'The Start of a Major Bull Run'

Earlier this week, the price of gold hit a new all-time high...

The precious metal has climbed higher amid uncertainty about the future of interest rates – and when the Federal Reserve will finally start cutting them.

But no one seems to be talking about it.

So Health & Wealth Bulletin Senior Editor Laura Bente and Retirement Millionaire Senior Analyst Jeff Havenstein sat down to talk about what's going on in gold, why now is still a good time to buy, and how you can start adding gold to your portfolio...

Laura Bente: Depending on whose stats you believe, anywhere between 10% and 40% of Americans own gold. Despite its recent rise, it seems lots of investors are still ignoring gold. Why do you think that is?

Jeff Havenstein: Well, there's nothing exciting about gold. Skim the recent headlines in the Wall Street Journal or Reuters and you'll find stories about the "Magnificent Seven" or the recent IPO of Donald Trump's media company.

We live in a world of clicks. Publishers just aren't going to get many if their front page is loaded with gold stories.

The price of gold is currently sitting near all-time highs, but you're right... no one cares. In fact, we're seeing people get out of gold exchange-traded funds ("ETFs").

According to the World Gold Council, global physically backed gold ETFs collectively shed $2.9 billion in February. This was the ninth consecutive month in which gold ETFs saw outflows. And again, the price of gold is hitting all-time highs.

This is setting the stage for what I believe to be the beginning of a massive rally in gold...

Laura: You mention a potentially massive rally in gold. But we often write about gold as a way to protect your wealth, not grow it. Do you see gold as more of a protective asset than something investors should expect to make big returns on?

Jeff: Am I breaking the rules if my answer is "yes" to both?

If you own gold, you know it will have value no matter what's happening throughout the world. It's the ultimate protective asset. Many great investors I know hold a lot of physical gold in their safes at home and are unlikely ever to sell.

With that said, there are times when you want to own gold more than others. I believe today is one of those times... And that means you should expect big returns on that.

Laura: But we still regularly call gold our "ultimate chaos hedge." Can you explain why?

Jeff: Dr. David "Doc" Eifrig has long maintained that gold, along with other hard assets like silver, timberland, and even farmland... should make up a small portion of your portfolio in the event of crisis. If the world spins out of control, you will always have value if you have timberland, for example, because folks will always need to build homes.

Gold, on the other hand, is a physical asset and has been a store of value for thousands of years. Gold coins were minted for commerce beginning around 550 B.C. No matter what happens to the economy – even if banks collapse and our economic structure spirals into oblivion – gold will always have value. (We think the same thing about silver... The words for "silver" and "money" are identical in many countries.)

Gold has several key characteristics that make it so universally attractive.

  • It's easily transportable. Unlike, say, land, you can bring gold wherever you need to make a transaction.
  • It's divisible. If you owe two people money, simply split your gold bar in half.
  • It's consistent around the world. Gold mined in China is just as good as gold mined in South Africa.
  • Its supply is limited. You can't just create more any time you feel like it. And even in today's era of money-printing, central banks still keep huge gold reserves. Having gold in the bank makes for a credible currency.

This makes gold the ultimate chaos hedge. It has historically held its value across borders, cultures, and political systems... in peacetime and in war.

Laura: Why now is the time for gold? My sense is that a lot of investors are afraid to buy it today after it has been on a nice run recently?

Jeff: I'll give you three main reasons why I, along with the rest of the Retirement Millionaire team, think gold can still shoot much higher...

First, gold prices are rising but no one cares. Again, money is flowing out of physically backed gold ETFs... To borrow the mantra of the great Steve Sjuggerud, gold is cheap, hated, and in an uptrend. That's a powerful recipe for even higher prices.

Second, interest rates are going to fall soon.

The knock against owning gold is that it's not a productive asset. It doesn't pay any yield like a stock's dividend. Your money just sits there, and that turns many folks away from it.

Since all assets compete with one another, if you can earn a decent return in a bank account or a bond, gold becomes less appealing. With interest rates sky-high today, most investors will choose a U.S. Treasury bill paying 5% instead of a gold fund paying 0%.

But... when interest rates fall, gold looks better by comparison. The Fed has already stated that interest rates are coming down later this year. This will be good for gold and should attract a lot of new buyers.

Finally, the U.S. dollar is likely going to fall as well.

You see, what really drives the price of gold is the currency it's valued in. When the dollar is strong in relation to other currencies, the price of gold goes down. And when the dollar weakens, the price of gold goes up.

When interest rates fall, yields on U.S. government bonds will be lower. As a result, fewer people will be rushing to own dollars. Also, the U.S. dollar appears to be overvalued after a strong run since 2008. It's due for a breather... Historically, we usually see these big up-cycles in the dollar followed by long stretches down.

Add everything up, gold at $3,000 an ounce doesn't seem all that unrealistic.

Laura: What are a few of the ways your average investor could get started investing in gold?

Jeff: If you're just getting started in gold, a good place to start is to look at gold bullion coins.

These coins sell for a small premium over the spot price of gold. Typically, the premium is around 5%. But that can fluctuate based on supply and demand.

Bullion coins get their value from their gold content – not from their face value or collectability. Popular examples include American Gold Eagles, Canadian Gold Maple Leafs, and South African Krugerrands. (You can also get bullion coins in silver.)

If you're putting a larger amount of capital into physical gold, then bullion bars might be the best route for you. You can check your local Costco as it sells gold bars, but the company does have trouble keeping them in stock.

Finally, one of the best one-click ways to get exposure is through the SPDR Gold Shares (GLD). The fund invests in gold in one way – holding physical gold bullion. By buying shares, you are getting direct exposure to the price of the commodity. It lets you profit from gold in the easiest way possible.

GLD also only has a 0.4% expense ratio, which is fair. This just means the vast majority of our money is being kept out of the fund manager's pocket and is actually invested in bullion.

Laura: Any potential downsides?

Jeff: I think now is a great time to own gold if you don't currently have any... and to increase your allocation if you do. Gold is at the start of a major bull run.

The only downside I can think of is that you are not going to collect any income while owning the metal. Again, gold does not pay any yield. It's not a productive asset.

In the end, I don't think that will matter much as the gains you will receive from gold's change in price will be remarkable. But it is worth pointing out again.

Of course, there are plenty of ways to get exposure – and even leverage – to the price of gold. And some of our favorite ways pay a generous dividend.

Just earlier this week, Doc and the rest of us at Retirement Millionaire, published a comprehensive report called "Preparing Yourself for Gold's Final Bull Market." In this report, we talk about our outlook for gold to potentially reach $4,000 an ounce and the best ways to own it, including two precious metals companies with safe dividends and superb business models.

You'll also want to read the other report we published, "My No. 1 Gold Recommendation." This is Doc's favorite gold pick, one that has been more than a decade in the making for him. Doc believes this one stock – which provides the ultimate leverage to the price of gold – can potentially be one of the highest-returning stocks he has ever recommended.

If you don't already subscribe to Doc's flagship Retirement Millionaire newsletter, he just recently launched a new presentation with his thoughts on the gold market. It also explains how you can get access to his research. You can watch the entire thing – for free – right here.

(Current Retirement Millionaire subscribers can access our new gold-focused reports here.)

Editor's note: Our offices are closed for Good Friday tomorrow. Expect your next Health & Wealth Bulletin issue on Monday, April 1.

Here's to our health, wealth, and a great retirement,

Laura Bente, CFP® and Jeff Havenstein
March 28, 2024