Chief Investment Strategist, The Freeport Society
It was just… gone.
When David Copperfield made the Statue of Liberty disappear on live television in 1983, tens of millions of viewers were stunned.
There it was – one of the most recognizable landmarks in the world – lit up, standing tall, framed by scaffolding.
And then, with the wave of a hand and a well-timed reveal, all you could see was the clear sky.
Copperfield’s trick is still talked about today because of how convincingly it was staged. But at its core it was the quintessential magic tactic – look over here while something more important happens over there.
Nobody knows for sure, but Copperfield likely pulled it off by placing the live audience on a rotating platform.
They were seated on a large, circular platform designed to imperceptibly rotate. While a curtain was raised to obscure the statue from their view, the platform turned slightly, changing the audience’s line of sight.
Once the platform was rotated, the lights illuminating the statue were turned off, and lights in the new line of sight were turned on. This made it appear as though the statue had vanished, as the audience now faced an empty space.
I bring it up because something similar is happening right now in the markets.
The S&P 500 just posted nine straight days of increases. That hasn’t happened in 21 years.
And the index is up about 9%.
What investors are not seeing is that gold is up 11%.
And gold hasn’t just been outperforming stocks over the past nine days.
Over the past six months gold is up 28% versus a 5% loss for the S&P 500. And over the past 12 months, it’s up 46% versus an 8% gain for the S&P 500.
But don’t worry if you’ve ignored our repeating pleas in these pages to buy in. As we’ll look at today, despite that already stunning outperformance, we’re still in the early innings of the gold bull market.
That’s due to two powerful tailwinds…
The Age of Chaos Is Picking Up Steam
As I’ve been writing to you about since we launched The Freeport Society in December 2023, the 2020s are shaping up to be the most volatile, chaotic decade of our lives.
That’s partly due to the exponential rate of technological change, most notably AI. It’s also partly due to the breakdown of globalization and the postwar international order
And both these trends have been picking up steam over the past 12 months or so.
We’ve seen ever more powerful generative AI… record debt and deficits alongside a weakening dollar… and the biggest changes to global trade since the end of World War II
It’s no wonder investors are looking for stability. As a store of value for more than 5,000 years, gold is the best “chaos hedge” out there.
And that’s not the reason why it’s going higher.
Last Man Standing
Apart from being a chaos hedge, gold is also a dollar hedge.
That makes it a great way to protect yourself from another of the destabilizing megatrends on our radar – rising deficits and accompanying debasement of the dollar
The dollar has been in steep decline this year versus major trading partners’ currencies. The U.S. Dollar Index is down about 10% since the start of the year.
And given that Trump’s top policy priority is closing the trade deficit, this drop is a feature, not a bug. The weaker the dollar is versus overseas currency, the cheaper American exports are when priced in those currencies.
This is the core idea behind the proposed Mar-a-Lago Accord idea from the head of Trump’s Council of Economic Advisors, Stephan Miran. You hit your trading partners with eye-watering tariffs. Then you say you’ll reduce if they agree to working toward a weaker dollar.
This could go one of two ways…
Either Trump gets what he wants, and the dollar gets “reset” relative to the euro, yen, yuan, and other major currencies.
Or we get competitive currency devaluations where all our trading partners stampede to lower the value of their currencies, too.
In either event, the last man standing will be gold.
How to Play It
At The Freeport Society, we believe every investor should own gold as a permanent part of their long-term portfolio.
Ideally you should own some physical gold – either in the form of bullion coins or bars.
But if you’re allocating mostly IRA money or you don’t want the hassle of storing physical gold, the next best thing is to buy a low-cost gold-backed ETF such as the SPDR Gold Trust (GLD).
We’ve held a variant of GLD in our flagship Freeport Investor advisory’s model portfolio since we launched a year and a half ago.
So far, we’re up close to 70% on that position. And we consider it a “forever position.” It’s not something we’ll ever sell.
But apart from your forever position in gold, there’s also a time and place for more aggressive speculation.
And now is a great time to take more speculative positions
One of the best ways to do this is by way of gold mining stocks.
Last week I discussed this with colleague and former Wall Street trader Jason Bodner.
As he told me, Jason is not an “ideological gold bug.” He’s a “data bug” who simply follows the money.
And he’s particularly bullish right now on gold mining stocks.
Gold mining is an expensive business. But gold miners’ costs are collapsing. And margins are exploding higher.
Crude oil prices are down almost 20% so far this year.
And since crude oil accounts for as much as 25% of a gold mine’s total operating expenses, lower oil prices have a significant impact on profits.
Meantime, with the gold price up about 50% over the past year, miners are earning more for the gold they’re pulling out of the ground.
As I discussed with Jason, gold mining stocks are not “forever” positions. They can be horrendously volatile. But at times like these, they can hand you hundreds of percent in returns in short order.
So, consider taking advantage of this setup with something like the VanEck Gold Miners ETF (GDX). It holds a basket of the largest and most liquid miners. And it’s a great way to position yourself for higher share prices.
Most folks are looking at the rally in the stock market right now. But thanks to its powerful tailwinds, the real profit potential is in gold.
To life, liberty and the pursuit of wealth.
P.S. I’m curious: Do you own gold? If not, what’s holding you back?
You can write to me, as always, at [email protected]. I look forward to hearing from you.