Summary
➡ The article discusses the impact of inflation on the economy and the potential for a rise in gold prices. It explains that the Federal Reserve’s actions, such as maintaining a large balance sheet and low interest rates, have not effectively controlled inflation. The article also highlights the role of the national debt and deficit in fueling inflation. Lastly, it suggests that investing in precious metals like gold could be a good strategy to protect and grow wealth during inflationary periods.
➡ The value of gold has been steadily increasing over the past year, with a 50% increase in the past year alone. This is due to the weakening of the dollar and the potential for a new form of currency backed by gold being introduced by the BRICS nations (Brazil, Russia, India, China, South Africa). This could cause a significant shift in the world economy, potentially leading to further increases in the value of gold. There are many ways to invest in gold, including physical gold, electronic gold, and gold mining companies, and it has proven to be a reliable way to preserve wealth over time.
➡ The article discusses the potential for gold prices to rise significantly due to a shift in investor mindset from high-growth investments to wealth preservation. Currently, investment advisors do not heavily recommend gold, but as awareness of gold as a hedge against inflation grows, more money could flow into the gold market. This could cause gold prices to increase, similar to how housing prices rise when demand exceeds supply. The article also mentions the possibility of gold prices reaching $3,800 an ounce, a nearly 50% increase, due to this shift in investor behavior.
➡ The company is showing commitment to its shareholders by sharing profits through dividends, which are expected to grow as the company becomes more profitable. The value of gold and silver miners comes not only from the profit they make from selling their gold and silver but also from the economic value of their underground assets. The company Barrick Gold, despite past struggles, is predicted to see a rise in stock due to factors like the accelerating gold price and decelerating costs. Other companies like Contango and Avino Silver and Gold Mines are also highlighted for their potential growth and profitability in the gold and silver market.
➡ The speaker believes that Avino, a silver mining company, could be a quick win for investors as it’s likely to be acquired soon due to its majority retail investor base. The speaker also discusses the potential for significant earnings in the gold mining sector in the coming years, driven by cost cuts and balance sheet optimizations. He emphasizes the importance of investing in hard assets like gold, silver, and energy, as they are crucial for the next economic cycle.
➡ The speaker believes we’re entering a new era where tangible goods, like gold and silver, will become more valuable. This shift is being led by Asia and the U.S. is being pulled into it. The speaker encourages people to invest in these tangible assets now, as they believe their value will increase significantly in the future.
Transcript
Great to see you. The reason why we all have gathered is because, one, we’d like to welcome a bunch of new subscribers. So everyone who’s new to the channel, thank you very much for your support and for your interest in trying us out. We are going to do everything we can to justify your confidence in us and also to our old subscribers. We absolutely love you and we’re always here to serve you. So thank you for rejoining us and for watching. Obviously, gold’s on our mind and it has been glittering along with silver, which I think I’m probably the greediest of us.
Also, I’ll talk a little bit about silver later, but let me open this up and hand it over to Byron for a second. Byron, Byron, you’ve got every trick in the book, every prop. You’ve been around the world. We’ve been talking about this for a while, long term cycles. It looks like it’s finally here. What’s your take on it right now? Well, thank you, Sean and my colleagues. Thank you everybody who’s watching. Again, like Sean said, we really appreciate that you would give us your time and put your trust in us to send your newsletters and emails and whatever.
We’re going to do the best we can to help you out here. If you’ve been around for a while or if you are brand new to the franchise, whatever. Welcome. We are going to talk about gold, mostly gold, silver, precious metals, hard assets. Inflation is out there. You know the story. $35 trillion in national debt. I just saw this thing the other day. That last year, fiscal year 2024, the us federal government total outlays were 6.8 trillion with a t trillion dollars, $6.8 trillion to give us our democracy here. And of that six eight t one eight t was borrowed money.
We had a 1.8 trillion national debt or deficit last year, which is just added to the national debt on which we pay interest, etcetera, 1.8 trillion. It just by size. Take the Defense Department times two. Okay. And you’re in the ballpark there. So that we spent that, we don’t have that money. We borrowed it. If we didn’t borrow it, the Fed printed it. And so we have inflation. You talk about the price of bacon, the price of gas, whatever. Yeah, and the price of bacon is going up and the price of gasoline and the price of a loaf of bread.
I mean, six, $7 for a loaf of bread at the store. I mean, sticker shock for people. You asked for props. This is a Hershey bar. I stopped at the gas station yesterday to get gas and I knew we had this call. I thought, I want to illustrate this. This is a Hershey bar. I’m old enough to remember when you could buy one of these things for $0.10. Okay. Yesterday at the 711 and just the 711. You’ve got them. They’re everywhere. They’re around the world. This thing was almost $2. I think it was a buck 95 or something like that.
And you can say, well, I could buy it cheaper. No, they were charging 20 times the price of what it used to be a long time ago. So this ten cent Hershey bar is now a $2 Hershey bar at the 711. Thats inflation over the course of your life. Look at your house, look at rent, look at college tuition. The dollar purchasing power is shrinking. And when we say the price of gold is going up, the price of gold is going up. The gold hasnt changed one bit. Every atom, every molecule, every neutron and proton and electron in that gold is the same as it was long ago, billions of years ago when it formed in the core of a neutron star.
It’s the value of the US dollar that has gone down, props and such. This is a five ounce gold ingot here. It was minted probably about 9100 years ago on the back, the Republic National bank. You can read that, but I don’t want to bore you with it, but there’s 5oz of gold right here. If gold is, let’s say $2,600 an ounce, do the math. This little thing here, which is about the size of my thumb, this is $13,000 worth of just plain gold. Right now. When I’m finished, it’s going off site to a vault because I don’t keep this stuff around the house.
