Cue the Tom Jones music…
🎵Debt bomb… Debt bomb.
You’re a debt bomb.
You can take my money when I need to come along… 🎵
The U.S. government has hit its debt ceiling. Federal Reserve Chair Jerome Powell has largely remained silent about the subject… but he’s also sick in bed with Covid-19…
But Treasury Secretary (and Powell’s predecessor at the Fed) Janet Yellen said the agency is ready to engage in a shell game to prevent the U.S. government from default.
Here come the “Extraordinary Measures” – making the Treasury Department sound more like characters from a Marvel movie than a bunch of accountants engaging in a harebrained scheme to make America look less insolvent than it is.
The threat of a debt ceiling crisis is accelerating, as I noted on Tuesday. It’s no coincidence that America’s rush toward $31.381 trillion aligns with a global rush among central banks to buy gold.
Gold demand among central banks (and their holdings) hit a 47-year high at the end of 2022. I expect that the gold rush will only accelerate as debt talks continue.
As promised, let’s go over the best ways to trade gold for 2023.
I’ve got three of them for you right now.
How to Buy Gold Option No. 1: Coins Remain Popular
Yes, we’ll talk about equity markets. But there’s always a good reason to have physical gold. Have a safe. Put it inside the wall. Make your own Treasure map and create an adventure for your great-grandchildren in 2071. Just have some physical gold, as it remains a solid investment.
There are multiple ways to buy physical gold. You can own American Eagle coins, which tend to trade at a premium compared to the spot price of gold. These coins are minted in one-ounce, half-ounce, quarter ounce, and tenth-ounce quantities.
You can buy other gold coins minted by governments around the globe, like Australia, England, South Africa, Canada, and Japan.
But I prefer the authorized gold that is linked to Swiss banks. The best bang for the buck and certification is found in Credit Suisse bars.
Each is minted in Switzerland and carries a unique serial number… so I know where it is. Bars today trade at a premium of about $80 today, which isn’t surprising given the demand. I personally own these bars and keep them in a safe deposit box a mile from my house.
You should never keep four things in a safe deposit box: Cash, your passport, your will and healthcare directives, and rare or heirloom jewelry.
Gold bullion is the only thing in my deposit box.
How to Buy Gold Option No. 2: Buy the Big Cap Miners
A lot of experts like to recommend junior miners as a way to play higher gold prices. These are VERY speculative companies. Junior miners are venture capital companies that finance mining operations. While higher prices can fuel speculative gains on these stocks, they are VERY unstable plays.
There are plenty of companies in the mining space with established operations, secure financing, and a big upside. There’s no need to overthink as these stocks do well as gold prices rise, thanks to the large amounts of deposits on their balance sheet.
If you’re looking for names, I prefer mining companies with greater exposure in North America, South America, or Australia, as it reduces geopolitical risk. Notable names include Newmont Goldcorp. (NEM), Barrick Gold (GOLD), and Franco-Nevada (FNV)
How to Buy Gold Option No. 3: Diversify With an Income Fund
The last way to focus on gold prices is to diversify with a closed-end fund that pays strong income and gives you access to other mining stocks and their long-term upside.
Closed-end funds trade on public exchanges and operate on the whims of sentiment in the market. They may trade at either a discount or premium to the net asset value of the fund.
That brings me to the GAMCO Global Gold, Natural Resources & Income Trust (GGN). The closed end fund currently trades under $4.00, despite the sum of its parts being valued above this level. GGN gives investors a 9.9% annual distribution and taps into various natural resources and mining giants.
Investors will get access to Newmont Corporation, Franco-Nevada, Barrick Gold, and Rio Tinto (RIO) on the gold mining side. On the energy side, the fund owns Exxon Mobil (XOM), Chevron (CVX), and Shell.
Materials comprise 41.6% of this fund, while oil and gas represent 34% of the portfolio. This is a little riskier than traditional methods, but investors can profit from the combination of the near 10% yield and 6.4% discount to NAV.
To your wealth,
P.S. Please let me know if you have any feedback, questions about today’s issue or anything else. Just email us at firstname.lastname@example.org.
*This is for informational and educational purposes only. There is an inherent risk in trading, so trade at your own risk.
Market Momentum is Green
However, we saw a dramatic selloff start yesterday at 10:30 am off the 200-day moving average, and I’m taking profits from a large variety of trades and positions from the previous weeks. Should momentum turn in the next few days, I’ll add a specific hedge to my existing portfolio in Tactical Wealth Investor to ensure that we can capture gains from any pronounced selloff this year.