If you’re one of the millions of Americans who have already set up direct deposit with the federal government, you’ll have already gotten your payment of up to $1,200.
And the Internal Revenue Service (IRS) sent out notices that it will mail the paper checks starting tomorrow, April 24.
If you don’t have enough savings, and you need those funds right now, you should spend them.
But if you already have your immediate expenses covered, I recommend you use your check to buy gold.
As I’ll show you today, gold is going up in just about every currency… including the U.S. dollar.
And as we enter a new phase of monetary madness, that trend will accelerate.
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What most folks still don’t get about the modern money system is that it’s all data entry and spreadsheets.
The kind of money that governments issue exists mostly as digital records.
According to the Fed, as of April 8, there was $1.8 trillion in U.S. currency (banknotes and coins) in circulation.
That may sound like a big number. But one measure of the overall money supply the Fed uses, called M2, stands at $16.7 trillion.
That means only about one-tenth of U.S. dollars in existence are in physical form. The rest of them exist as 0s and 1s in a computer database somewhere.
And guess what… The Fed knows how to use a computer!
When the government needs to spend, a clerk at the Fed simply marks up numbers in accounts.
You can complicate it as much as you want. But that’s where most dollars come from – keystrokes on a computer.
Although it’s hard to take in at first, gold is made in outer space.
It’s forged when two giant neutron stars collide. We know this because astronomers observed the creation of gold this way on August 17, 2017.
Using several well-placed telescopes in Chile, they spotted the explosion in a previously obscure galaxy called NGC 4993.
And they say it propelled glowing debris… including huge, mind-boggling amounts of gold… into space at about one-third the speed of light. (You can read more about how it all works here.)
But here on Earth, we have to make do with what we have.
World Gold Council figures show that the total amount of gold we’ve extracted since the dawn of civilization is about 190,000 tonnes. And before the coronavirus panic, global mining output was about 3,300 tonnes a year.
Relative to dollars, euros, and yen… where supply is elastic… gold’s supply is relatively fixed.
It’s why gold is going up in most major currencies…
Rising lines on the chart above mean gold is rising in value relative to the U.S. dollar, euro, British pound, Swiss franc, Australian dollar, and Canadian dollar.
As we looked at here, demand for bars and coins is through the roof. Meanwhile, the places that make new bars and coins to meet that demand – mints and refineries – are offline.
That’s why Daily Cut regular and gold investing expert E.B. Tucker says gold royalty stocks are so attractive right now. Here’s E.B…
Royalty companies control hundreds of thousands… even millions… of ounces of gold in the ground through legal contracts. They have a claim on a small percentage, usually 1% or 2%, of that miner’s production – regardless of how hard or costly it is to dig the ore out of the ground.
If the price of gold surges, the royalty owner captures all the upside. Say the mining company produces 100,000 ounces of gold in a year. It gives the royalty company 1,000 ounces (1%), which the royalty company sells right away. If gold goes up $100 that year, the 1,000 ounces yields $100,000 more than it did last year.
Meanwhile, the royalty holder’s cost didn’t change. The day it bought the royalty was the last dollar it paid the mining company, even if that was 20 years ago.
E.B. says there are three other key advantages the royalty companies have compared with gold mining stocks…
Let’s say Company A owes a royalty holder 1% of all the gold produced at its mine. It goes belly-up. Company B buys the mine out of bankruptcy.
You might think that would be a problem for the royalty holder. But it isn’t. Company B still owes the royalty holder 1% of everything that comes out of the ground.
Here’s E.B. again with more on how that works…
Most mines go on producing far longer than planned. Once the operator is 2,000 meters and $1 billion into a project, it’s reluctant to leave. Usually, it spends money drilling for more gold at the bottom of the mine. The operator often finds it. The royalty holder gets 1% of that, too.
This happens all the time to cash-strapped mining companies.
They issue new shares to raise funds. This dilutes the value of existing shares.
A royalty, by contrast, can’t be diluted.
As E.B. likes to say, “1% is always 1%… from now until the end of time.”
You can get started investing in gold royalties today by looking at shares of Franco-Nevada (FNV). It’s the largest gold royalty… and one of the safest ways to take advantage of the coming boom.
Until tomorrow…
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Chris Lowe
April 23, 2020
Dublin, Ireland
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