resource Stock Digest. He's also the founder and editor of Foundational Profits, Family Office Advantage, and Hodge Family Office . He specializes in private placements and speculations in early stage ventures, and has raised tens of millions of dollars of investment capital for resource, energy, cannabis, and medical technology companies. Co-author of two best-selling investment books, including Energy for Dummies, his insights have been shared on news programs and in magazines and newspapers around the world.

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