Hello, Reader.
Thomas Yeung here.
As a card-carrying Costco member, I’m given remarkable insight into the trends rooting themselves into our everyday lives.
It’s one thing for a customer to experiment with a small pack of gluten-free rice from their local Whole Foods or Target. It’s quite another to invest in 18 pounds of the stuff, the quantity available at Costco. The same goes for the keto diet craze, cushioned Hoka sneakers, and ladies’ pickleball swimsuits. (Yes, they do exist).
When you see a new item show up on Costco shelves… you know it’s made the leap from fleeting fad to everyday necessity.
Of course, smart investors do top-down and fundamental research as well, beyond what they see within the walls of their local retailer. Nothing beats old-fashioned analysis of global supply and demand. But Costco is still a wonderful “resource” that reminds us that all these financial figures we study are still driven by customers like you and me.
That’s why you should know about a surprising item that’s now flying off Costco shelves…
Gold bars.
The wholesale club began selling one-ounce bars in the summer of 2023, and these trinkets have suddenly become harder to find than a Costco parking space on a Sunday afternoon. My hometown stores are stocked out for 50 miles in any direction.
Join the club…
That’s because gold prices have rocketed in the past year, rising from $2,060 in January to $2,310 today. This 12.5% return is well ahead of the Dow Jones Industrial Average (3.0%), long-term treasury bonds (-5.1%) and the Dow Jones U.S. Real Estate Index (-6.3%).
So, how high can gold prices go? In April, analysts at Goldman Sachs set a $3,000 price target on the metal – well above the $2,400 I foresaw based on futures prices at the time.
But now… a surprising new study suggests that gold could actually rise another 30% to hit that magical $3,000 mark this year.
So, in today’s Smart Money, let’s look at exactly why the bull case for gold just got more bullish… and the best way for you to get in on this gilded trend.
Gold’s Global Supply
On Monday, the World Gold Council, the metal’s international trade association, announced that production had officially increased only 0.5% in 2023. The council blamed the lack of growth on aging mines, a lack of new deposits, and geopolitical issues. If this is the case, that means the gold supply grew two-thirds slower than even Bitcoin (BTC) over the same period!
The news comes as a shock. We’re already seeing lower-than-expected production at Newmont Corp. (NEM), the No. 1 gold producer, and significant mine maintenance at Barrick Gold Corp. (GOLD), the No. 2 producer. Low 2023 production figures players now suggests that smaller players (particularly those in Russia and China) are struggling with production. Gold production is now forecasted to rise just 2.4% this year, well below the 4% rate seen in the first quarter and significantly below the 5.9% global inflation rate.
Together, that means we’re facing a gold shortage going into the end-of-year. Central banks have become aggressive buyers of the metal, with those in China, India, Turkey, and Russia leading the way. Sovereign governments have become wary of becoming too dependent on U.S. dollars, so you have countries like China that have increased their gold holdings by 300 tons in the past 18 months.
The remaining gold supply (as Costco demonstrates) is getting sucked up by retail investors worldwide.
How to Play the Gold Game… the Eric Fry Way
I must note that buying raw gold from Costco is the hard way to invest. Physical bullion is difficult to trade and requires a safe place to store. Only the most dedicated gold bugs have large quantities of the metal sitting around their homes.
Physical gold is also a challenging way to make money. As Eric has long said, gold is an asset that rises slowly over time. It can take decades to double your cash. In fact, gold’s inertia is precisely what makes it so popular among some conservative investors.
That’s why I think it’s essential that you read up on Eric’s work about the proper way to invest in gold for long-term profits. Through his Golden Ratio strategy, he’s found a way to turn these unpredictable rises in gold prices into enormous gains… all without risking the bank.
As he writes in The Speculator (members can log in here)…
The key difference between intelligent speculators and amateur gamblers comes down to how they approach risk.
Amateurs always focus on the potential reward in any investment or trade.
Pros always focus on the potential risk in any investment or trade.
When you focus obsessively on avoiding excessive risk, the rewards take care of themselves.
You could say that the potential upside of a trade vs. the potential downside of a trade is our “Golden Ratio.”
Eric, of course, didn’t name this strategy after the metal… but gold prices do illustrate this concept perfectly. Amateur gold buyers are snapping up Costco bars with only the gains in mind. They’re not thinking about the difficulty of selling the bars down the road… or what happens if gold prices unexpectedly drop. They’re only paying attention to what’s in front of them.
Meanwhile, Eric uses his Golden Ratio technique to capture far more of gold’s gains, while protecting himself from too much downside risk. For instance, his Golden Ratio strategy has already netted him 100% gains on gold since April. And if gold does skyrocket to $3,000 this year, Eric’s bet on the metal in The Speculator will surge another 300%.
It’s a time-tested way of buying the metal, and one I think you find out more about now.
Regards,
Thomas Yeung, CFA
Markets Analyst, InvestorPlace.com
