With what has happened in the world of late and what will be unfolding in the next 5 years or so those few investors who fully understand the impact the current economic situation is going to have on future inflation, the USD, interest rates, the stock market, physical gold & silver, gold & silver stocks and gold & silver warrants are going to be in the unique position of being the benefactors of currently unimaginable returns and wealth. All they need do, as I like to say, is “Prepare and prosper!”
By: Lorimer Wilson, editor of FinancialArticleSummariesToday (A site for sore eyes and inquisitive minds), munKNEE.ccom (Your Key to Making Money!) and the FREE bi-weekly Market Intelligence Report newsletter (see sample here; sign up in top right hand corner of page)
The 1970’s Revisited
Back in the mid- to late 1970’s, as gold went up from its 1972 low of $60 to $850 in 1980 (and silver to $50), some gold and silver stocks realized absolutely amazing gains – in excess of 10,000% in some cases.
I can’t imagine that ever happening again but that is what actually happened back then. It is absolutely amazing, isn’t it? ‘Just’ a 10,000% appreciation would have turned $10,000 into $1 million dollars! Remember, it only takes a few good investment decisions in one’s life to be exceedingly successful and that was such a time.
The 1990’s Revisited
I know, I know, you think that was then and this is now and increases in excess of 500% let alone 1000% or more would never happen again. Well, that is not the case.
During the mini-bull market in gold in 1993-1996 many gold and silver junior miners went up over 1,000%, a few over 4,000% and one even over 26,000%. Again, unbelievable, but true!
The 2010’s Projected
Will such happen again within the next 5 years? Most likely! Are you of the opinion that the U.S. dollar is going to weaken against other currencies? Are you of the opinion that we are going to have significant inflation in the next few years? If so, then we are going to see gold and silver doubling or tripling in price as a result.
As such, it is imperative that you invest in either the stocks of the companies that mine the gold and silver and/or in the royalty companies that buy the gold and silver from mining companies at predetermined fixed prices. Better yet, much better in fact is that, wherever possible, you should purchase certain of the long-term warrants offered by some of the gold and silver mining and royalty companies as a means of realizing your +1,000% returns.
Why Buy Gold and/or Silver Mining/Royalty Stocks instead of Physical Gold or Silver? To Double Your Returns – or Possibly More!
If gold, for example, were to escalate considerably in price (i.e. to $2,000, $3,000, or even more) in the next few years it would have a significantly positive impact on the profitability of the companies who mine it and the royalty companies that buy it from marginal producers.
For example, with gold priced at $1,000/oz., and the cost of production at perhaps $600/oz. the gross profit margin of gold mining companies would be 40.0%. If 2 years from now, however, gold were to increase to $2,000 and the cost of production were to increase by only 20% to $720/oz. then the mining companies’ gross profit margins would have gone up from $400/oz. to $1280/oz. or 220%!
That’s called leverage and historically, in a rising market, the ratio for gold and silver mining/royalty shares vs. physical gold ranges from about 2.5:1 for large-cap companies on average to as much as 6:1 for gold and silver mining/royalty companies, on average and even 10:1 in exceptional circumstances for certain truly outstanding performers.
All the more reason for you to do your due diligence to find and invest in those gold and silver mining and/or royalty companies with the right mix of capable management, strong financing, major resources and geographically and politically well-located properties and reap the major benefits of such a surge in the future price of gold and silver.
Why Buy the Warrants instead of the Stock of Certain Gold/Silver Mining and Royalty Companies? To Further Double Your Returns – or More!
For those of you who are prudent enough to do your homework and buy the right long-term warrants associated with the right gold and silver mining and/or royalty companies at today’s undervalued prices, your eventual returns could well be 1.5 to 3 times greater, on average, than had you invested in their associated stocks. For companies whose stock prices go through the roof with monster gains that ratio could even be as high as 5:1.
That’s referred to as leverage-on-leverage or doubling-up on the leverage factor. The catch is, however, that you have to know whether or not the warrant associated with the stock you are interested in buying is the right warrant i.e. will the stock price escalate enough to generate sufficient leverage at various stock price appreciation levels during the duration of the warrant to justify its purchase.
Will Junior Gold and Silver Equities Experience +1,000% Returns Again?
Using the above ratios the answer is: “Yes they can!” True, not all such companies with reap such returns but a few of the well chosen ones will once again see returns that most gold bugs dream about.
Mega returns can be yours in the future if you start today to prepare for that day. All it is going to take is an environment in which some combination of a declining U.S. dollar, rampant inflation (or fear thereof), high interest rates, ongoing financial instability, further economic turmoil and occasional acts of terrorism come together to interact with high gold and silver prices and some trading mania. We are moving in that direction right across the board so it is just a matter of time.