A Storm’s Brewing…

When gold dropped below $1,700/oz earlier this year, investors panicked. 

Tears were shed. Hands were wrung. Gold was dead, cast onto the island of misfit financial assets alongside tulips and beanie babies. 

At Resource Insider we bought more.

Today, at $1,900/oz Au, we’re still in the nascent stages of a buyer’s market, though few have woken up to this fact.

You don’t need a Ph.D. in economics to understand what’s driving this trade. You just need to understand two simple concepts:

  1. Real Rates; and

  2. The U.S. Fiscal Deficit.

I’m going to explain why this is important to you as an investor and how to use this info to make money in under 3-minutes. 

The Gold Barometer

Real rates are interest rates adjusted for inflation. 

Real Rate = Interest Rates – Inflation

When interest rates rise faster than inflation, real rates go up and gold does poorly. When inflation outpaces interest rates, real rates fall, and gold prices run. 

Dropping pressure on a weather barometer means we’re in for a storm. Dropping real rates indicate gold is about to be hit by a money storm.

The following chart demonstrates how gold price has tracked real rates for the last 8-year.

felder real rates gold

Earlier this year, interest rates rose faster than inflation – thus, we saw real rates rise, and gold price was predictably punished.  

Now the tides have changed… Inflation is on the rise. 

Don’t believe me? Just listen to, well, EVERYBODY:

inflation headlines

Gold has resumed its march to new highs – batten down the hatches, a storm’s brewing!

Beast of (Fiscal) Burden

The Congressional Budget Office estimates that the 2021 deficit will be slightly less than last year’s total at $2.3 trillion. 

But, this is pretty much bullsh*t as it does not include:

  • The $1.9 trillion (TRILLION!!!) stimulus package passed by congress; or 

  • The proposed $1.7 trillion infrastructure package currently in the works.

So, we can take that $2.3 trillion (which took decades of fiscal mismanagement to achieve) and 2.5X it. Let that sink in… the USA is now on track to effectively triple its deficit in a 1-bloody-year!  

Look at this chart:

felder fiscal deificit gold

Notice how the blue line (gold price) has yet to catch up to the rapidly increasing red line (fiscal deficit)? 

Well… if the last 30 years of known data are any indication, it’s going to.  

Gold hasn’t yet caught up to the 2020 deficit, let alone the coming astronomical 2021 deficit. 

MEANING: Gold price is going up. WAY UP.

The Perfect Storm

Gold’s utility as an inflation hedge and a fiat currency remains as true as ever. 

Earlier this year as investors became preoccupied with some of the most volatile asset classes on the planet, cryptocurrency and hot Twitter stocks (or is it stonks?). During this time gold saw a healthy correction after its meteoric 2020 run – today the gold market has consolidated and is poised to enter it’s perfect financial storm.

Oh, BTW You’re F*#cked… Unless

In today’s economy interest rates can’t outpace inflation, and depress gold price, without destroying the financial system. 

Ever wonder who is going to fund all this debt?

Foreign investors? Nope.

They bought only 5.2% of all U.S. Treasuries issued in 2020.

US banks? Not really.

They bought 17% of last year’s Treasury issuances, but now they’re fully loaded up with Treasury bonds. In fact, banks now lend more to the government than to businesses and households by record amounts.

Who then???

You guessed it: The Fed.  

macrobond & Nordea

If the Government is to continue running extreme deficits to prop up the equity and bond markets the US Federal Reserve must suppress interest rates – thus allowing inflationary forces to continue to build.

The Fed has no choice but to increase its quantitative easing. They are now a bigger player in the U.S. Treasury market than all foreign investors.

Why should you care?

This means that there will be a cap on interest rates, even in the face of raging inflation. 

Remember: Real Rate = Interest Rates – Inflation?

Stable interest rates and rising inflation mean one thing: real rates will drop.

And, if you don’t have gold exposure… it’s gonna be bad

How I’m Playing It

I believe that the best way to get gold exposure is investing in great mining deals. That means private placements into publicly listed, or IPO’ing, companies. This allows me to get better deals than I would paying “retail prices” on the market. 

It’s better to invest alongside the pros at a discount to market prices and get warrants (free options). 

Right now at Ri we’ve got two great gold deals in the works. The first is already live, the second will launch in the next 2 weeks. 

These deals have everything I look for:

  • Strong experienced teams;

  • Cheap entry prices;

  • Warrants;

  • Massive upside potential; and

  • Good access to capital.

The first PROJECT NEWFIE is gold exploration in one of the hottest exploration jurisdictions on the planet, you guessed it, Newfoundland.

As strong gold prices translate into profits, major miners have begun to trade higher. The majority of junior mining companies on the other hand are lagging behind. 

Where this isn’t true, is Newfoundland – here gold explorers are already trading at hefty premiums. 

  • Labrador Gold, an exploration company with 2 drill holes, is trading at a $180 million market cap; 

  • New Found Gold, a pre-resource exploration company, has a $1.89 BILLION market cap. 

At Ri we’re getting in on the action with Project Newfie, a company backed by some of the strongest financiers in the sector and the man who might be Canada’s most successful, and famous, prospector. 

Plus… I think it’s cheap at a $15m market cap. 

Project Newfie’s stock is currently trading at a 50% premium to the price that I’ll be investing at alongside my Members. Plus, we are getting a full warrant that is already in the money.

Our next deal, PROJECT BLOWTORCH, is set to launch later this month. I’ll send you more info on that soon… 

Due to the exclusive nature of these opportunities, we can accommodate a  limited number of new Ri Members. 

If you are an accredited investor, and you want access to a year of exclusive independent research and the opportunity to invest alongside me, you can:

Become an Ri Member HERE.

Or,  shoot me and my team an email to learn more or schedule a call.

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