Don’t bother coming around. But I knew we had this show here. In the olden days, banks used to actually put their names and their marks on gold because banks dealt with gold. Heres another one. This is Republic bank. This is also Republic bank. This is 5oz of silver. Its a different size because silver is a different density than gold. Gold is denser than silver, but they are about the same thickness, but the silver is just bigger. The banks used to trade in these things and the banks used to back up their banking with real live gold.
Well we don’t worry about that today. We have cash money and we have electronic money and everything else. But what we’re saying here is that your dollars, whether it’s the paper in your pocket or the change in your cookie jar, whatever, wherever you throw your extra change or whatever, and whether it’s certainly the electronic money in your bank, what your bank account is and what’s represented by your stock account and everything, you are being attacked every day, every week, every month by inflation. Which leads you from a long time ago, and some of you out there might be old enough to remember, leads you from $0.10 Hershey bars to $2 Hershey bars.
And who knows, in a couple of years this could be a dollar five Hershey bar or a dollar ten Hershey bar. So be careful in terms of preserving your wealth. That’s sort of the background. I’ve got lots more to say, but I don’t want to hog the scene. I mean, Dan Amos, as Sean said, is the hardest working, one of the hardest working investment analysts you’re ever going to find. Dan, why don’t you throw a few words in there from your perch down in eastern Tennessee, which I guess you didn’t get flooded as badly as other people did, but I suppose you had some rain the last week or two as well.
No, we had some rain and thanks for asking and throwing it over. Add that the Fed has gotten more and more influential in the financial markets with each passing wave of market history. And it’s just remarkable. I started my career about almost 25 years ago. The Fed was kind of a sideshow, really. People really focused on earnings, on cash flows, on old fashioned valuation metrics. And this parallel, it kind of parallels what Byron was talking about with the devolution of the monetary system. It used to be based on savings. Banks would take in everyone’s savings, reloan them out, etcetera.
We’d had a gold standard which kept government and banking to a reasonable size relative to the economy. And with every passing cycle we’ve had bailouts, we’ve had deficits out of control, and as a result, the monetary system is really collateralized by Treasuries and that’s why we have. But it’s a big unspoken risk to investors at large and to the economy at large that people really can’t admit, and especially the Fed, because it’s embarrassing. But this deficit is out of control and it’s a real driver of inflation. You don’t see Jay Powell getting these questions, these hard questions at his press conferences asking, hey, what will your rate policy, how will your rate policy influence the refinancing of the treasury bill market? Rough numbers, about 70% to 80% of the national debt.
That 35 trillion that Byron talked about is in T bills, 60 or 70. I believe that means not only do we have to sell almost $2 trillion of new Treasury T bills a year and notes to fund the deficit, but we have to roll over most of the debt load. And the Fed basically, with their rate policy, they determine the rate at which that rollover happens. So the Fed is the Treasury’s banker. It can choose to back as they did back in the Volcker days in the early eighties. He basically put the squeeze on Congress and on the banking system to get inflation under control.
And it was painful. And we thought Jay Powell, when he started this latest tightening campaign, he thought maybe we’d have to go the Volcker route and it would be painful. Well, now the narrative is we’ve had this immaculate disinflation and everything’s fine. We’re going to go back to 2% inflation and a soft landing. And I just think that the odds of that are of quite, are quite a bit lower than the market is pricing in right now. And the reason for that is a lot of stuff goes into the inflation calculations, including owners equivalent rent. They ask, they survey people, what do you think you can rent your house out for? And nobody knows really, we haven’t had a big inflation real estate downturn.
If we had had that, if housing prices were down ten to 20% from their peak, I’d be much more like. Yet I think we have inflation under control. You know, housing prices really haven’t gone down. So the way the Fed has tightened this cycle with its massive seven to $8 trillion balance sheet, it hasn’t really shrunk its balance sheet. It pays interest on excess reserves. It’s been a more of a tightening drama than a real tightening because financial conditions are super easy. Corporations can borrow at very low interest rate spreads. This is nothing like the past two long Fed tightening cycles and just tying this back to the national debt.
I think the big unspoken reason why the Fed wants to get rates lower, but really can’t say this out loud is that what I said earlier with the T bill rollover? Right. The spiraling interest scenario is happening. Everyone sees it happening. And the Fed can kind of, it’s going up at a very sharp rate of increase and the Fed can, can basically slow that rate of increase down of the interest on the national debt by cutting rates. Now, the cost of that is it takes pressure off Congress to ever have a plan to get us back on fiscal sustainability.
Takes pressure off. Right. The banker just said, I’m going to make it easier on you to borrow more money. So that’s not going to stop the deficit as a source of inflation, which it is. A big source of inflation. People don’t want to admit it. They want to blame supply chains, they want to blame Opeche, all these things. Well, you know, $2 trillion, that deficit, that, the way it works its way into the monetary system is through the commercial banking system. You know, when they pay contractors, when they pay Social Security checks, that new money supply works its way into the system and it inflates goods and services prices so that that money is competing with the existing money supply that circulates all the time.
And with the commercial banking, you know, new, new credit creation. So we have, we have all the ingredients for inflation to make another, to just tie this in a bow, make, to make another move up, to call it 3%, 4%. If we go back up to that and the Fed doesn’t return hawkish again, that is the ultimate bull scenario for gold. You could see a stampede into it and it’s still a very, very ignored and very quiet bull market. With that, I’ll turn it over to Zach, what he sees technically regarding flows and so forth. Yeah, yeah.
