Doug Casey: Why Gold Stocks Are an Ideal Speculation
Doug Casey: Why Gold Stocks Are an Ideal Speculation by Doug Casey for Casey Research
My regular readers know why I believe the gold price is poised to move from its current level of around $1,760 per ounce to $2,000… $3,000… and beyond.
Right now, we are exiting the eye of the giant financial hurricane that we entered in 2007, and we’re going into its trailing edge. It’s going to be much more severe, different, and longer lasting than what we saw in 2008 and 2009.
In a desperate attempt to stave off a day of financial reckoning during the 2008 financial crisis, global central banks began printing trillions of new currency units. The printing continues to this day. And it’s not just the Federal Reserve that’s doing it: it’s just the leader of the pack. The U.S., Japan, Europe, China… all major central banks are participating in the biggest increase in global monetary units in history.
These reckless policies have produced not just billions, but trillions, in malinvestment that will inevitably be liquidated. This will lead us to an economic disaster that will in many ways dwarf the Great Depression of 1929–1946. Paper currencies will fall apart, as they have many times throughout history.
This isn’t some vague prediction about the future. It’s happening right now. The Canadian dollar has lost 24% of its value since 2013. The Australian dollar has lost 34% of its value during the same time. The Japanese yen and the euro have crashed in value. And the U.S. dollar is currently just the healthiest horse on its way to the glue factory.
These moves show that we’re in the early stages of a currency crisis. But if you make the right moves, you could actually make windfall gains instead of suffering losses. Here’s how to do it…
The huge winner during this crisis will be the only currency that has real value: gold.
Gold has been used as money for thousands of years because it has a unique combination of qualities. Let me spell it out very briefly:
It’s durable (almost indestructible – that’s why we don’t use food as money), divisible (each divided piece is valuable – that’s why we don’t use artwork as money), convenient (its unit value is very high – that’s why iron isn’t a good money), consistent (all .999 gold is identical – that’s why we don’t use real estate as money), and has value in and of itself (which is why we shouldn’t use paper as money). Just as important, governments can’t create gold out of thin air. It’s the only financial asset that’s not simultaneously someone else’s liability.
When people wake up and realize that most banks and governments are bankrupt, they’ll flock to gold… just as they’ve done for centuries. Gold will rise multiples of its current value. I expect a 200% rise from current levels, at the minimum. There are many reasons, which we don’t have room to cover here, why gold could see a truly significant gain. And in real terms, not just against paper money.
This should produce a corresponding bull market in gold stocks… of an even greater magnitude. A true mania for gold stocks could develop over the coming years. This could make anyone who buys gold stocks at their current depressed levels very rich.
What History Teaches Us About Great Speculations
Many of the best speculations have a political element to them.
Governments are constantly creating distortions in the market, causing misallocations of capital. Whenever possible, the speculator tries to find out what these distortions are, because their consequences are predictable.
They result in trends you can bet on. Because you can almost always count on the government to do the wrong thing, you can almost always safely bet against them. It’s as if the government were guaranteeing your success.