Gearing Up for Gold Profits

Select Gold Equities & ETFs
Set-to-Soar in 2023

With market volatility and inflation still historically high, investors are turning to gold as the most trusted asset for protecting the purchasing power of one’s wealth.

In fact, gold has surged from the $1,650 per ounce level in Q4 2022 to currently above $1,850 an ounce — signaling what may prove to be the start of a longer-term bull market trend for the yellow metal.

As you’ll soon discover in this Special Report, gold and select gold equities and ETFs are setting up for a powerful resurgence in 2023 that could last for multiple years as the easy-money policies of the Fed come home to roost.  

Exacerbated by Russia’s invasion of Ukraine in late-February 2022, inflation soared to multi-decade highs in the United States last year, driven largely by trillions upon trillions in fiscal spending in response to the COVID crisis coupled with pent-up consumer demand and unprecedented, across-the-board supply chain disruptions. 

And although inflation is finally beginning to cool slightly, gold is showing no signs of slowing down as investors continue to flock to the safety of the yellow metal.

Historically speaking and from an inflation hedge standpoint, gold should be trading even higher than where it is today — which is currently just above the $1,850 per ounce level.

As you can see in the 12-month gold chart below, the yellow metal spiked above $2,000/oz in early-March 2022 — very close to a record high — immediately following Russia’s incursion into Ukraine.

That initial spike wasn’t a big surprise to longtime gold investors as the yellow metal typically moves up during times of immense geopolitical turmoil. 

Yet, that initial rush of capital into the precious metal following Russia’s wanton action against its peaceful neighbor was followed by a sharp yet short-lived pullback despite coinciding with a near unprecedented rise in inflation and a zero-growth economy in the US. 

A key reason for that temporary pullback was the relative strength of the US dollar during that span.

As noted… inflation, recession, and geopolitical tensions are all positives for the price of gold. 

Yet, a strong US dollar is negative for the yellow metal since a strong greenback relative to other currencies makes it more expensive for foreign buyers to purchase US dollar-denominated gold. 

That’s the exact scenario we watched play out in Q2 and Q3 2022.

Yet, our research tells us that the US dollar’s 18-month reign at the top of the proverbial fiat money throne is swiftly coming to an end.

That's because, as a result of the easy-money policies of the Fed since the great financial crisis of 2008, the federal debt — now above $30 trillion — has ballooned to unsustainable levels of 130% to 135% of GDP.

Already, with Powell & Co. recently raising the federal funds rate at its fastest pace in history, the cost of financing the debt has soared to a hyperbolic $600 billion a year — and that figure could soon eclipse $1 trillion if the Fed continues on its current rate hike trajectory.

We mentioned that the Fed’s primary goal with its current aggressive rate hike stance is to rein in inflation at any cost. 

That reality — along with Powell & Co. ultimately capitulating to the fact that the size of the debt renders it near powerless to get inflation quickly back to its “normal” target range of 2% to 3% — is producing a market environment that’s demonstrably bearish for the broader indices… yet exceedingly bullish for gold bullion and select gold equities and ETFs. 

Plus, we’re about to get an even stronger bullish signal for gold as the Fed makes its inevitable pivot back to a lower interest rate stance… and that could happen as early as Q3 of this year.

Another key point few are talking about is the fact that the federal debt is now close to 4X what it was during the Fed’s last rate hike cycle back in 2015. Hence, the Fed has built what amounts to a financial house of cards that’s essentially going to force a pivot back to a softening stance.

That about-face will likely coincide with a secondary rush into gold — with silver in-tow — as investors seek to protect the purchasing power of their wealth as the Fed’s house of cards collapses.

Equally important in the gold argument is that, as the yellow metal rises, the share prices of well-positioned precious metals mining equities and ETFs will outperform the broader indices by a large degree — including the price-percentage gains in the precious metals themselves. 

That makes now an opportune time to be allocating a portion of one’s investment capital into the gold sector as those aforementioned bullish indicators come squarely into play. 

 

How to Best Play the Gold Market in 2023

Timing is everything… and the ultimate goal of ANY investor is to buy low and sell high. 

Despite gold more than holding its own, the bear market in the broader indices that began in Q1 2021 temporarily dragged precious metals mining equities down with it — resulting in a timely “buy low” opportunity that’s materializing now. 

We talked at-length about the financial house of cards the Fed has constructed by way of its easy-money policies over the last decade-plus. 

As that flimsy financial base inevitably crumbles… those who’ve preemptively positioned themselves in select gold equities and ETFs are going to do extraordinarily well.

That timing is now upon us. 

Our focus in this Special Report is on select large-cap miners — known as the “majors” — as well as the top sector ETFs (Exchange Traded Funds). 

In terms of individual mining equities, the gold sector comprises three distinct subsectors: majors, mid-tiers, and juniors. 

The majors represent the large-cap precious metals producers and royalty/streaming companies. The majors typically pay a quarterly cash dividend, are closely tied to the price of gold, and offer the lowest risk factor of the three subsectors. 

The mid-tiers represent the mid-cap precious metals producers, prospect generators, and royalty/streaming companies and typically carry a higher degree of risk than their large-cap counterparts.

The juniors represent the small-cap explorers and prospect generators and carry the highest risk factor of the three categories and typically do not pay a quarterly dividend. Stocks in this category are oftentimes thinly traded but can produce truly life-changing gains, especially when the drills hit pay-dirt on a new or emerging precious metals discovery. 

Again, for the purposes of this report, our focus is on the lowest-risk segment of the gold space — the majors — and we’ll also introduce a top sector ETF for your consideration. 