Thanks. Thanks, Dan. And Byron too. Sean, I wasn’t aware that we were supposed to bring props, so I may not be fully prepared for that. But I will say here we have my Starbucks and I like my coffee. Hey, cheers. Cheers. I like my coffee like the outlook for the us dollar, dark and bitter black. But I’m just thinking about this in terms of what Byron was saying. I think this just plain black coffee cost me 349 this morning. And I don’t usually do that because it’s obviously probably not worth $3.49 or whatever, but I was in a hurry to pick up the kids and get them to school and all that.
So sometimes you got to do what you got to do. But it has been interesting. I may be the baby here. I’ve only got 25 years or 24 years of experience in the market. Dan’s got me beat by a year? I don’t know, Sean, Byron, you guys might have both of us beat, but I’ve watched this phenomenon and it has been very interesting to see just how prices put pressure on the normal consumer, specifically on retirees. And I’ll touch on that a little bit, because my focus in the markets, especially over the last ten years or so, has been income and helping people who have built their savings, who have worked hard, who have put money aside for retirement, then to be able to generate the income from that retirement, to cover your day to day expenses, to live a happy life, to be able to be generous to the causes or the people that you care about.
And inflation really puts a damper on that type of lifestyle. Let’s say that you saved up enough in retirement and you said, okay, I need to earn. Let’s just say I need to have $60,000 because maybe you don’t have to pay a mortgage or rent or whatever, your house is paid off, but you need to have $60,000 of income per year to be able to do the things you want to do, to be able to get your starbucks, to be able to take your grandkids out, to be able to go out to dinner once a week or whatever that would be.
Well, that $60,000 right now might mean that you need $70,000 in three or four years, maybe faster than that. You might need $90,000 in a decade. And that number just keeps increasing and increasing because of this inflation issue that we’re talking about. So if you’ve prepared and you’ve got a bundle of savings and you know that, you know you can make a 3% or 5% or whatever, that percentage number that you, you’ve got in your mind off of the savings that you’ve got, that number has to increase over time, because every dollar that you earn next year, the year after, the year after that really is less and less.
One of the things that I really focus on when it comes to income is figuring out how to grow that income over time. It’s not good enough just to have the income from your savings be the number that you need. It’s important for that number to grow as fast or faster than the rate of inflation. And while we do have a lot, just as Dan and Byron were talking about a lot of things to be concerned about with the national debt, with, with the interest paid on the national debt, with the devaluation of the dollar, because we do know that the more trouble the US is in economically and financially, the more pressure that puts on the US dollar.
But the counter to that argument is that when dollars become weaker and weaker, it takes more dollars to buy stuff. So if you own stuff instead of dollars and buy stuff, we talk about commodities that hold their value, specifically gold and silver. Then that winds up being a good hedge or sometimes even an accelerator for inflation. I don’t just want you to keep up with inflation, I’d like you to beat inflation and to wind up with more spending power over time. And so precious metals can be a really good way of not just protecting your wealth, but growing your wealth in an inflationary period.
And there are some really good income plays that you can, can tap into. Historically, Warren Buffett has been one of the naysayers for gold and silver, saying that it’s one of the only assets that you dig up out of the ground. You spend money processing it and then you bury it again in a vault or whatever like Byron was talking about. And he said it doesn’t have any economic value. And functionally he might be correct. But that’s not the way the market has worked over the last 5000 years. So if I’m a betting man, and I am a betting man, I would say let’s go with what has worked over the last 5000 years.
Reason to expect that this year or this decade or this century is going to be something different than what we’ve seen over the last 5000 years. And precious metals do help to not just store, but also create extra value. And that extra value can actually lead to income depending on how you play it. So that’s my two cent or maybe $0.01 or thirteen cents. I can’t remember which way that goes. That’s brilliant. Thank you, Zach. That’s great. So gentlemen, I mean, I think you very well established the foundations of why we are such precious metal bulls at the moment and probably well into the future if I can hand it back to you.
Just go. Where do you think gold will be in the next six months? And again, it’s incredibly hard to predict these things, but if we could get your outlook over the next six months and why you think it’s going to be there. And Byron, we’ll lead off with you if that’s all right. Okay. Well, the price of gold is very dependent on, you know, what the perceptions of the dollar and the future of the dollar. So people look at the dollar index. When the dollar goes up, gold goes down. I mean, dollar goes down, gold goes up.
Thats the basics of it. Sure. Right now for the last year, and a half or so, the perception of the dollar has been weakening, weakening, weakening. Which is why a little over a year ago you could buy an ounce of gold. The spot price of gold about a year ago was around $1,800. Now that price of gold is not long ago, it just barely touched 2700. So that’s a $900 difference. On the $1,800 basis, that’s a 50% move in gold in a year. When Zach was talking about long term preservation, if you go back 20 and 25 years, your annualized return, if you had bought gold in 2001, 2002, something like that, your annualized return for the last 22 years is something over 9%.
Thats pretty good. Go do that in the stock market. Yeah, sure you could have bought Nvidia and whatever, but im just saying if youre just playing the indexes, the last 20 some years of gold has been over 9% and thats steady. Sure you got to buy the gold, you got to secure the gold. You hang on to it. At some point you want to convert it into cash money that you can spend because you don’t go to the supermarket and pay for your groceries with a gold coin. Although if I was the supermarket manager, I would take your gold coin and definitely make change.
But that’s not how we work. But it is doable and there are many ways to do it. And if you’re new to this game, there’s so much to learn about gold. I mean there’s physical gold, there’s like gold that’s been mined and here it is right there, 5oz. This gold was mined 100 years ago, probably from the homestake mine in South Dakota. Turned into this little ingot and it’s been ever since. Like Zach said, we mined it out of, you know, a mile and a half beneath the earth and you know we buried it. You know, we buried in a steel vault down and you know, down in a very secure bank, you know, but you can have the physical gold, you can have the electronic gold, gold ETF’s, you can have gold miners, big miners, medium little miners, explorers.
