I grew up in my corner of Florida, it used to be an old gas station on the edge of the Everglades. The owner did a lot of business with his oversized, hand-painted warning sign:
Last chance for gas.
Behind the fuel pumps was a thin two-lane strip of asphalt and 90 kilometers of swampy wilderness. No smartphones. There is no “emergency call box”. And, in most places along the highway, there are also no protective fences.
You were alone – much like in the economic wilderness we are all forced to sail today.
That is why the sudden drop in gold prices and mine stocks is similar to that warning sign … and a monetary gift …
In short, if you’ve been waiting on the sidelines after this year’s monster gathering, this is your second chance – and, in my opinion, your last chance – to buy gold at these prices. And it comes at the right time.
Typical moves for gold
Gold has made a complete return trip in the mood of customers over the past 12 months: from being the “most hated commodity” 12 months ago at the lowest levels of approximately $ 1,050 an ounce, to “I have to buy it” status of $ 1,350 an ounce this summer.
With gold now falling from those high heights, an investor is more likely to ask, “Gold, what have you been doing to me lately?”
Overall, gold returned about 60% of its set in 2017. Yet such abrupt declines followed by the continuation of a broader trend are more typical of early moves in the bull market for this volatile metal. The most famous of these returns was the fall of gold to all its peaks in the 1970s.
Starting at $ 35 an ounce in the early ’70s, when gold became legal for Americans to own again, lever prices rose to nearly $ 190 an ounce in 1975. That’s pretty much just for itself. Over the next 18 months, gold prices fell by almost 60%, falling to $ 100 before reaching a then-record $ 800 an ounce over the next three and a half years.
The song stays the same
Most importantly, when it comes to companies that dig these things out of the ground … nothing has changed.
As I’ve pointed out in recent months, gold mining companies have done a great job of cutting costs and making money.
As early as February, we noticed that elite companies in this group were earning an average of $ 215 for every ounce of gold they dug out of the ground and, without hesitant words, told everyone who would listen, “Stop selling panic gold stocks.”
Likewise, after dividend cuts in 2014 and 2015, as gold prices fell, many of the same companies not only returned payments, but began to raise them again. Meanwhile, mining companies have cleaned up much of their old cost structures. That’s why Newmont Mining, as one example, managed to lower its “AISC” – overall maintenance costs – from $ 1,170 in 2012 to $ 910 so far in 2016.
The point is that there are many reasons for owning gold: because of speculative profits, as mentioned above; for insurance; and to preserve wealth. But you can’t benefit from any of these strategies without taking advantage of gifts that are low gold prices and low expectations placed on our table by triggers from Wall Street triggers.