"There is no physical gold available today," my good friend and legendary gold dealer Van Simmons told me yesterday.
What I assumed he meant was that there was a shortage of gold to buy. So I figured if you wanted to buy gold, you'd have to pay higher premiums over the quoted gold price online.
I was right. But there's more to it than that. It's a situation you never see in precious metals. And it could lead to huge upside from here...
"I've never seen anything like it in decades," Van said. "Gold refiners around the world are shutting down due to coronavirus. So the supply of physical gold is disappearing for now. That creates the risk that there won't be enough gold available in New York to fulfill futures contracts. It's crazy."
Van is not one for hype. He has been at this for many decades. He has seen it all... But he hasn't seen this.
"It's not just gold," Van explained. "The premiums for physical silver went crazy this week as well." The premium to buy silver soared 10-fold in a couple days, he added.
Here's what's going on...
The physical silver exists... but nobody will deliver it. Due to coronavirus, not enough folks are willing to load it on the trucks or planes.
It's all new territory.
What it adds up to is a perfect storm for higher precious metals prices...
- You have no supply, and plenty of demand. This is Economics 101 – when there's more demand and less supply, prices go up.
- You have the government "printing" money and passing it out. (We can expect "$6 trillion in coronavirus stimulus," Larry Kudlow of the Trump administration said this week.)
- You have interest rates at essentially zero. Precious metals pay no interest, so they have trouble competing with money in the bank. But when money in the bank pays zero interest, precious metals become attractive again.
These are three massive catalysts. And they all point to the same end result... higher prices for gold and silver.
Importantly, you haven't missed it. Gold and silver haven't soared yet... quite the opposite.
Gold fell 3% over the last month, and silver crashed by more than 20% in the same span. But it's only a matter of time until the catalysts above catch up to current prices. And when they do... look out.
The simplest way to own gold is the SPDR Gold Shares Fund (GLD). For silver, you can own the iShares Silver Trust (SLV). These simple funds track the spot price of gold and silver. And while there are better ways to profit from what's going on, they're both solid options.
No matter how you do it, consider adding some precious metals to your portfolio – now.
Good investing,
Steve
P.S. In the latest issue of my True Wealth letter, I share my favorite precious metals pick at this crazy moment in history. It's actually not a gold investment... but silver. And this unique opportunity has much higher upside than simply owning the metal. To learn more about how to access this recommendation with a subscription to True Wealth, click here.
Further Reading
"Most folks believe gold is a crisis hedge that immediately goes up when stocks crash," Steve writes. But this usually takes some time to play out. History shows that with a little patience, gold can pay off in a big way... Learn more here.
If you're still looking for the bottom in stocks, you're not alone. And unfortunately, we're not there yet. While the trend in gold ahead is promising, the short-term outlook for stocks is still pretty grim... Read more here: No Bottom Yet: The Dumb Money Is Still Buying.
If you can't buy physical silver at reasonable prices, there's another way to own the precious metal. And it could lead to triple-digit gains as silver takes off...
CELLPHONE STOCKS AREN'T IMMUNE TO CORONAVIRUS PRESSURE
Today, we're looking at another company that's selling off amid the coronavirus outbreak...
Roughly 60,000 Americans are confirmed to have COVID-19, and more than 840 have already died. In this frightening environment, folks are staying home... businesses are shutting down... and supply chains are facing disruption. That's pushed down this company's shares...
Verizon Communications (VZ) is a $200 billion provider of wired and wireless Internet and telephone services. It's the sort of business that folks still need, even in a crisis... But with the economy in turmoil, Verizon's customers might delay upgrades. Some of its business customers, responsible for $8.1 billion in revenue last year, won't reopen after the outbreak. And Chinese suppliers have fallen behind on producing smartphones and telecom equipment.
VZ shares are down about 14% over the past month, falling to a new 52-week low. Verizon's difficulties won't last forever. But even as many hard-hit stocks snapped back this week, the market isn't rushing back to Verizon yet...