We’re talking dreams in the ground. Oh yeah, I see a brown stain on that hillside. Well yeah, someday that brown stain will be a gold mine, but it’s not there yet. You’ve got a long ways to go, so there’s lots of ways to own gold. But fundamentally in terms of preserving wealth over time, this stuff has been around for 5000 years. They say that, oh, you know, an ounce of gold has always been able to buy a really nice men’s suit? Well, I don’t know. I wasn’t around in the days of ancient Rome. I suppose you could have bought two or three really bad togas for an ounce of gold or whatever.
If you were a roman centurion or something, they probably paid you for winning your battle in the coliseum or something. Okay, great. But that was then, this is now. We don’t think in these terms, but I do. But looking right now and looking ahead, the price of gold is going to go up. I promise you. It might fluctuate a little bit here, and it’s going up in not too long from now. The BRICS nations. The BRICs, Brazil, Russia, India, China, South Africa, and about 20 some others of the world, which, if you add up the population is something like two thirds of the people in the world.
A billion and a half Chinese, a billion and a half Indians, 150 million Russians, a couple hundred million Brazilians. Start adding it up and you’re getting into some seriously big numbers. They’re meeting to come up with this new form of currency to compete against the dollar. The BricS unit, they’re going to call it a unit, and from what I have read, the unit is going to be backed, they say, by 40% gold, 40% of the values. Well, that’s 40% more than the us dollar is backed right now. So right away, there is going to be a monetary earthquake in the world.
And it really is one of those things where you could wake up and within a day or two or three, the world markets are going to say, whoa, what just happened? Holy smokes. Two thirds of the world doesn’t need nearly as many of those dollars to buy oil, to buy wheat, to buy soybeans, whatever. They don’t need those dollars. They’re going to come back to the US and be inflationary. So I get it’s a long way of getting into where’s the price of gold going? Well, this morning, it was 26.50 /oz that’s the spot price before you pay the dealer markup to actually buy something physical.
But by the end of the year, I could see us well into the. In six months, and this is whether Kamala wins or whether Trump wins. If Kamala wins, it’s going to be a huge rise. If Trump wins, there might be a. Might give him a grace period to see what he does in terms of running the us government. But I definitely see $3,000 gold coming. And with that $3,000 gold, there’s that sucking effect. The gold ETF’s, the gold miners, the intermediates, the explorers, the juniors, they’re all going to be lifted by that, by that golden tide.
I agree with Byron. There are many different factors that drive the gold price, obviously the international monetary factors that he mentioned, the BRICS, the Fed’s policy, and obviously the election next month. I agree completely that if Trump wins, and it’s currently Jim’s Rickard’s prediction that Trump will win and pull it out, I do think there’s a chance for a correction, but I would buy that diphtheregh, because people remember back to when Trump won in 2016 and 2017 and beyond. He likes tax cuts, he likes deficits, he likes to spend heavily. And he has a different idea about where that spending should be directed to bring manufacturing home to help labor, et cetera.
And the Fed, just knowing them and how they operate and the models they use, they’re going to look at that and they’re going to be like, you know what, we’re a little concerned about the inflationary impact of the Trump. It’s kind of funny how you probably all have read and heard that about 90% of Fed officials, maybe 95, are democrats, so they can kind of make excuses to say, oh, we’re not going to worry about the deficit under the current administration, but they might actually start talking about it under Trump. So that is a scenario for a correction.
And I don’t think it’ll be that deep. Because here’s the most compelling thing in my mind about why gold and gold stocks could surge in the next six to twelve months is it’s been a very quiet, orderly bull market. It is not rowdy yet. I’ve been around long enough to see when it gets crazy, when flows start going into ETF’s and mutual funds, people just leave the valuation argument behind. I just want to buy it. They look ahead to if gold goes to 30 00, 40 00, 50 00, nobody on the sell side on Wall street is talking about those type of scenarios.
But if they happen, you could see the majors go up multiple fold, you could see the intermediates and juniors go up ten to 20 x. And obviously that’s not a guarantee. That is a plausible scenario, because when you run through the reserves, they have in the ground the marginal cost of pulling it out, refining it and selling it. And you net outlandish, you know, all the costs relative to that revenue at, call it five, $6,000 gold price, you get earnings per share numbers that are about half of the current stock price. And the thing about bull markets is a new monobaric and Agnico is not going to stay at two, three times earnings at the current price.
What happens is the stock price goes up as fast or faster than their earnings. And with high fixed costs, when you have a surge in the price of their product, a lot of it falls to the bottom line. And so this is a quiet, orderly bull market. Like I said, I follow, I track flows carefully and it is shockingly low. The amount of capital that’s flowed into gold miners. The GDX and the GDXJ ETF’s are the overwhelming alliance share of assets in the ETF space. And it’s combined only 20 billion with a b dollars versus, you know, multi trillion dollar market caps in and funds in the, in the tech world.
So if people want to reallocate toward this sector, you know, it’s, it’s, you can see a lot of bids and not a lot of offers, and that’s how markets get disconnected on the upside. So I’ll just turn it over to Zach, see what he has. Yeah, I love all the stuff that you’re talking about, Dan. When I think about gold, let’s, let’s take a step back and talk about the technology stocks that Dan mentioned just now. A lot of times I like to talk about bubbles. And when we, as investors think about a bubble, we think about the bubble bursting, right? And things are sky high and they come down sharply.
