4 Reasons Why Gold Is a Bargain Right Now

By Rich Checkan

Editor’s Note: After testing levels close to $1,300 per ounce and $17.30 per ounce on Friday, gold and silver prices dropped roughly 1.5% and 3%, respectively, on Monday as the dollar climbed following two weeks of decline. The dollar rose up against the euro after German Chancellor Angela Merkel’s unsuccessful attempts to form a German government coalition. This, in effect, has brought the euro under scrutiny, giving the dollar an edge against the world’s strongest currency. Gold’s recent dip gives investors the chance to take advantage of temporarily low prices, and I explain below why gold is an excellent bargain right now…

For the past two decades, I have bought and sold a significant amount of gold, silver, platinum, palladium, rare coins, and rare stamps. I have delivered it to clients and have arranged for domestic and international storage on behalf of clients. I have seen robust bull markets and staggering bear markets.

And, right now, I believe a fledgling bull market in gold is beginning to get underway. So, if you are a prudent investor, this will interest you.

Let’s look at each one in turn…

1. Peaks, Valleys, and Sweet Spots

I was speaking with one of our valued clients the other day. His view is a view shared by many. He was absolutely convinced that gold, at current price levels around $1,275 per ounce, was high.

Now, I am a believer that gold, bought for the right reason (long-term wealth insurance), can never be purchased at the wrong time or at the wrong price. But, not everyone sees things my way. Regardless of whether or not you believe in that statement, I don’t think you can make a case for gold being expensive here.

Gold’s all-time high was achieved in September 2011. Gold peaked then around $1,900 per ounce.

Gold’s recent lows occurred in December 2015. At the time, gold’s valley was near $1,050 per ounce.

From peak to valley, gold fell (in U.S. dollar terms—more on that later) nearly $800 per ounce. That’s a 42% correction in gold’s price.

From the valley, we currently stand roughly 21% higher.

This is important. One of the most successful investors of all time, Bernard Baruch, wouldn’t invest in a particular investment until it appreciated 20%. He also wouldn’t stay invested in any particular investment for the last 20% of appreciation. All Bernard Baruch wanted was his safe and profitable 60% appreciation in the middle.

He waited out the first 20% to make sure the investment wasn’t experiencing a false start. He sold the investment and chose to miss out on the final 20% of appreciation so as not to get caught reaching for and missing the highs. All he cared about was the 60% in the middle… the safe Sweet Spot.

Gold has just entered the Sweet Spot… up $225 per ounce from the recent lows.

2. The Herd

Contrarians tend to avoid the herd mentality at all costs. Typically, by the time the masses have entered an investment, it is too late.

Not to worry as far as gold is concerned.

Right now, sentiment for gold is as low as it has been in my more than two decades in the industry. Out-of-favor does not even begin to describe gold sentiment right now. Production floors at major mints are almost indiscernible from a funeral.

The reason is quite simple to grasp. Money is flowing where it is treated best. For the past 8 years, that has been the stock market. If you want to find the herd, that’s where they are. This is confirmed almost daily by new record levels for the equities markets.

I sense greed at work here. Greed is at play for those who got a taste of paper profits and want more. They are starting to believe the stock market can only go up. How did that work out in the past?

Desperation is also at work here. Think of all the people who planned to retire in 2008 and the years to follow, but are still working today in 2017. They lost 40% to 50% of their retirement assets from 2008 to 2009, and they have been desperately fighting to win it back so they can finally retire. They are hoping the bull market lasts long enough for them to do so.

Equities will revert from these highs. Gold is already starting to revert from these lows… but the masses aren’t paying attention to it yet.

3. What History Can Tell Us

One useful technical chart we can consider to determine whether gold (and silver) prices are high or low is the Gold/Silver Ratio (GSR). Simply put, this plots the number of ounces of silver you can buy for one ounce of gold.

Take a look at the GSR Chart below…

Historically, when the GSR is high—and a reading of 80+ signifies this—gold and silver prices are both at lows. And, this time is no different. The GSR touched 80 in August 2015. It touched 84 in March 2016. Almost directly in the middle of those two readings, gold hit its recent low of $1,050 in December 2015.

From that point, gold and silver have historically appreciated… with silver appreciating faster than gold and lowering the GSR as they climb higher. They tend to settle at a GSR reading between 35 and 50.

As I write, the GSR is 77.12.

If this chart holds to form as it has in the past, the trend is toward higher gold and silver prices from here, and most of the appreciation is ahead of us.

4. Temporary U.S. Dollar Opportunity

For U.S. dollar based investors, the dollar is giving you a short-term opportunity to get more gold for your dollar.

Thus far this year, the U.S. dollar has been under pressure—with the USD Index falling from 103 to below 90. Take a look at the chart below…

Since the lows in September, the dollar has undergone a bit of a rebound rally. However, many analysts believe this rebound to be counter to the longer-term trend of U.S. dollar decline.

If they are correct, this period of dollar strength will not last. Consider taking advantage of this short-term dollar strength to buy gold. After all, the time to hedge the dollar is when it is stronger, not when it is weaker.

What’s a Prudent Investor to Do?

Prudent investors invest when…

1. Their investment is in the Sweet Spot… Bernard Baruch’s 60% in the middle.
2. Their investment is out of favor… not wrapped up in herd-induced mania.
3. Their investment is favorable from a technical standpoint.
4. Their investment can be purchased under opportune conditions.

Right now, gold may be out of favor, but it is extremely desirable for the prudent investor. If you are a prudent investor, consider starting—or adding to—your gold position now. One of the best ways to do so is with 1-ounce gold Canadian Maple Leaf coins. Canadian Maples are currently available at highly discounted rates. As enormously popular government-minted coins valued for their beauty and purity of .9999 fine gold, Maples are often available at premiums higher than other bullion products—making now an ideal time to secure these coins while they’re available at such low prices—and while the price of gold is down!

You can now purchase 1-ounce Canadian Maple Leaf coins—our choice of year—for as low as Spot + $39.99 per ounce*. To see how these coins can benefit your portfolio while gold is poised at such an ideal level, please call us at 800-831-0007 or email us. Investing in gold—given its current position in the market—is one of the best ways I know at present to Keep What’s Yours!

*Prices subject to change based on market fluctuation and product availability. Prices reflected are for cash, check, or bank wire. Offer expires Friday, December 1, 2017.