We started sending The Daily Cut to all Legacy Research subscribers in August 2018.
One of the first recommendations I (Chris) passed on in these pages was to buy gold.
Gold was cheap and hated at the time. And it turned out to be a great contrarian play.
Gold is up 40% since.
But as regular readers know, you don’t own gold as an investment…
As I’ve been showing you, it protects you in times of crisis… like the one we’re going through now.
I hope you acted before this crisis struck. Because as you’ll see in today’s dispatch, there’s a gold “crunch” going on right now.
Demand is so high for gold coins and bars, it’s extremely hard to get your hands on them.
And if you are lucky enough to find some gold coins or bars available, your dealer is likely to charge you a premium over the gold spot price.
As you’ll see, this is another blaring signal that gold is going to go higher.
And don’t worry… At the end of today’s essay, I’ll show you how to play gold’s rise without having to pay a premium… or wait in line for months to get your hands on physical gold.
I’m Chris Lowe, your editor. It’s my mission to bring you the latest moneymaking… and wealth-protection… ideas from Bill Bonner, Doug Casey, Teeka Tiwari, Jeff Brown, E.B. Tucker, and the rest of the Legacy team.
These are crazy times for the economy… and for society.
I’m writing to you from self-isolation in a cottage in the Irish countryside.
Scenes from your editor’s life in lockdown in Ireland
Last I checked, 100 million Americans are in lockdown as the coronavirus spreads.
You may be one of them.
I know isolation can be tough. So feel free to say hi… send in a question to your favorite analyst… or pass on updates about how you’re hunkering down and weathering this storm.
We’re here for you. Write us at [email protected].
Since the coronavirus became front-page news on January 8, gold dipped as much as 6% as stocks crashed.
I’ve marked it on the chart below with a red arrow.
Something similar happened to gold in the wake of the 2008 crash in stocks, too.
Gold dipped as much as 29% between March and November. Then it soared 166%.
As I explained here, gold wasn’t going down for any fundamental reason. In both 2008 and 2020, overleveraged traders had to sell gold to satisfy margin calls.
These traders needed to raise cash as collateral for borrowed stocks. So they sold anything that wasn’t bolted to the floor – including gold stocks and gold exchange-traded funds (ETFs).
Instead of a rush of selling… there’s been a rush of buying.
This has come from individual investors seeking coins and bars to protect their wealth from falling stock prices.
Meanwhile, the spread of the virus has crimped supply of physical gold.
It’s causing shutdowns of key refineries in Switzerland. These are near the border of northern Italy, the world’s second-worst coronavirus hotspot after central China.
Tai Wong is the head of metals derivatives trading at Canadian investment bank BMO Capital Markets. Here’s what he told the L.A. Times by phone on Tuesday…
This isn’t anything that we’ve seen in a generation because refiners never had to shutdown – not in war, not in the great financial crisis, not in natural disasters. It’s never happened. And it happened astonishingly rapidly.
Take German gold and silver retailer Degussa.
Its CEO, Markus Krall, said demand from customers for bars and coins is running at up to five times the normal daily amount.
Or take British gold retailer BullionByPost. The Financial Times interviewed its founder and managing director, Rob Halliday-Stein. Here’s what he told the newspaper…
Basically we’re selling as soon as we get stock on location in secure vaults – but we’re restricted to what we can get hold of. It’s a bit like toilet roll.
Here at Legacy, we reached out to several gold dealers. And they had similar stories.
One said it would be two to three months before it worked through its backlog of orders. It also warned that the premium over the gold spot price would be $175 – or a little over 10% of the $1,635 spot price at writing.
Dealers also told us that it wasn’t just U.S. dealers running short… but also dealers all over the world.
If you already own physical gold, congratulations. You’re weathering this storm better than most.
If you’re committed to getting some disaster insurance, and you don’t mind paying a premium, you can contact any of the four dealers listed in our free special report on buying physical gold.
But as I’ll show you tomorrow, you can actually buy gold at a discount now in the stock market.
That’s because the prices of gold stocks have been beaten down in the panic. And one special type of gold stock is particularly attractive right now.
Make sure to tune in for more on that tomorrow.
Regards,
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Chris Lowe
March 25, 2020
County Kilkenny, Ireland
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