May 19, 2023
A recession is coming... and investors can no longer ignore this fact.
The coming global economic slowdown seemed to be possible in late 2022. But now, the recession's odds are incredibly high, and some may even say it's inevitable.
The Federal Reserve's (or Fed's) own economists are projecting recession by the end of the year.
"The Fed is bracing for recession," says Robin Brooks, the chief economist at the International Institute of Finance in Washington.
No need to sugarcoat it-the consequences of this event could be brutal.
Personal savings could evaporate, and the economy could start seeing massive unemployment.
It will be challenging for some, and the Fed may not be planning to save anyone this time.
Traditional investments such as stocks and bonds could tumble again.
But there is a chance to survive the coming turmoil-and even potentially profit from it.
An investing strategy that we'll explain below has delivered solid gains in the past.
We call these-"Millionaire Makers."
We'll explain why in a second... and if you would like to learn more about this strategy, you can get a free special report that may help you to survive the coming recession... and possibly even benefit from it.
Investors are fastening their seat belts and getting ready for a rough ride.
To protect their capital, they turn to the time-tested safe haven asset-gold.
The yellow metal has a strong track record during times of high volatility. Research by Schroders, an asset manager, proves this.
Schroders' study found that during the seven recessions that happened since 1973 (shortly after President Nixon de-linked the US dollar from gold), the gold price gained 28% on average.
During those times, gold outperformed the S&P 500 by 37 percentage points.
In other words, investing in gold during economic meltdowns, on average, returned 37 percentage points more than investors would make in stocks.
This may sound too good to be true.
But the truth is even better. A small group of stocks beat the S&P 500 by 69 percentage points on average.
We're talking about gold stocks.
Why did they beat the yellow metal itself?
Well, it's all coming down to the concept of "margin..."
(And we're not talking about leverage here, as in "margin call." This is a different kind of margin you need to know about.)
Here's how it works.
When the gold price rises by $100 per ounce (let's say from $1,900 to $2,000), its absolute gain is 5.3%. Not a lot.
But when a gold mining company sells its gold for $100 more, it can greatly boost its operating margin.
A recent report from the World Gold Council says that the average cost of producing one ounce of gold is $1,289. If the company sells an ounce of gold for:
In other words, while gold gained only 5.3%, the mining company's profit went up by 16.4%.
This 3x difference could make a gold company outperform the underlying commodity-gold.
No wonder gold stocks were beating gold at its own game.
And we expect this recession will be no different.
The gold price has already surged past $2,000 per ounce. That's a sign that investors are getting ready for an economic slowdown.
Not only are retail and institutional buyers rushing into gold, but also central banks are buying it hand over fist.
Since the beginning of this year, central banks have bought 125 tonnes of gold (over 4 million ounces). That's the fastest pace of gold buying after the Great Recession of 2008-2009.
Investors can follow the same strategy and allocate part of their portfolio to gold, the ultimate safe haven asset.
And based on the same data, more risk-tolerant investors can try gold stocks for higher potential gains.
If economists are right and we're heading into recession, gold stocks will likely beat gold again.
There are easy ways to get exposure to gold mining companies:
Both are exchange-traded funds (ETFs) focused on gold stocks. GDX tracks the performance of the bigger players, while GDXJ is focused on junior mining companies.
But if you're looking for "Millionaire Makers," you need to focus on individual stocks in our opinion.
Past performance does not guarantee future results, but it provides valuable lessons to investors.
You can find our special report discussing these success stories free of charge HERE.
Disclaimer: This report is for informational use only and should not be used as an alternative to the financial and legal advice of a qualified professional in business planning and investment. We do not represent that forecasts in this report will lead to a specific outcome or result, and are not liable in the event of any business action taken in whole or in part as a result of the contents of this report.