It’s like buying gold for $1,000 ounce

Gold just hit another all-time high this week, briefly touching $3,800 per ounce… which means it has more than doubled in the last two years.

When any asset continues hitting all-time highs, most people who haven’t bought it yet naturally believe that they missed out… or that they should wait for a pullback.

Of course, many people believed that when gold hit $2,400 in April of 2024… and then $2,800 early this year… and $3,400 in April.

As gold has continued its rise, however, we continued to suggest that this is still early days… and that the gold price could continue to surge much, much higher.

It’s not hard to understand why.

Foreign governments and central banks around the world are rapidly losing confidence in the US government… and by extension, in the US dollar.

The national debt is $37.5 trillion and rising. Deficits total $2 trillion each year, and there seems to be no appetite to cut spending. Worst of all, Congress can’t even manage to pass a budget… risking yet another government shutdown at the end of this month.

If that weren’t bad enough, the US federal government has also gotten in the habit of freezing assets of any foreign country that it doesn’t like.

At the moment, those same foreign governments (and foreign central banks) hold trillions worth of US dollar assets. So naturally any sensible foreign official is thinking about diversifying away from the US, and from the US dollar.

Unfortunately there simply aren’t too many options. No one trusts the Chinese Communist Party, so the yuan is out. Europe is its own economic basket case, so euro-denominated assets and European government bonds are not much better.

Out of the universe of options available, gold is one of the few assets that can solve this problem for foreign governments and central banks.

Gold isn’t controlled by any single government. No one can freeze them out of their gold or confiscate their holdings. Gold will hold its value against inflation. And the gold market is large enough that sovereign nations can purchase hundreds of billions of dollars worth.

This is why gold is at an all-time high: foreign governments and central banks have been buying it by the metric ton. And that extreme gold demand has pushed prices higher and higher.

We have been talking about this for 2+ years, since gold was below $2,000. And throughout gold’s rise, we kept saying that this trend will continue, i.e. foreign governments and central banks will buy more.

We still believe this is true, especially if you have a longer-term view over the next few years.

But we also presented an alternative to gold.

We wrote that the main demand driver for gold was from central banks. But central banks only buy physical gold. They do not buy gold stocks.

And we pointed out that while gold was at all time highs, the share prices of companies producing the gold were ridiculously.

In January, for example, one gold company we follow was trading at roughly 1x forward earnings.

And we practically screamed from the rooftops that this opportunity would not last— people would realize how undervalued these businesses were, while their revenue was literally denominated in gold at all time high prices.

Well, the gold companies’ earnings reports starting rolling in this year, and the market saw just how much money these companies were making.

Investors finally woke up. And by April, that same gold company had doubled its January share price— but was still only trading at about 2x earnings.

Gold kept ripping higher, and so did this company’s profits— after all, the cost to mine gold didn’t increase, and this company was still pulling it out of the ground for about $1,000 an ounce.

So its profit margin went from $800 per ounce two years ago, over $2,500 per ounce today.

Production costs have been flat. But their revenue per ounce has soared, up 50% this year alone.

Now, it’s share price has doubled again— 4x higher than in January.

And next month it will release Q3 results, a period it could sell gold as high as $3,700 per ounce. Its profits could be simply ridiculous.

Here’s the crazy part: even though the share price has quadrupled this year, the company is making so much money that it is STILL only trading for 2x earnings.

Which is why we think, despite already multiplying by four this year, the share price is poised for even higher growth once Q3 earnings are released in a few weeks.

In other words, gold companies are STILL cheap compared to gold, and offer leverage beyond physical gold.

If you own shares in a company that can produce gold at $1,000 per ounce, in a way its like buying gold at $1,000 per ounce. And that’s a pretty fantastic deal these days.

Right now it’s still possible to buy into these gold companies at cheap valuations, delivering gains that could far outpace gold.

So we really want to encourage you to check out our premium investment research— it’s called The 4th Pillar, where we feature these undervalued gold companies… along with other real asset businesses ranging from silver to platinum to oil to industrial metals to agriculture.

Many of our picks are up 2-4x just this year alone, and based on our analysis, we think there’s scope for them to go much higher over the next few months based on Q3 earnings (which will be released in a few weeks).

We’re offering a limited time promotional discount to The 4th Pillar, along with our iron-clad money back guarantee. So definitely take a few minutes to learn more about it and consider joining.

Source

Simon Black is an international investor, entrepreneur and permanent traveler. His daily letter is both educational and entertaining, and we suggest that those who want unbiased, actionable information about global opportunities sign up for Sovereign Man’s free, actionable newsletter at http://www.SovereignMan.com.

From Simon Black of SovereignMan.com

Source: https://www.schiffsovereign.com/trends/its-like-buying-gold-for-1000-ounce-153590/