"Wealth Megatrends" Points to Gold

07/02/2020 5:00 am EST

Focus: COMMODITIES

Sean Brodrick

Senior Editor, Weiss Ratings

Considering recent statements from the Federal Reserve, the door is open to much higher gold prices, suggests Sean Brodrick, editor of Wealth Megatrends— and a speaker at the MoneyShow Canada Virtual Event on July 8-9.

In case you missed it, the Fed recently announced that it would maintain its baseline interest rate range of 0% to 0.25%. And it doesn’t expect to raise it from the “zero bound” until the end of 2022!

The Fed will also continue to purchase billions of dollars worth of Treasury bonds and other securities, as it’s done to stimulate the economy and keep liquidity flowing throughout the crisis. The Fed is telling Wall Street it will print money forever.

MoneyShow Canada Virtual Event on July 8-9

Indeed, you can print fiat currency all you want. But it devalues that currency — in this case, the U.S. dollar. But you can’t print gold! You can’t devalue it. And the Fed’s actions are simply more fuel for a Midas metal rally already supported by strong fundamentals.

That’s why I expect gold to test $1,800 sooner rather than later. So, how do we play the move? Junior gold miners have outperformed the seniors recently — and that’s exactly what you’d expect to see in a precious metals bull market.

We recently banked a second round of gains on Newmont Corp. (NEM), which leaves us with just one gold and silver position, Wheaton Precious Metals (WPM) remaining in our model portfolio.

Wheaton Precious Metals paid a dividend of 10 cents a share on June 4. Meanwhile, analysts are busy hiking their earnings estimates. The consensus forecast is for 2020 earnings per share of $1.04, up from 96 cents a share previously.

So, as I see it, the best thing to do is buy VanEck Vectors Junior Gold Miners ETF (GDXJ). This exchange-traded fund gives you a basket of 76 gold and silver mining companies. Top holdings include Kinross Gold (KGC), Pan American Silver (PAAS) and Gold Fields (GFI).

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