Gold soared today…
The price of gold jumped 4.2% today, its biggest one-day gain in almost four years. It’s now at its highest level in over a year.
Gold’s big surge has tripped an important signal… one that suggests gold is headed much higher in the months ahead. We explain more in The Chart of the Day at the end of this issue.
Dispatch readers know gold is a safe haven asset. Gold is money. And unlike currencies like the U.S. dollar or Japanese Yen, governments can’t destroy the value of gold by creating it out of thin air. That’s why gold has held its value for centuries.
As a safe haven asset, gold typically performs well during economic turmoil. Investors buy gold as “wealth protection” when they’re worried about a financial collapse or a stock market crash.
• Global stocks are tanking…
The S&P 500, the world’s most closely watched index, fell 1.2% today. It’s now plunged 11% since the start of the year. It’s off to one its worst starts to a new year in history.
All of the key U.S. benchmarks have fallen hard this year. The Dow Jones industrial average has dropped 10%. The tech-heavy Nasdaq has dropped 15%.
Foreign stocks have done even worse…
The STOXX Europe 600, which tracks 600 large European stocks, has fallen 17% this year. The Japanese Nikkei 225 has plunged 17%. The Chinese Shanghai Composite Index crashed 22%.
On Monday, Business Insider reported that global markets have already lost $6 trillion in value this year.
• The “real” economy is confirming this bearish price action…
Yesterday, shipping giant A.P. Møller-Maersk (MAERSK-B.CO) reported that its sales fell 15% last year. And its profits fell 32%. The company lost $2.5 billion just last quarter… after making a $150 million profit during the fourth quarter of 2014.
Maersk’s stock fell 3.6% yesterday. It’s down 39% over the past year.
• Maersk is the world’s largest shipping company…
It moves 15% of all manufactured goods shipped worldwide. Many investors consider the company a bellwether for the global economy.
In October, the company laid off 17% of its workers. Maersk’s CEO, Nils Smedegaard Andersen, explained why he laid off thousands of people:
We believe that global growth is slowing down…Trade is currently significantly weaker than it normally would be under the growth forecasts we see.
• Andersen says the global economy is now in worse shape than during the financial crisis…
Financial Times reported yesterday:
It is worse than in 2008. The oil price is as low as its lowest point in 2008-09 and has stayed there for a long time and doesn’t look like going up soon. Freight rates are lower. The external conditions are much worse but we are better prepared.
• Maersk is the latest giant corporation to warn of a major economic slowdown…
Last year, machinery maker Caterpillar (CAT), industrial conglomerate 3M Co. (MMM), and diesel engine maker Cummins (CMI) all warned investors that sales would likely decline in 2016.
Last week, Reuters reported “the number of companies whose executives have mentioned recession concerns to analysts and investors is up 33 percent from the same period a year ago; the first such increase since 2009.”
With stocks crashing and the economy stalling, we recommend investing cautiously right now. Avoid expensive stocks and companies that will struggle to make money in an economic downturn. And instead of keeping a large amount of your wealth in stocks, put extra money into gold and cash.
• Switching gears, the Internal Revenue Service (IRS) was hacked again…
The Wall Street Journal reported on Tuesday:
The Internal Revenue Service said Tuesday that it identified an automated attack on its computer systems aimed at getting information that could be used to steal tax refunds.
The agency said identity thieves last month used personal data of taxpayers that was stolen elsewhere in an attempt to generate e-file personal identification numbers to file fraudulent returns and claim tax refunds.
The IRS, which collects and enforces taxes in the United States, said the hackers successfully accessed over 100,000 passwords.
• It was the second major cyberattack against the IRS in the last year…
Fortune reported on Tuesday:
This year’s attack follows a massive data breach at the IRS in 2015, when hackers stole information from 330,000 taxpayers to successfully file bogus tax refunds and obtain $50 million in federal funds.
These two attacks show that even the world’s most “secure” databases are vulnerable to cyberattack. That’s why we’ve been warning you about the threat of a major cyberattack…
• A single hacker could empty your bank account in an instant…
Think about it. If you have cash in the bank, what do you really have? These days, it’s certainly not a claim on a real asset like gold or silver. It’s not even a claim to real paper cash. The money is an IOU from your bank. It’s just digital entries in a computer that can be erased in an instant.
If you have a bank or brokerage account, a major cyberattack is a huge threat to your wealth. Becoming a victim of a cyberattack could devastate your finances far more than a stock market collapse, severe economic depression, or even a currency crisis.
• Cyberattacks happen in the U.S. every day…
We never hear about most of them. But here are a few big attacks the public knows about…
? In 2013, Iranian hackers infiltrated a small dam in New York and took over its control system.
? In 2013, Russian hackers stole $1 billion from more than 100 U.S. banks.
? Last year, hackers gained access President Obama’s personal email.
Hackers have also successfully breached the Federal Reserve, Department of Defense, and CIA.
• We encourage you to move money outside the digital financial system…
We suggest holding enough cash to live off of for up to six months. You can store this cash in a secure place like a safe or public storage unit. You could even bury it in a waterproof container in your backyard.
This advice might sound crazy. But remember, the money in your bank is just bits in a computer. A cyberattack could make your cash vanish in an instant.
We also recommend owning physical gold. Gold is a tangible asset that you can hold in your hand. And unlike cash, its value is not tied to a fragile financial system.
If a financial attack cripples our financial system, gold wouldn’t just preserve your wealth. The value of your gold would likely double or triple.
Gold just made its most bullish move in five years.
As you likely know, gold has been in a bear market since 2011. After peaking at $1,899 in 2011, the price of gold has fallen 35%.
As today’s chart shows, gold didn’t go straight down for five years. Instead, it rallied several times on the way down. However, each rally failed to push gold higher than the rally that came before it. You could say each rally failed to achieve a “higher high.”
Higher highs are an important concept. If a rally doesn’t make a higher high, it can’t turn a bear market into a bull market. So knowing how to spot a higher high can keep you on the right side of major trends.
For example, gold rallied 15% from June 2013 to August 2013.
Many folks thought this marked the end of the bear market in gold. But if you understood the concept of a higher high, you’d know they were wrong. The rally failed to push above the high that came before it. Gold resumed its bear market, and fell another 26%.
Today, for the first time in five years, gold has made a higher high.
As you can see in the chart, the price of gold surged to $1,248 today. This pushed it past the prior high of $1,185 it hit in October.
We marked each high with a dotted line in the chart. Think of these as stairs. Since 2011, gold has marched down the stairs. Today, for the first time in five years, gold took a step up.
This is a classic bottoming pattern. It’s an extremely important signal that suggests the gold bear market is over. The odds now favor gold prices going higher.
If you don’t own gold yet, we strongly suggest buying some. And if you do own gold, now’s a great time to add to your holdings.
If you want to speculate on higher gold prices, we recommend owning gold stocks. Regular readers know gold stocks offer leverage to the price of gold. A 10% move in the price of gold can cause gold stocks to jump 30%. Gold stocks soared 602% during the gold bull market from 2000–2003.
Courtesy: Justin Spittler
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