This is a very bullish week for precious metals. And gold’s gain comes at the pain of the U.S. dollar.
Now, that’s bad news if the U.S. dollar is your biggest investment. That’s because the value in those dollars is going to get shredded.
The good news is you can hedge your risk with physical metals and a portfolio of hot precious metals stocks.
Let’s talk about the bad news first. The U.S. dollar has given back all the gains it made since Donald Trump was elected president.
That’s a heck of a fall from the 14-year peak of 103.82 the dollar hit on Jan. 3.
There are multiple reasons why it dropped. Economics is one factor. Politics is another.
And not just here in America …
First, economics. The European Commission expects that the EU economy will grow by 1.7% this year and 1.8% in 2018. That’s up from less than 1% last year.
Meanwhile, we’ve seen a string of poor numbers on U.S. retail sales, inflation and housing starts. The Fed is projecting that U.S. economic growth will rise to 3.1% in the second quarter from a pathetic 0.9% in the first.
But few believe that.
Then there’s politics. France, one of the Eurozone’s most-important countries, recently elected a pro-Euro, pro-banking president. Meanwhile, President Trump is mired in political battles with the press, his own party and, sometimes, his own ego. That makes it harder for Trump to pass his proposed tax cuts and $10 trillion infrastructure program.
By some metrics, Europe looks more attractive than the U.S. right now. So, international investors are looking to swap their dollars for euros.
That, in sum, is why the dollar is plunging. It has no real support until 96 or 95 — a big move for a currency. And there’s no guarantee that support will hold.
Which brings us to gold.
Gold is priced in dollars. This puts the metal and the currency on what I call "the seesaw of pain." When one goes up, the other usually gets hurt.
As you might expect, the dollar’s decline is helping gold. And it’s helping miners and explorers even more. Let’s look at the action of just the last 10 trading days. That’s when the dollar really hit the skids.
This is the action in gold, miners and explorers since May 3. That’s when we launched my Red-Hot Resource Millionaire trading service. As the saying goes, "Some people are lucky enough to be smart. I’m smart enough to know I’m lucky."
It’s a nice trend. That’s why I’ve spent the last two weeks giving my subscribers one "hot" metals pick after another.
What’s more, this trend ain’t over yet.
For one thing, the shift into precious metals ETFs has BARELY BEGUN. Let me show you a chart of the holdings of all the world’s physical gold ETFs and all the world’s physical silver ETFs.
|The blue (lower) line shows physical gold ETF holdings; the black (higher) line shows physical silver ETF holdings.|
Here’s a snapshot through Tuesday. You can see that, proportionally speaking, more money is pouring into physical silver ETFs than physical gold ETFs. For now.
That’s because gold is something investors buy when they’re scared.
Investors aren’t really scared. Not yet.
But it’s coming.
Do you think the circus in Washington is going to end overnight? I sure the heck don’t. I think we’re in for three rings, a carload of clowns … maybe a parade of rabid elephants.
Meanwhile, for months, a whole flood of money shifted out of Europe and into the U.S. as investors worried what might happen on that continent. At the same time, they were comforted by President Trump’s pro-growth strategy.
Now, Europe looks safer. It looks pro-growth. And Trump’s growth plans are mired in a political swamp.
That means a big chunk of the money that shifted to the U.S. will likely shift back to Europe.
That means more downward pressure on the U.S. dollar, as funds flee this continent.
What do you think that means for gold?
I’d say it will ride much higher as the seesaw of pain comes crashing down on the greenback.
Related story: You Can Gain from Gold’s Seesaw of Pain
And now is when YOU should be taking action. The dollar could, and should, bounce from this important level. When it does, prepare yourself for what’s coming.
And that’s the next leg down in the dollar.
So, hedge your dollar holdings. Buy some physical gold and silver. Buy the better miners, the ones that are leveraged to gold and silver.
You’ll thank me later.