1. Gold stocks continue to take out key highs, but in the big picture, the upside action has barely started.
2. Please click here now. Double-click to enlarge this quarterly bars XAU index versus gold chart.
3. A multi-decade rise in gold stocks versus all other assets is likely beginning. Institutional money managers are buying on days of strength, weakness, and sideways price action!
4. Why are these money managers so enthusiastic about gold, and even more enthusiastic about gold stocks?
5. Well, central banks around the world are engaged in a bizarre policy of low interest rates and quantitative easing that is ostensibly designed to “kickstart the economy”, but is really designed to allow governments to borrow and spend until the cows come home.
6. Negative interest rates allow governments to borrow money, and make a profit on their reckless actions. In America and Japan, where a lot of citizens are elderly, negative real interest rates on pensioners is very destructive.
7. In Japan, most pensioners lost large amounts of money in the huge equity bear market that began in 1989. Now, the remnants of those investments are subject to negative interest rates. They are pulling money out of the banking system, holding cash, and buying gold.
8. American bank loan profits have been in a twenty-year bear cycle, and so has money velocity. Savings are funnelled to government, where it is quickly spent on bizarre and violent programs to promote regime change in Muslim nations.
9. Most government spending is a useless endeavour that gives almost no boost to GDP. Please click here now. The US government is particularly notorious for wasting money on a vast array of guns and bombs, while refusing to buy a dying elderly citizen a needed prescription pill.
10. Horrifically, as India’s top central banker found out the hard way, if central bankers don’t print money for governments to spend on a regular basis, governments will find another “whipping boy” who will do what is asked of them.
11. So, most of the world’s central banks continue their policy of low/negative rates and QE. This is a very dangerous situation, and it is causing top institutional money managers to worry about the growing likelihood of a global sovereign bond crisis.
12. Gold is their only protection against that type of crisis, and right now these money managers are clearly engaging in significant buying in the gold market. What about gold stocks?
13. Well, a bond market crisis can create massive inflation in the current situation, because so much money is sitting idle at the Fed. Interest rates soar during a credit market crisis. Money pours out of government bonds and into the private economy. Stock markets can crash horrendously as that happens, and gold stocks become the go-to asset for institutions.
14. Please click here now. Double-click to enlarge this important GDX weekly chart. The surge to above the highs of 2014 and 2015 is turning the $27-$28 price zone into massive support.
15. All $2 – $3 corrections in the GDX price can be bought by gold stock enthusiasts with a smile, because that’s what a myriad of institutional money managers are doing. The Western gold community needs to let go of all bad past memories, grab this exciting gold stocks bull by the horns, and enjoy the ride!
16. Please click here now. Double-click to enlarge. Gold is moving higher in an up channel that looks like it was sculpted by Michelangelo.
17. Please click here now. China is an emerging economic empire, but all empires have horrible recessions and financial market crashes.
18. Chinese banks have seen their loan profits squeezed by the government’s policy of chopping rates. A potential Chinese banking crisis is really just another part of a looming global sovereign bond crisis. If such a crisis occurs, citizens and institutions in China will rush to buy more gold.
19. Please click here now. Double-click to enlarge. Silver now has what appears to be a bull flag pattern in play. A pullback within the pattern is likely now, but an upside breakout would suggest silver is going to $26 quite quickly.
20. If governments continue to pressure central bankers to keep chopping sovereign bond interest rates so they can borrow insane amounts of money and waste it, silver will benefit nicely from the safe haven flows into gold.
21. On the other hand, if central bankers raise interest rates in an attempt to force governments to act responsibly, that will incentivize banks to move money out of government bonds and into the private sector, which is inflationary. Silver will do extremely well in that situation.
22. For the first time in history, all US central bank actions are bullish for the entire precious metals sector.
23. Hillary Clinton wants to spend vast amounts of money that the government doesn’t have. Don Trump wants to increase the already beyond-insane military budget.
24. With both presidential candidates appearing eager to grow government size, the US central bank may have to revalue gold. If the Fed hiked rates aggressively, the US government could collapse. A gold revaluation policy would restore the government’s balance sheet and credit rating. A revaluation would also essentially devalue the fiat-oriented West, and revalue the citizens of India, who hold titanic amounts of gold. India, most of China, and the tiny Western gold community are probably on the cusp of a “bull era”. That era would be launched by central bank gold revaluation to either avoid a sovereign debt crisis, or to solve it. Good times are now here for gold-oriented investors, and even better times lie just ahead!
Stewart Thomson of Graceland Updates, Guest Contributor to MiningFeeds.com