In an average day I probably spend a good 3-4 hours doing research on many things that are mainly in topics that are directly tied to investing. I also like hearing from experts in various fields like global politics, Wars, and rumors of wars, pending legislation and anything that may have an adverse or positive impact on any investments that we hold.

In this article I am going to try and put a few ideas together from respected sources that paint an extremely bullish- in my opinion- picture not only for gold and silver but also for the companies that mine them.

It is my opinion that EVERYONE should have some exposure to the metals and possibly the miners. There are many reasons but many times the metals, in particular, have a low correlation to traditional assets like stocks and bonds. In addition, gold has been the #1 performing asset class in this century. (Bitcoin not included).

I was watching a Zoom call with Sprott- and in particular with John Hathaway- a well-known gold stock investor and fund manager. We are both on the same page in that even though the gold mining stocks have moved substantially higher they are still undervalued and grossly undervalued vs the S&P 500. He provided a chart by Bloomberg that showed that gold miners vs. S&P:

· Gold miners are 50% less expensive vs. S&P stocks.

· Gold miners have 20% HIGHER dividends overall.

· Net debt is a 66% LESS than the debt being carried by S&P stocks.

· The profit margin of gold miners is 30% HIGHER than S&P stocks.

It was mentioned on the call that with the price of gold at $3000.00 the net profit per ounce (with all-in costs) is between $1400-$1600.00 per ounce produced. While gold has moved substantially higher on the back of the world’s instability, declining dollar VALUE and central bank buying, the gold stocks only now appear to be waking up from an extended period of underperformance.

Another expert- Michael Oliver-of MSA Research has made the point that when the stock “market” pulls back he expects gold, silver, and miners to move substantially higher. Gerald Celente of the Trends Journal has said that Dotcom bust part 2 has already begun and most people are unaware of it- YET.

Anyone who has studied investing in any meaningful manner likely knows that there are a few common themes that tend to always play out like:

Markets revert to the mean over time, excesses in either direction will lead to the opposite excess in the next cycle. There are no new eras. When “markets” rise they usually go higher than expected and for longer but when bubbles pop they do not meander lower but fall hard- not all at once but in a manner where there is a hard down- a relief rally and then a prolonged downturn. Possibly the most crucial point here would be when market breadth is broad (which means that market leadership is being carried by MORE companies rather than less markets are stronger than when a handful of companies are leading the way. This insinuates that a problem in a few stocks could be tempered by other stocks in the index that could pick up the slack.

I have pointed out many times that the S&P 500 has seen most of its returns in the recent past by only seven companies. This is FAR from broad participation. In fact, I saw Stephanie Pomboy yesterday say that 45% of Russell 2000 companies are producing NO PROFITS. (Zombies)

I also saw a chart put out by moomoo- an investment company which surprised me.

As it turns out not only are those magnificent seven driving our “markets but the market cap of those seven companies (Apple, NVIDIA, Amazon, Alphabet, Meta, Microsoft and Tesla) is higher than the entire stock “markets” of Australia, Germany, Canada, the UK and France COMBINED! (As of 2-28-2024)

Their combined market cap is over twice the entire Japanese stock “market”.

When we look at gold stocks in their entirety their market cap equals the market cap of Home Depot. The point here is that not too much of an allocation would have to be made to gold, silver, and the companies that mine them to send shares soaring.

This is likely one of the main reasons why people like Michael Oliver and Gerald Celente believe that when the traditional “markets” revert to the mean- and likely crash- the flood of money into these assets could lead to massive gains.

Less than 1% of invested assets are in gold and silver. Historically, it has been as high as 20% in the 1930s and has been 5% in recent history. To get back to 5% allocation could move the gold price thousands of dollars higher- without any official revaluation. Think of the profit margins of the miners then.

Many people are of the opinion that gold, in particular, is expensive here. I disagree- along with Jonathan Haycock- the longest tenured managing director in Morgan Stanley’s London office- who said in an interview that gold would have to rise 75% from here to get back to the 1980 high in real terms. My guess is that it goes WAY higher than that because the situation today is FAR more dire- particularly with all of the world debt than at any time in history.

In addition, demand is rising for the metals and because of all the artificial suppression of price there has been virtually no increase in gold production in over a decade. In another chart it shows that gold exploration budgets have crashed from 2014 to today- actually in 2023 the chart shows ZERO. Obviously, over that time major discoveries have also collapsed. Rick Rule- The cure for high prices is low prices (prices are high and production ramps up-over time prices fall). The cure for low prices is high prices (low prices disincentivize new discoveries- unless demand collapses prices rise because of a lack of supply). I believe we are here.

I was surprised to learn on that call that Scott Bessent, billionaire, and our Treasury Secretary considers GOLD to be his top investment position- just like most of the world’s central banks.

On top of all of this keep in mind that the world is in turmoil. Wars are being fought all over the globe by countries that have no “money” to fight them, so countries are going deeper and deeper into debt and becoming less solvent day by day. This makes those “promises to repay” less likely day by day. The central banks know this. The result? They are shedding paper promises and buying an ASSET that is not someone else’s liability and has no counterparty risk.

In my opinion, I see the downside risk as severely limited because of the circumstances we are in and the sky as the limit for the same reason. Remember, the question is NOT how high can gold and silver go but how far can fiat currencies fall. With all of the “printing” going on globally it appears that there is literally no limit as to how far fiat currencies can fall so that means there is no limit on how high gold, silver and other hard assets can climb.

People laugh when I say gold should be $25,000.00 per ounce-or more right now. They usually stop laughing when I show them that in Japan you need 454,465 Yen to buy one ounce of gold. They just got a head start on “printing,” but we are rapidly catching up.

By the way, the wars we are currently conducting are “off the books” if anyone is wondering why we are still near $37 TRILLION in admitted debt- along with the $200 Trillion plus in unfunded liabilities- also off the books. How do YOU anticipate this works out?

Be Prepared!

Any opinions are those of Mike Savage and not necessarily of those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information in this report does not purport to be a complete description of securities, markets or developments referred to in this material. The information has been obtained from sources deemed to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct.

Commodities are generally considered speculative because of the significant potential for investment loss. Commodities are volatile investments and should only be a small part of a diversified portfolio. There may be sharp price fluctuations even during periods when prices are overall rising.

Precious Metals, including gold, are subject to special risks including but not limited to price may be subject to wide fluctuation, the market is relatively limited, the sources are concentrated in countries that have the potential for instability and the market is unregulated.

Diversification does not ensure gains nor protect against loss. Companies mentioned are being provided for information purposes only and is not a complete description, nor is it a recommendation. Investing involves risk regardless of strategy.