But think about this. How does a bubble get built? What causes any asset class to go from a normal or low priced stock or asset class all the way up to bubble mania kind of ring? And I think that’s, that’s really what we can focus on with gold right now. As Dan mentioned, investors are not heavily allocated to gold investment advisors. So your Merrill lynch or your schwab or whatever advisor that Morgan Stanley you might go to and say, hey, help me out with how to manage my retirement. Those guys are almost zero exposure to gold.
When they make a recommendation for how to allocate your assets, they might say, well, you should probably have maybe one or 2% in gold because it’s kind of the thing to do or it’s more balanced or whatever. But none of those guys are saying you should have a significant portion of your wealth invested in gold or in silver or any other precious metal. Play gold miners. And so as we start to see the price of gold move higher, as people become aware of this as a good hedge for inflation, as the whole mindset of investors shifts from hypergrowth, Nvidia AI, all of this excitement, to something that says preserve my wealth, be careful, be more wise with how I’m allocating my retirement.
As that mindset shifts. There’s a ton of money just, and this is just retail investment. There’s a ton of money that could move into the gold market, and that doesn’t even touch central banks like China or many other central banks across the world that are building larger and larger allocations to gold. And so I do think that we haven’t really scratched the surface yet when it comes to gold and the money that could flow into gold. And as Dan was talking about, just the basic concept for how markets work, there are buyers and there are sellers, and if there are more buyers than there are sellers, the amount of assets or whatever that those sellers have available will deplete very quickly because the buyers are taking that inventory.
Whatever is on the market, when you have fewer and fewer sellers, the only way to find more of the asset that you want to buy is to say, I will pay more. Okay, I’ll pay more. Okay, I’ll pay a little bit more. We’ve seen that in the housing market, right? There’s not enough houses available for everybody. And so we’re seeing home prices go higher and higher and higher because people say, I need to have someplace to live. Okay, it hurts. I might not be able to go out to dinner for, you know, for a few years, but I will pay that for a house because I need it.
Well, people are going to be doing the same thing with gold and saying, okay, I’ll pay a little bit more. Okay, I’ll pay a little bit more. And by the way, remember what happened with Nvidia, where the stock kept going higher and higher, and the higher it was, the more attractive it was to other investors. It didn’t matter how much they earned, how much they earned in profit. It didn’t matter what the value of the company was. It was just people saying, shiny object, right? No pun intended. With gold, but shiny object, this thing is moving higher.
I want it. Well, we haven’t seen that yet. With gold, it’s been an orderly market. The price has been moving higher, but we haven’t seen this like, oh, my gosh, I need to buy gold. And when that starts to happen, the higher gold trades, the more attractive it becomes to investors, and the farther, well, see that price move. Six months. It’s hard to say because like Dan said, there could be many different factors affecting the short term price of gold. But I don’t think it’s unreasonable to think that gold could move up to $3,800 an ounce, which is almost a 50% increase.
I know that’s a big number, but think about how fast Nvidia went and doubled or went up by 50% over a few months period of time. And that was when there was excitement in the market. The shift of expectations from this is a stodgy, somewhat interesting investment asset class to I need to have. This could push the price of gold up by 50% or more in a very short amount of time. Trey thats a great observation, Zach. I really like that a lot. Im going to piggyback off everything each of you said for my pick, but Im still smarting from 2016 when Trump got in and gold took a nosedive because I got long like there was no tomorrow thinking, wow, I’ll get ahead of this thing and basically got my legs taken out.
And that is my one big worry over the next six months. How is this election going to affect everything? And I think, Dan, you made a great point that the Fed, being made up of PhDs who were paid for by the Fed and will naturally be Democrats because of that, because the government paid for their PhDs, will of course jump in on the Donald’s plans and may sit there and go, yeah, you know what, maybe we will hike a little bit and bother them. And funnily enough, I had the dollar index up, unfortunately owe our other colleague Alan Nuckman dinner because it did touch below 100.
But we are trading at 103.23 right now. And the dollar has been rocketing over the past couple of weeks, which I don’t think anybody saw coming. I certainly didn’t. I thought it was going to head down after 100. Very, very interesting. But for me, I’m going to go a little bit more conservative just because I think we’ve got a lot of bumps in here. I do think Trump will win. I think he will pull it out now. I thought for a while there we were going to be hosed with Kamala, but I think Trump will win.
I think though, there will be an enormous amount of pressure on the price of gold once he gets in again. And then after a while I think it’ll go up. I’m going to just stay with 2800 for the next six months. After that, I’ve said a $3,000 golden for a while down the road. I think that will happen. I think you also bring up a very interesting point about market microstructure. And when people look at the gold bid offer, like our good friend Rick rule said, you want to be on the bid when there’s no competition.
And I think right now, when you look at gold holdings, Rick rule, our good friend, had said, listen, the average allocation of gold right now is a half a percent. So, Zach, what you said about the Morgan Stanley guys not recommending it, that’s absolutely true. Right now, Rick had mentioned that if we just go back to 2%, which is the normal holding, that’s a quadrupling of the gold price from here, which is a $10,000 ounce, which I’m absolutely positive we’ll see over the next five to ten years. And if we have that, that sudden adjustments where we have a market dislocation and the powers that be get together and then revalue, I think Jim’s.
What’s Jim’s scenario? $26,000 an ounce. I think if that happens, which is, wow, again, absolutely plausible, impossible, gold might turn into that Veblen good, where the laws of supply and demand inverte. And as it gets more expensive, as you said, it just gets more and more attractive. Gold will turn into a Birkin bag, and everyone will want it. So I just don’t think that’s going to happen right yet. But I wouldn’t be surprised to see a $3,800 out sack. Absolutely. With that, gentlemen, let’s talk about a ticker, our favorite tickers right now. I think that would be something for our subscribers, new and old, to like to hear about and give them options to explore and see what they’d either like to or not like to join us wherever we are.
