Seeking Alpha

Last Chance To Buy Gold Cheap Is Not Now

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Includes: DUST, GLD, JDST, JNUG, NUGT, SLV
by: Doug Eberhardt
Summary

Just because the price of gold goes higher, doesn't mean gold is ready for liftoff.

U.S. Mint sales are still lagging. Gold dealer sales are still lagging.

Faith in the Fed, Trump, Stocks, et al not helping gold.

Silver needs to lead if we are ready for liftoff. It's not. Why?

National Debt and Budget Deficits are irrelevant to gold. What's the Fed doing?

I have been following gold for a long time. Back in 1980, there was a gentleman who lived in my parents' building where I was still a student in college and I noticed he owned not one, but two Rolls Royces. I asked around and found out that he was a gold dealer. From 1970 to 1980, he made it big in gold.

There are stories back then about how gold dealers would ride around in limousines during the heyday of gold, and that once 1980 hit, the bottom dropped out and the gold dealers disappeared. For 20 years, gold languished.

Then from 2000 to 2011, gold took off again. Thanks to the addition of Exchange-Traded Funds, it made it easier for investors to buy gold and cheaper than a dealer when GLD was introduced. Also, having a Democrat in office allowed the likes of Glenn Beck to scare everyone into buying gold. Of course, his favored gold dealer, Goldline International, was placed under injunction and ordered to change sales practices, and since that time, Glenn Beck parted ways with Fox News and gold floundered a few months later. I had warned investors in 2010 about these deceptive sales practices in my book Buy Gold and Silver Safely.

The last 8 years have been tough for gold dealers. It's tough for them now even with the run up in the price of gold. I asked around my various suppliers and asked how gold sales were going.

It has been even tougher since President Trump got elected as the major buyers of gold have been Republican based on my interview of a marketing manager for a big gold firm in the past and my following of my own clientele since then. I even wrote an article January 2018 The Trump Effect On Gold And Guns.

In that article, I address the lagging gold coin sales at the U.S. Mint and up to now, gold sales have been just awful compared to their heydays before 2017. You can see actual gold coin sales in the table below. 2019 is on pace with last year but nothing to write home about.

U.S. Mint Gold Sales

*U.S. MINT

You will notice that gold sales are up the first month of the year, each and every year. Why is that? It's another scam the gold dealers use to take bullion coins straight out of the sealed U.S. Mint boxes and send them off to PGCS or NGC and get it slabbed for $50 and then double the price on it saying it is an "Early Release" or "First Strike" coins. Don't fall for this. These coins will rise with the price of a bullion coin.

Gold dealers have had to find other ways to sell gold and make a profit with this fall in price and slowdown in sales. How else are they were going to afford the cost of TV ads on Fox News and other media. In 2018, with an updated version of my book, I warned investors in precious metals about another deceptive sales tactic gold dealers were using, and as it turns out, my warnings have got enough people to contact the Los Angeles City Attorney who has filed a lawsuit against Lear Capital, Inc. for alleged unfair and deceptive practices with its selling of gold and silver coins.

I want to note that I was interviewed prior to both these lawsuits by the Santa Monica City Attorney Adam Radinsky and Deputy LA City Attorney Steven Son. I don't just randomly get a Tweet liked by the LA City Attorney.

The Gold Price Moving Higher Brings Out All the Gold Bugs Saying I Told You So

When it comes to the price of gold moving higher, especially over prior resistance like $1,360, it brings out the majority of gold buts saying "this is it" as Kenny Loggins used to sing. I am on record already that one should be long 50% of their silver and gold allocation and in the comment section to my articles and am clear about my feelings on silver and gold overall. We are clearly in a confident buy the dip mode and I haven't been this bullish in 8 years.

For miners, it's a bit different but may not be for long. We have been trading in and out of the usual suspects; JNUG, NUGT, JDST, DUST, and some individual miners, buying dips and selling tops. But I have been giving warnings that at some point we may not want to sell as the price will keep going up. I don't think we are quite there yet, but I am on record in saying that on a long enough time frame, buying and holding miners is OK now. You can always hedge at times with JDST and NUGT. But I also think I can time the market still to get the one last dip in miners before saying I am "all in." I've been waiting a long time to shove all my chips in with confidence. So have many of you. Some of you already have. I think we'll all be winners.

What's Needed To Secure Metals and Miners Have Bottomed?

The answer to that I think is silver leading the way. The Gold/Silver Ratio is presently 92.48. It takes 92.48 ounces of silver to buy gold at the current price of $1,411.30. Why does it take so much silver historically speaking to buy gold? My take is silver is an industrial metal and if you compare it to another industrial metal, copper, you see that the charts are similar. Neither moved up much with the dollar beat down we just had. Gold, however, shined.

What this really tells me is, the economy is not really "great" as some think it is. Housing, in particular, has had a terrible 18 months. If higher rates caused housing to fall last time, and yes, commodities also, perhaps this is why silver is not performing as well as you would think it should. Silver has a very similar chart as copper, whereas gold had clearly broken out this last leg up.

Gold Chart June 2019

Silver Chart June 2019

Copper Chart June 2019

Looking at the big picture, I wrote an article U.S. Budget Deficit Says Gold Going Much Higher But You Most Likely Need More where I point out that we are still at $1 trillion deficits and U.S. Consumer Confidence is low and U.S. Consumers are at the same household debt levels of 2008 before the last crisis. What could go wrong? But just ignore the data. Push that stock market higher, the investment advisor say. Well, they have a good track record, don't they? That's why gold/silver/miners should only be a part of your portfolio. Their time will come. Asset allocation models dictate it will. Take from what is high and put it into what is low. If you believe the evidence of eventual higher prices and the history of "real" money and "debt" money and government's ability 100% of the time to screw it all up.

Silver is the real catalyst for gold and will lead the next leg up. The gold silver ratio dictates this. Gold and silver historically have peaked the same time at highs for each in 1980 and 2011. Expect the same moving forward. Buy the dips in SLV, physical silver and silver miners where there is no political turmoil.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: We most likely will take positions in JDST and DUST heading into or after G20.