All Is Well! (Or is it?) Dear John, On Friday afternoon, after the market close, it hit me. Gold was over-bought and the dollar was oversold. I was speaking at the MoneyShow conference in Toronto, to an eager audience of investors. Some were already positioned in the metals and mining sector, but others were new to the area and full of questions.
I was answering a question from the latter group about how and when to buy gold when I realized that, yes, gold was a bit over-extended. The last few weeks had seen the metal on a red-hot run. At the same time, the dollar had been falling like a rock.
They were both due for a short-term trend reversal. That’s what happened yesterday, as gold lost about $20 and the Dollar Index rebounded about half a percent. Today, both are trading flat as pancakes.
It’s important to note that this doesn’t represent a break in the overall trend, only a correction in the rally. Trading around $1,327 right now, gold won’t risk a trend-reversal unless it gets down to the $1,290 range.
Still, I expect the rally to continue very soon. And that’s because of the real reason behind this brief correction...
Golden Opportunities continues below...
The Eye Of The Storm Given our recent experiences with hurricanes, I can’t think of a better metaphor for what we’re going through right now than a hurricane that is passing directly over us. After being buffeted by the maelstrom, we’re now in a period of relative calm — the figurative eye of the storm before the tempest renews. You see, gold’s rapid rise last week was due to a re-emergence of the North Korea crisis.
As I’ve told you in recent issues of Golden Opportunities, this potentially catastrophic stand-off has slipped in and out of the headlines over the past few months.
But every time it fades out of the limelight, I’ve warned you that it will soon return.
Why? Because Kim Jong Un is perilously close to developing an ICBM-delivered nuclear weapon. No new science or technology is needed; at this point, he can coast to the final deployment. Given this, there is no way he will give up his nuclear ambitions.
And the U.S., especially under the Trump administration, will not accept living under the shadow of a North Korean nuclear threat. This issue will be resolved in the near future — within the next year, I believe — and any resolution that doesn’t involve China will be horrific in nature.
That’s why gold rose in recent trading sessions, because of the larger threat from North Korea...and because it was widely expected that Kim would ratchet up tensions with a new missile test over the weekend, as the “Hermit Kingdom” celebrated the anniversary of its founding.
And when a missile wasn’t launched on Saturday as expected, gold lost much of its “fear premium” when trading reopened yesterday.
But don’t let that lull you into believing this crisis isn’t going to re-emerge, and soon.
In fact, last week Kim announced the nation was at “quasi-war status” which, believe it or not, is actually a real thing in North Korea. It’s officially the last stage before actual war, and citizens were scrambling in response to their leader’s proclamation.
Now, with the passage of a new set of sanctions in the U.N., importantly including the support of China and Russia, North Korea is once again screaming bloody murder.
You can bet that Kim will conduct another nuclear test or launch another missile in the days just ahead in response to this latest round of sanctions.
And gold will catapult higher in response. The Real Reason To Buy Gold And Mining Stocks Now Despite the frightening geopolitical risks we’re now facing, these are not the reasons you need to buy metals and mining stocks today.
Truth be told, you should never buy gold in reaction to these kinds of crises. Instead, you need to own gold as insurance against the inevitable depreciation of fiat currencies.
Sovereign debt loads in the U.S. and every other developed nation are now so large that their underlying currencies simply must be depreciated to reduce those debt burdens.
In the U.S., the federal debt has roughly doubled under every two-term president in recent decades. That means our federal debt will approach $40 trillion when/if Donald Trump completes a second term!
And that means that the prices of gold and silver will be far higher over the coming years.
It’s already begun. Despite yesterday’s correction, gold has broken out from the long, six-year down-trend line extending from the 2011 peak. This is a new bull run — and if it’s like the last one, we’ll see junior mining stocks multiplying in price. It’s already started. Some of our recommendations in Gold Newsletter and from last year’s New Orleans Conference are now trading three, four, even five and more times higher than when originally recommended. If you’re a serious investor, you need to be positioned in this sector. I suggest you do so now. All the best, 
Brien Lundin
Editor, Gold Newsletter
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