So let me go back to Zach. We’ll go reverse order this time. Okay, so, Zach, what’s your favorite pick right now? And I’ll bring the chart up as we do that. Yep. Yep. I’m going to go with Wheaton Precious metals, which is Ticker WPM. It’s kind of a diversified mining company, but they also have gold and silver royalties. One of the reasons I like Wheaton is they actually have exposure to silver as well as gold. And, Sean, you were talking about silver and being a little bit more greedy. I think there’s an argument to be made that when investors in general are greedy, they often go towards silver.
And when investors are fearful, they go towards gold. But both of them are great inflation hedges, and both of them obviously will do well when precious metals are in vogue, which I think we’re heading into that. We definitely already are in that type of season. But Wheaton can profit both from gold and silver because they do have large silver holdings. One thing to think about are two real quick points about Wheaton. One is they pay a 1% dividend, which isn’t a lot, but at least shows that they are taking their shareholders and they’re actually willing to give their profit to shareholders.
And I think that dividend will continue to grow as the company becomes more and more profitable. And obviously, higher gold and silver prices will drive those profits higher. The other thing to remember is that gold and silver miners benefit not just from the profit they make from selling their gold and silver to the market, but also from the value of the underlying asset. Think about book value. Except it’s not book value, it’s actually the economic value of their underground assets. So if you have a mine that has however many million ounces of gold every dollar, let’s say it has a million ounces of gold, every dollar, that the price of gold goes higher should add about a million dollars worth of value to that company.
Of course, there’s costs of exploring and producing that gold, but those costs aren’t necessarily going to go up just because the price of gold went up. So somewhere around that same level, you can just look at the underground reserves and increase the stock price by that amount, or the overall market cap by that amount, just because the underlying price of gold or silver moves higher. So don’t place a normal multiple of profits on these stocks, because that doesn’t really incorporate the value of the assets that are underground. That will continue to increase as gold and silver prices go up.
So wheat and precious metal. That’s my story. I’m sticking to it. Brilliant. Daniel, what do you got, pal? Yeah, Barrick gold ticker is gold. Very easy one to remember, but it’s a household name. It’s been struggling for a couple of years. Operationally, they had a few hiccups at their various mines, but this one in particular, it owns about a two third stake in a joint venture with Newmont in the state of Nevada called Nevada gold mines. And this is an enormous operation. They have giant rock trucks and they consume a lot of diesel. So with the diesel price kind of correcting and their costs, which have surged a lot in recent years, decelerating and the gold price accelerating, I dont think the estimates are high enough for this stock.
I looked at the quarterly estimates and the estimates looking out next year and just pulling them up now. The earnings per share estimates are $1.28 here in 2024 and their dollar 78 next year. I think with the trends that I just mentioned in their marginal economics, this estimate is way too low. And one thing that we’ve noticed about this market I mentioned before about the Fed dominating the stock price, marginal stock prices. Well, one other thing that you notice with every earnings season is if you see a big earnings miss or a big earnings beat with a guidance increase, those can drive gaps higher in stock prices.
So as Sean’s showing here in this chart, you saw a gap higher in, I believe it was late August or late July, August in this stock where they had a beat and a raise. And I think they’re setting up for another big beat and raise. And so Barrick gold is one that I could see going to dollar 30 within six months. And it really all depends, going back to what I said earlier, how ruly or unruly this bull market gets. There have been many times in history where Barrick and GDX, the ETF that’s popular, has gone up 50% in a month.
I mean, when it gets, when you have that market dislocation, where you have no incremental sellers and everybody wants to pile in, you have to just raise and raise and raise that offer. And that’s when you see, and there are lots of funds out there that just constantly scan the market with AI and quants and so forth, they scan the market for accelerating moves higher in charts and they pile in. So I love the fact about this stock and the gold sector at large that its still quite ignored. Its still a small percentage of everyones portfolio.
Yet I have enough broad knowledge from following all types of investors over the years, whether its quants, whether its fundamental analysis and all these things. When you have everyone, this sector light up as a great bullish opportunity. At the same time, that’s when you have these surges higher in very short periods of time. Wow, fantastic. Okay, Barrick Gold for Dan Byron, who’s your favorite? Okay, thank you. Zach talked about wheat and which is a great company. I’ve followed it for years. And Dan talked about Barrick, which is a very well run company. Now, it didn’t used to be so well run 810 years ago, but they really cleaned up their act.
I am going to be a little more aggressive here, a little more edgy in what I’m doing here. I’m going to go with a company with a smaller market cap, but with an immense upside, in my humble opinion. I mean, I’m a geologist, I’ve been doing this for years. I’ve visited a couple of hundred different gold companies over the years. I mean, been on site, talked to the geos, looked at the rocks, et cetera, et cetera, et cetera. This company is called Contango. C o n t a n g o c t g o. Charlie, Tango, golf, Oscar, CTgo.
When you look at the chart, you think, well, wait a minute. It’s just sort of flipping around here. Yes, because this has been a development company for the last couple of years where they were developing a project. They’ve got the project up and running now, and just this summer and now this fall, they are finally in the production side. And so things are going very well with Contango. They work in Alaska, so they’re a us company. Management is small and tighten. An absolute scholar of the mining industry. Rick van Neuenhaus runs it. Bonnie Bronfren is the head geo.
