What Stimulus Dollars Mean for Gold

Tonight is Your Last Chance to Get in Early There's a stock poised to make a historical run higher. A run we've only seen one other time in the last 57 years. This could be your last chance to get in early. Click here for everything you need to know. This Overlooked Sector Just Got the Green Light By Sean Hyman, Editor of Currency Cross Trader Dear Sovereign Investor Subscriber, The world has been slowing down. You can see it in manufacturing data from across the globe. But, the central banks of the world say they have a solution: Print more money. I didn't say it was a good solution … just said they had one. I've long learned to not trade based off of what "should" happen, but what they "will" do. And once again they are doing what they do best … printing money. Advertisement How to STOP the Feds from Meddling in Your Life… Once and For All A few regular Americans have found a surprisingly simple way to halt big government in its tracks… In short, this group has been able to skyrocket their wealth by taking advantage of opportunities that most Americans are clueless about. For instance, they recently discovered a Swiss investment that U.S. brokers don't typically recommend… a safe-haven that U.S. lawyers can't blackmail, bully or break… and the secrets of South America's newest tax haven. How is this possible? The answers are right here… The most recent example of this just came from the European Central Bank (ECB). The European solution is to do "unlimited bond purchases" to try to help save the European economies and to try to help solidify the future of the euro. But China had decided to roll another way. They've decided to "juice up" their economy with stimulus spending on transportation infrastructure to the tune of $100 billion. Now, I'll give China this … at least this type of spending has a lasting effect and does create some jobs. And, they are also pulling their cash from a surplus, rather than simply printing more of it as the Europeans and U.S. have been doing. But, regardless of whether it's surplus money or freshly printed money, the stimulus is coming. And with all of this new money being pumped into big economies, there is one asset class that's set to benefit more than any other. The Double Whammy for Commodities Both of these stimulus efforts are going to have worldwide effects. Europe's "unlimited" bond purchases will push up asset prices in general, including commodities. And China's stimulus is going to push up a lot of commodities directly. So that "double whammy" gives the green light to commodities in general. And when central banks take stimulus actions like these, commodities like gold and silver tend to benefit most of all. It would be easy to just make a play on gold itself, but let's drill down a bit deeper … within the gold sector, there are gold stocks that have been shunned for quite a while now (and in the last six months especially). Let's take a look at a chart below. Gold Stocks Will Catch Up to Gold See larger image In the chart above, you'll see the price of gold charted in red/black and then the stock of a huge gold miner, Barrick Gold (ABX). You can see from the chart that ABX has really lagged gold, which has created a huge opportunity as the market has temporarily mispriced ABX relative to the price of gold. You'll notice that both gold and ABX have broken their recent corrections downward and are heading higher. So now is a great time to be getting in, as the charts are proving that the demand for ABX and gold is overtaking the supply. Owning one of the world's largest gold miners can be a great way to play gold because the gold in their mines is going up in value as the price of gold rises (and I see gold hitting $2,000 an ounce in the months ahead). But, by owning ABX itself, it's like owning gold with a 2% dividend. There are other reasons why I like ABX in particular. Barrick is a $40 billion dollar company. I like investing in huge companies that are simply hard to compete with. Barrick Gold: The Wal-Mart of the Mining World After all, would you rather make an investment in your local "mom and pop" grocer or in Wal-Mart? If I wanted the best shot at both the return of my money and the return on my money, I'd go with Wal-Mart, which is enormous and has a long, proven track record. Barrick is certainly a Wal-Mart of the gold mining world because of its size, but that's not all that counts – I also like that it makes good money doing what it does. For instance, ABX's profit margin is 27.85%, and its return on equity is a nice 16.32%. Barrick is also trading at a cheap price relative to its earnings since its P/E is in the nines. (By comparison, the S&P 500 is trading at over 16 times the level of its collective earning power.) Any time you see a single-digit P/E, you know that the price usually won't stay that low for long. Typically, over the months ahead, the price will soar as traders and investors alike snatch it up as they realize the deep value in the stock. Another thing I like about this company is its cash position. It's got $2.33 billion in cash on its books. The deeper the pockets, the better the chances of survival … and Barrick has a ton of cash to work with. That puts the company in a very good position right now. Therefore, when you couple the fact that gold stocks are way undervalued relative to gold … that gold itself is breaking out higher … and the fact that Barrick is huge, with a nice dividend, good profits and a ton of cash … then you see what I see: the future is looking bright for Barrick Gold. Therefore, Buy Barrick Gold (ABX) now before this bargain gets away. Have a great day! Sean Hyman Editor, Currency Cross Trader P.S. Even as Europe and the U.S. struggle with their economic doldrums and endless money printing, emerging markets around the world keep on growing strongly. To take advantage of this, Jeff Opdyke has been looking at small U.S. companies that are tapping into this overseas growth to pull in huge profits. Right now, he sees one company in particular that's about to go on a historic run … but today is your last chance to get in early. For your final opportunity to see Jeff's research – and how you can profit from it – click here. Chart of the Day Disability is Growing Twice as Fast as Jobs Last week, the government lied to all of us once again by announcing that the unemployment rate dropped from 8.3% to 8.1%. The reason the unemployment rate dropped was because 368,000 people were removed from the labor force. According to the government measures, you're not unemployed if you have not looked for a job in the last four weeks. The chart below from the St. Louis Fed tells you all you need to know about unemployment. Both the employment-to-population ratio and the participation rate are down to roughly where they were 30 years ago. This is helping to keep the "official" unemployment rate below 10%. With more people out of the work force, the rate stays artificially low. See larger image If you're on disability, you're also not considered to be in the labor force. One of the explanations for this drop in participation rate is the fact that more Americans are mysteriously becoming disabled. Since June of 2009, nonfarm payrolls have grown by 2.3 million jobs. During that same period, the number of disability enrollees has grown by 4.7 million. This is very disturbing. And it will have tremendous financial implications for all of us. Since we're not creating a whole lot of jobs, the Fed is likely to print more money to "stimulate" the economy. This is likely to lead to inflation down the road, reducing everyone's standard of living. As an investor, you can protect yourself from this nonsense by buying gold and silver. Precious metals are likely to move a lot higher as the Fed tries to reduce unemployment by printing money. Regards, Evaldo Albuquerque Senior Analyst Related Reading: Defend Yourself from the Failing US Dollar with Forex Trading Now is the Time to Buy Oil Stocks All the Value of Gold in the Palm of Your Hand Is The World's Biggest Ponzi Scheme About to Unravel? RECENT ARTICLES 9/11/2012 The Buck Has Begun to Crater Again China announced a new stimulus plan focused on infrastructure. Invest in steel and copper ETFs and stocks to profit from an industrial boom 9/10/2012 A Warning From Spain When America's crisis comes, make sure you have the freedom to escape by having your nest egg in an offshore bank in a stable country. 9/07/2012 The Real Safe-Haven CD to Protect Your Lifestyle With the greenback's sad future, you need to turn to safe-haven european currencies. Diversify your portfolio by owning the krona and krone. 9/06/2012 The Contrarian Play in Your Morning Coffee While Demand for coffee is growing, supply is shrinking. Coffee prices are set to soar, and Starbucks, SBUX, will suffer - consider selling. STATE OF OUR WORLD National Debt Clock: $16,021,343,722,310 BECOME A MEMBER For more valuable information from The Sovereign Society on how to protect and grow your wealth, become a member today. 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