Forty Trillion Reasons Why a Gold Breakout Is Imminent

In the short term, soaring bond yields have pinched our favorite market, gold.

Since peaking at $5,500 at the start of the year – in a move we warned was too much too fast – the metal has comfortably settled in around $4,000.

Thanks to Warren Buffett’s allergy to the metal: “Gold infamously pays no dividend and offers no cash flows.”

So when interest rates rise, bonds look to many retail investors as a better bet than gold.

Bond yields are heavily influenced by inflation. That 5% yield today won’t look so good if inflation gets back to its 2021 level of 9%. But at 3%? This short window has presented one of the most attractive periods for bonds in the past 20 years.

Bond yields also give us an easy forecast of the gold price.

It’s not precise, of course. But the data shows that if you take 10-year yields in developed countries and look at gold stocks compared with the rest of the market 2.5 years later, there’s a direct correlation:

Should the trend hold, it’s good for gold mining stocks. There are roughly 40 trillion reasons, off the top of our head, why we agree.

Next week’s midterms won’t change the trajectory of Washington’s dysfunctional spending. Regardless of which party gets to elect the speaker of the House, we don’t expect any member to suddenly remember the U.S. Constitution requires fiscal discipline… the part that comes after a century of campaign promises and profligate waste, fraud and abuse.

Ronald Reagan, the 40th U.S. president, set the tone in Washington spending for the ensuing six decades, when he told his cabinet “deficits don’t matter.”

He meant they don’t matter politically, of course. If voters don’t “throw the bums out” for violating their most basic responsibility to balance the budget, then the incentive was then, is now and will always be to promise more spending. And then add a little more when they get to Washington.

Since 1971, after Nixon’s disco era crime, gold has been the missing discipline that marks the endless devaluations of the fiat era.

Nor are we going back to a gold standard anytime soon. We recognize, much like a growing number of central banks, the importance of gold.

And as yields rise right now in part to fund the AI buildout, and as tech companies go from being massively cash flow positive to cash flow negative, gold looks more and more attractive than a cursory glance at bond yields would indicate today.

Today’s Pro recommendation taps into that sentiment. It’s an exploration company that could move into production just in time for gold mining stocks to catch up to the delayed signal provided by soaring bond yields.

~ Addison

P.S. We have gads of historical data revealing an anomaly you cannot afford to miss.

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P.P.S. Tomorrow, Grey Swan Live! returns with a closer look at some of the election data we’re sharing here.

History shows the S&P 500 has finished higher 12 months after every midterm election since 1950, with an average gain of 15.1%. But with bond yields rising and concerns over AI mounting, knowing what to buy — and what to avoid — is critical right now.

Join us this Friday at 2 p.m. ET for a special Grey Swan Live! as we share our final midterm forecasts and the moves we’d consider making now.

You don’t want to miss out… It’ll be one of the last chances to make any moves before next Tuesday’s midterms.