She’s wonderful. They are mining a very high grade of gold ore at a place called Mancho. It’s sort of like a, it’s like a native, it’s like a First nations word, mancho. And they mine a very high grade of gold from the surface, so they don’t have underground mining to worry about. Theyre mining high grade gold at the surface, and then they truck it up to the Fort Knox mine owned by Kinross, which is near Fairbanks, Alaska. So they dont even have to worry about opening a mine. They dont have to worry about permits, air permits, water permits, running a mine.
Kinross processes the ore, and they have a deal with Kinross. They split the lucre there. So they mine high grade ore. They have somebody else process it. They get the gold bar, and then they sell it, and then they divvy up the money. Now, in terms of what they’ve done so far, they’ve been paying down some debt because getting everything started, you have to borrow money, and you owe people this. They’re paying all that down. But once they get that behind them, this is all their money. This is all bottom line kind of money. Now with that bottom line kind of money, they have other programs going on.
They have a really high grade mind that they’re working to restart called lucky. You know, beautiful, beautiful names for these mines in these old mining districts. And, you know, and that’s happening. And then they just made a deal over the summer with a really with a wonderful company that it was called high gold. And they bought what they call the Johnson tract, which is down on the cook inlet of Alaska. I don’t want to get all geographical and technical on you. Super high grade ore deposit. This is exploration upside like you wouldn’t believe. So what I like about Contango is that we are at the beginning of a production cycle and nobody has quite figured it out.
I mean, when I say nobody, some people have, but like big market has not. There’s no sector rotation into contango yet. There should be. They’re just at the beginning of a production cycle. They’ve got high grade ore. It is very processable. Ken Ross is doing all the heavy lifting for that. It’s all coming out in the, in the metallurgy. It’s all good. They’ve got exploration upside, you know, with the lucky strike. And then they’ve got even more exploration upside with this Johnson track down in the cook inlet. This is, this is, you’re not going to put everything into Contango.
You’re going to buy other things as well. But this is one of those hip pocket plays. You buy into it, you don’t worry about it. You give them six months, you give them a year, you go back and you go, wow, holy smokes, look at that. It’s very well run company with a lot of gold and a great future. That’s what I think. Fantastic. Over to me, I am going to go with avino silver and gold mines. Like I said, everybody, I’m a bit more aggressive right now probably. I am indeed fearful I’ll be less fearful when the Donald wins, I hope.
But I’m going to go for greed. I’ve liked Devino for a while and full disclosure, I have owned it since about $0.80. It’s been bobbing around and then it’s just broken out of a pretty good consolidation range here. But besides the technicals that I really like about this, and you can see the clear uptrend there. After core mining and Silvercrest announced, well, actually core announced the acquisition of Silvercrest. It wasn’t a merger. Aveeno is a sitting duck. And I think this could be a very quick win because 80% of Avinos shareholders are retail investors. So theres no one really that could block a takeover.
And I think at this price, with their all in sustaining costs projected to decrease over the coming years and a lot more silver production to come on by 2027, I like them as a takeover target. So I wouldn’t be surprised in the next three to six months to see these guys gobbled up again. If you look at guys like Don Durrett, who’s an excellent mining analyst, over@goldstockdata.com dot I really like don stuff. He thinks this was a potential 50 bagger, 25 to 50 bagger, which would be just amazing. I don’t think we’re going to get to that, because I think they’re going to get taken over a lot sooner than that would be able to happen.
However, it is still a multibag play, even if they get taken over. With that said, gentlemen, why don’t I. Let’s wrap it up with the final word. I’ll give you the final word. Dan, we haven’t started with you yet. Any final words? Let’s see what Dan has to say. Yeah, just a little bit more detail on the m and a angle. We’ve seen it actually pick up, interestingly early in this bull market, and I think we are very early in this gold mining bull market, and it didn’t really. I was around and following the sector very closely from, call it zero two to zero eight, and that was a great run.
But the m and a cycle didn’t really pick up till there was a few big deals. In 0708, there was a few big deals. Ken Ross bought Redback. It’s kind of an infamous deal, actually. In 2011, 2012. They overpaid for it. But you’ve seen some very savvy management teams, whether it’s Alamos buying out Argonaut gold and their Magino project at just pennies on the dollar, way less than what Magino invested into it. And by doing that, they’re sowing the seeds for massive earnings out 2345 years. Right. Because Magino is a great project. So Argonauts, not Argonaut, but Alamos AGI is another one I like.
We’ve recommended in the past that readers of strategic intelligence know well. But my main point there is the whole, the phenomenon of them getting capital discipline and having a nasty long bear market. When you see that in any resource sector and any commodity sector, the actions that they take at the board and management level really sets you up for big upside earnings surprise when the commodity goes in your favor. And you’ve seen a lot of cost cuts, a lot of optimizing of balance sheets and portfolios. Newmont’s doing that now. They bought new crest and they’re selling off some of the mines they don’t like to smaller intermediates.
When you see all the circulation, recirculation of capital, when you see M and a this early, I think it makes it that much more likely that looking at three, four, five years, we will see earnings per share numbers that will people probably can’t even imagine now, especially if you see gold in the three to $7,000 range, call it. These are just rough numbers. And when I picture that scenario and your Morgan Stanley, financial advisor looking at that, we in this business, we try to anticipate what these financial advisors will be doing in six or twelve months.
That’s essentially what we do for our readers. We’re always looking for these small probability, but high impact type of trades. And just, I would say to wrap it all up, just try to beat the rush. Do your homework now. Identify the companies you like and just hang on and just check in every 612 months and see how they’re doing on their earnings and so forth. Yeah, I would just, the parting thoughts would be, there’s a book that I’m reading called expectations investing, and we’ll talk about that more in a future call, maybe, but it talks about how market prices typically move and are driven by changes in expectations among investors.
