Over the next few months, you could make triple-digit gains in one of the world’s most hated commodities: gold.
No, you won’t get rich quick. But as I’m about to show you, some of the world’s smartest investors have been quietly accumulating precious metals. And before the move is over, we could see prices more than double. Let me explain.
Hedge Funds Forecast: Huge Upside for Gold Prices
These are hard times for resource investors.
The past three years have seen big declines in gold price, with the metal trading more than a third below its peak of $1,900 an ounce. A number of investment banks have slashed their gold price forecast for the rest of the year.
For the mining industry, the situation is even worse. Small producers are shutting down. Barrick Gold Corporation, one of the world’s biggest gold miners in the world, has written off over $2.8 billion in assets through the past year.
With news like that, who’s buying gold now? Hedge fund managers, for one. Over the past few years, some of the world’s smartest investors have been quietly accumulating massive positions in gold, silver, and other hard assets.
As my colleague Jing Pan wrote last week, billionaire investor Ray Dalio has been warning savers to get out of fiat currencies. He has been storing his wealth in a collection of precious metals and mining companies. See “Gold Prices: What Ray Dalio Has to Say.”
Within the past few months, we’ve also seen an enormous spike of hedge fund activity in resource firms like Goldcorp Inc., Yamana Gold, Inc., and Agnico Eagle Mines Limited. These large-cap names have enough size and scale to survive the industry’s current doldrums. But given that their expenses are mostly fixed, these companies could see their profits soar if gold prices rise.
The question is; why are they buying gold now?
Here’s the problem: according to most industry estimates, the average cost to produce one ounce of gold is about $1,500. At current rates, miners are losing money on almost every ounce of metal they haul out of the ground.
That’s exactly why the current situation won’t last. Small miners are going bust. Larger producers will scale back operations. Eventually, the laws of economics dictate prices will rise to meet the cost of production—that’s more than 30% above today’s levels.
At this exact same moment, central bankers are flooding the world with phony paper money.
In March, the European Central Bank launched a $1.5 trillion bond buying blitz in a desperate attempt to revive the continent economy. And in the past few months, a number of countries—including Australia, Canada, India, Denmark, and others—have slashed interest rates.
You can’t print trillions of dollars out of thin air without any consequences. Eventually, all of this money will flood into the marketplace, raising prices across the board. Just as we saw at the beginning of this century, the only way savers will be able to protect their wealth will be through hard assets like gold.
The Smart Money is Buying Gold; Should You Buy, Too?
When inflation starts working its way through the system, it’s impossible to predict how high gold prices could go. $2,000? $3,750? $4,500? Some mining experts see spot rates going as high as $5,000 per ounce.
Regardless, something has these Wall Street financiers excited. I’d say it could be only one thing: they see an epic rally ahead.