By Justin Spittler
Gold had a HUGE day yesterday. The price of gold jumped 2.5% to $1,263/oz. Gold is this year’s top performing asset. With a 19% gain since January, it’s off to its best start to a year since 1974, according to Bloomberg Business.
Casey Research founder Doug Casey thinks this is just the beginning…..
In case you missed it yesterday, Doug explained why gold is set to rise at least 200%…and possibly even 400% or 500%. It’s a “must-read” essay, especially if you’re worried about the fragile stock market, slowing economy, or reckless governments.
In short, Doug believes the government has set us up for a crisis that “will in many ways dwarf the Great Depression.” And Doug expects the coming economic disaster to ignite a historic gold bull market.
Gold stocks will soar even higher…..
Longtime readers know gold stocks offer leverage to the price of gold. A 200% jump in the price of gold could cause gold stocks to spike 400%…600%…or more. The Market Vectors Gold Miners ETF (GDX), which tracks large gold miners, has soared 52% this year. Yesterday, it closed at its highest level since February 2015.
But gold stocks are still extremely cheap..…
Doug is loading up on gold stocks right now.
If you’re interested in multiplying your money by 5x or 10x in the coming gold “mania,” now is the time to take a position in gold stocks. The window of opportunity won’t stay open long. As Doug said, gold stocks will skyrocket once people realize the financial system is doomed. Because this window of opportunity is small, we’re currently running a special $500 discount on our service that recommends gold stocks, International Speculator. Click here to learn more.
Crude Oil is also soaring…..
As Dispatch readers know, there’s been nothing but bad news in the oil sector for nearly two years. The price of oil crashed 75%. Two months ago, it hit its lowest price since 2003. But since then, oil has climbed 36%. It jumped 5.1% yesterday. Why the big reversal? We’ll get to that in a second. First, let’s recap the recent disaster in the oil industry.
The world has too much oil…..
From 1998 to 2008, the price of oil surged more than 1,200%. Last year, U.S. oil production surged to the highest level since the 1970s. Global output also reached record highs. High prices encouraged innovation. Oil companies developed new methods, like “fracking.” This unlocked billions of barrels of oil that were once impossible to extract from shale regions. Today, the global economy produces more oil than it consumes. Each day, oil companies produce about 1.9 million more barrels than the world needs.
Crude Oil companies have slashed spending to cope with low prices…..
They’ve sold assets, abandoned billion dollar projects, cut their dividends and laid off more than 250,000 workers since June 2014. According to investment bank Barclays, oil and gas producers cut spending by 23% last year. Barclays expects spending to fall another 15% in 2016. This would be the first time in two decades the industry has cut spending two years in a row. Last week, the number of U.S. rigs actively pumping oil and natural gas plummeted to its lowest level in 70 years.
With oil prices rising, many U.S. companies can’t bring rigs back online fast enough…..
They don’t have enough workers or equipment after all the spending cuts. The Wall Street Journal reports:
The Wall Street Journal continues:
This is a dramatic shift in thinking by the industry…..
Oil companies had been pumping near-record amounts of oil for almost two years, despite low prices. Many companies had no choice. When all your revenue comes from selling oil, you have to keep pumping and selling oil. Companies could either sell oil for cheap or go out of business.
With fewer rigs pumping oil today, oil prices are climbing..…
Still, the oil crisis is far from over. Even with the recent rally, the price of oil is 65% below its 2014 high. It’s trading around $38 a barrel. Many companies won’t earn a profit unless oil gets back to $50. According to The Wall Street Journal, one-third of U.S. oil producers could go bankrupt this year. A wave of bankruptcies would likely trigger another leg down in oil stocks.
The oil market is highly cyclical…..
It goes through big booms and busts. Today, the industry is going through its worst bust in decades. It will boom again…but not until the world works off its massive oversupply of oil. According to the International Energy Agency, the oil surplus could last into 2017.
Last month, Saudi Arabia, Russia, Qatar, and Venezuela agreed to cap oil output…..
Saudi Arabia and Russia are two of the world’s three largest oil-producing countries. Qatar and Venezuela are also major oil producers. These countries agreed to “freeze” their oil production at January levels. They quickly broke the agreement. On Monday, CNN Money reported that Saudi Arabia and Russia actually boosted output last month. Both countries are pumping record amounts of oil. They don’t have much choice. Oil makes up 80% of Saudi Arabia’s exports. It accounts for 52% of Russia’s exports.
Nick Giambruno, editor of Crisis Investing, doesn’t think Saudi Arabia will survive the crisis…..
But he says the U.S. shale industry will survive.
The Saudis are playing a dangerous game.
Shale oil stocks are a train wreck right now. Occidental Petroleum Corporation (OXY), the largest shale oil producer, is down 30% since June 2014. EOG Resources Inc. (EOG), the second-largest shale oil producer, is down 35%.
Nick sees huge opportunity here. He often reminds readers that a crisis is the only time you can buy a dollar’s worth of assets for a dime or less. And shale oil stocks are in a major crisis right now. Nick has already picked out a “best of breed” U.S. shale oil company. But before pulling the trigger, Nick is waiting for the Saudi government to show signs of cracking. The point of maximum pessimism will present a “once-in-a-generation opportunity” to pick up this shale company at an absurdly cheap price.
You can get in on this opportunity by signing up for Crisis Investing. Click here to begin your 90-day risk-free trial.
Chart of the Day
Oil is still near its lowest level in years. As we mentioned earlier, oil has rallied 36% over the past few weeks. That’s a big jump in a short period. But oil isn’t in the clear yet. Today’s chart shows the performance of oil since 2014. You can see that the price of oil is still well below its 2014 high. It’s trading at prices last seen during the last financial crisis. Many oil companies can’t survive with current oil prices. Some will go out of business. And a wave of bankruptcies will likely spark another leg down in oil stocks. We recommend avoiding oil stocks for now.
The article Gold and Oil Are Soaring…But There’s Only One You Should Buy Today was originally published at caseyresearch.com.
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