So it’s not the fundamentals matter. Absolutely matter, but the fundamentals cause those expectations to change from people, to turn their attention from one area of the market to another area of the market. And I think we’re at a really watershed event, a really important point in history, where those expectations turn from some of the glitzy areas of the market that many people have been invested in to some of the more solid, very fundamentally sound areas, including precious metals. And so as those expectations shift, that could be a big part of what drives prices higher and creates a lot of wealth for those of us who are in this area of the market ahead of the coming shift.
Well, I’m glad if you’ve stayed with us this long. Thank you very much for bearing up with us here. I want to get back to what I talked about at the very beginning. I mean, if you rewind the tape to the first comments that I made, I mean, I’m going to show you. This is a dollar 20 bill right here. Normal $20 bill. You might have one in your pocket, might have a few of them. It’s what you get at the ATM machine. I want to show you a different kind of $20. This is a $20 Federal Reserve note from 1914.
This was one of the. 1914. This was the first year of the Federal Reserve. And it’s series 1914. And it’s dated and everything else, it’s obviously, it’s an artifact. You buy it on. It’s worth something as a museum piece, basically. I would never take this to the 711 and buy a Hershey bar with it or something, but this is a Federal reserve note, and it’s got a lot of writing and everything else on it. But one of the things that it says is that the United States government will pay to the bearer the sum of dollar 20.
Well, what they meant in terms of the sum of dollar 20, they’ll pay you dollar 20 of gold. What was dollar 20 of gold back in 1914? $20 of gold back in 1914 was a $20 gold piece like this. This is a $20. This is from 1908. But this $20 unit, this note from 1914 would have bought this gold piece, or you could have taken it to a national bank and traded in this for that. And there you go. Well, to buy this thing today. To buy this $20 gold coin today, aside from the numismatic value, the gold alone on this thing is up around the $2,600 range.
So you need 130 of these modern $20 bills to buy this guy today. Now we’re talking. Well, that’s been a century. I mean, a lot of things happened. World War one, world War two, the depression. Yeah, I get it. Okay? But we are at a point where $35 trillion of debt, $1.8 trillion of national borrowing just to cover the budget for last year, 5% interest on that, which Dan Amos talked about earlier, where the curve isn’t just going to start to move like this. The curve is going to start to go up. The curve is going to start to get bigger.
We’re in this turn of the curve point, the asymptotic part. Things could get really dicey a lot faster than what you think. And it gets back to I mentioned earlier, this whole BRics thing, where theyre going to come up with a BRiCS unit, which is 40% backed by gold, which I said is 40% more than the us dollar. This used to be backed by this. Hello. This was 110 years ago. Now today, this $20 bill, it’s really not backed by anything. It’s backed by the full faith and credit of the us government, which means that the full faith and credit of the same government that runs FEma in North Carolina, that runs the FBI chasing down grandmas who spent 15 minutes in the US Capitol, all of those sorts of things.
The same government that’s been sponsoring this war in Ukraine that we’re losing, the same government, you name it. What does this great, wonderful government of ours do? Just asking, in terms of what is the faith and credit of the us government? Well, I hope we restore a semblance of that faith and credit in the us government. Good luck to us all along those lines. But in terms of what you can do out there, readers, viewers, subscribers, people who are just interested in this, educate yourself. I mean, this is just an hour long video here. We can’t tell you everything.
We have no universal theory of everything, but we’re telling you that hard assets, gold, silver, energy, other copper, lead, zinc, all those things, these are all very, very important in the next cycle of the world economy. You could wake up one morning and your $2 Hershey bar, you know, is on its way to being a $5 Hershey bar, a $10 Hershey bar. I never thought that the ten cent Hershey bar would be a two, a $2 Hershey bar. But this is what, you know, this is what, you know, 50 or 55 years will do for you.
And, you know, where does it go from here? So we’re, we’ve come full circle, at least in my view. You know, back to the beginning, you know, go out and have a Hershey bar. Thank you. That’s awesome. Oh, boy. I’m so glad I don’t live anywhere near Hershey bars. But anyway, I’ll wrap it up by saying I think, of course, you each made brilliant points, but to kind of echo what Zach was talking about, I think we are in a, on the cusp of, I wouldn’t say expectations differential, which, which is kind of Zach’s way of looking at it.
I think we’re on the cusp of the age of stuff again, and we’re going to see a capital rotation from, like you said, from apps and stuff that doesn’t really exist except during the ether to stuff that’s in the ground, stuff that we make other stuff with. And it is in large part, we’re being led into this by Asia and everything that’s going out, going on out in the east right now. And we, of course, try to keep an eye on that as well. Obviously, I’m in Italy, so a little bit closer to it. But I think the United States, in a lot of ways, is getting dragged into the new age of stuff almost against its will.
And it’s happening, folks. The great news about that is that there’s still time. There’s a lot of time. I think this is not going to happen overnight. I mean, of course, it’s plausible that the bankers get together and go, okay, we’re going to revalue gold to $26,000 an ounce. It’s a possibility, of course, but I think for the time being, especially looking at the next few months with the Donald versus Kamala, I don’t think that’s going to happen. I think you’ve got time to look at first the four tickers we were looking at. Look at your ingots.
Look at your, your coins, look at miners, look at the indexes, all different ways you can own gold and silver and by God, participate, because if you don’t, it’s going to be one of those things that you’re going to regret and probably never get a chance to take advantage of again. So please, please, please do so. And with that, I guess we’ll wrap it up. So, gentlemen, always a pleasure to see you. Thank you so much for your contribution. So for Byron and Dan and Zach, I’m Sean. And we will catch you sometime. Thanks again for all your support.
Thank you.
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