For those with a higher risk tolerance, we do offer separate exclusive reports and video presentations on the higher-risk, higher-potential-reward junior sector, which we’ll provide links to at the end of this report.

 

Barrick Gold Corp. (NYSE: GOLD)(TSX: ABX)

With a $30 billion market cap and roughly 70 million ounces of proven and probable gold reserves, Barrick Gold (NYSE: GOLD) is the world’s second-largest gold mining company. 

As you can see in the above chart, Barrick has bounced squarely off its 52-week low of $13.01 per share with plenty of upside left to go. 

Barrick, after its major acquisition of Randgold Resources for $6.5 billion in 2018, has gold and copper mining operations and development projects spanning 13 countries across North and South America, Africa, Papua New Guinea, and Saudi Arabia with a focus on high-margin, long-life assets.

Despite a challenging market environment, the company was able to turn in an impressive 2H 2022 performance — driven mainly by Carlin and Turquoise Ridge in Nevada, Veladero in Argentina, and Bulyanhulu and North Mara in Tanzania. 

The company boasts a strong balance sheet and pays a performance-based quarterly cash dividend, which currently stands at an industry-leading $0.15 per common share. 

 

Wheaton Precious Metals Corp. (NYSE: WPM)(TSX: WPM)

With a $20 billion market cap and streaming agreements for 23 operating mines and 13 development-stage projects around the globe, Wheaton Precious Metals is one of the world’s largest precious metals streaming companies.

For those unfamiliar with the streaming model, here’s a quick breakdown:

• Streaming companies provide cash to mining companies at various stages of mine development — offering an alternative form of financing beyond relying on banks or capital markets.
• In return, the mining company is contracted to sell to the streaming company a certain portion of its metals production at a preset, below-market price at certain points in the future. 
• Streaming companies generally use short-term debt, such as bank loans, to cover the initial expense of a streaming deal and then sell debt or issue stock to permanently finance the deal.
• Once the commodity is delivered to the streaming company at the previously agreed upon price, the streaming company may then sell the commodity in the open market to generate revenue or keep the commodity in reserve. 
• The biggest benefit for a gold streaming company — in addition to avoiding the risks associated with operating a mine — is that they get to buy gold at reduced prices, thus, locking in wide margins no matter what’s happening in the commodity market for gold. 
• From a speculator’s viewpoint, investing in a gold streaming company provides exposure to gold itself. And because of the wide margins just described, most of the large cap streaming companies are able to pay a quarterly cash dividend to their shareholders — with Wheaton Precious Metals being no exception. 

Wheaton’s impressive portfolio of streaming agreements is driven by a focus on low-cost, long-life assets including a gold stream on Vale’s Salobo Mine in Brazil and a silver stream on Newmont's Peñasquito mine in Mexico.

Similar to Barrick, Wheaton has bounced squarely off its 52-week low of $28.62 per share, which, again, we view as a contrarian buying opportunity.

Wheaton’s dividend is variable, which means the math behind it is preset: It pays shareholders 30% of the average cash generated by operating activities over the previous four quarters. And as such, investors don’t have to worry about any surprise dividend moves by the company’s board.

The company’s quarterly cash dividend currently stands at $0.15 per common share. 

 

Sector ETFs: SPDR Gold Shares (NYSE: GLD)

For investors seeking broad exposure to the gold bullion market without having to pick specific stocks — a gold-focused ETF may be the perfect fit.

SPDR Gold Shares offer investors an innovative, relatively cost efficient and secure way to access the gold market. 

SPDR Gold Shares represent fractional, undivided beneficial ownership interests in the Trust — the sole assets of which are gold bullion and, from time to time, cash. 

Investing in the ETF effectively mitigates the many barriers that often dissuade investors from utilizing gold as an asset allocation and trading tool — including the logistics of buying, storing, and insuring gold bullion. 

Additionally, certain pension funds and mutual funds do not, or cannot, hold physical commodities, such as gold, nor its derivatives — making the ETF an effective and efficient alternative instrument for gaining direct exposure to the gold market. 

As you’ll note in the above chart, GLD has bounced off its 52-week low of $150.57 per share, which aligns with our contrarian mantra of buying low while the investing herd focuses their attention elsewhere. 

 

In Summary… 

In a tumultuous market environment that has seen a number of major asset classes decline rapidly — gold has held up incredibly well as a long-trusted store of value. 

In fact, throughout human history, investors have turned to the yellow metal as a wealth protection mechanism against rampant inflation and the continuous debasement of fiat currencies.

We believe the Fed’s easy-money policies of the recent past and present are headed toward a cliff that will soon see gold return to record highs well above $2,000 an ounce.

Such a move will be especially bullish for select gold equities and ETFs — and we’ve presented our Top Picks from the major gold producers for your consideration, along with a top sector ETF.

We also briefly touched upon the higher-risk junior gold sector. 

You can think of the juniors as “pure exploration plays” where the discovery of a precious metals deposit through drilling can lead to near instantaneous gains of 1,000% or more. 

Yet, one caveat… since Mother Nature rarely gives up her below-surface treasures easily… investing in the juniors absolutely requires an elevated risk tolerance.

With that said, our team has a wealth of experience investing in the juniors — with great success mind you! — including having a deep rolodex of “go-to” industry contacts that truly represent the who’s-who of the grass-roots mineral exploration industry. 

In fact, our own Nick Hodge of Hodge Family Office recently released a video tour of an under-the-radar junior gold firm that’s drilling now and could soon deliver the type of spectacular gains that are only possible in the junior space.

It’s called, “America’s Next Biggest Gold Mine.” 

It was filmed on-location at the mine!

And you can check it out for yourself right here. 

 

— Bizarro World Research