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Kibali Mine Production Soars Past Guidance to Post Another Record Year SPONSOR: Loncor Resources $LN.ca $ABX.ca $TECK.ca $RSG $NGT.to $GOLD

Posted by AGORACOM-Eric at 1:56 PM on Monday, January 27th, 2020
This image has an empty alt attribute; its file name is Loncor-Small-Square.png

Sponsor: Loncor is a Canadian gold exploration company that controls over 2,400,000 high grade ounces outside of a Barrick JV.. The Ngayu JV property is 200km southwest of the Kibali gold mine, operated by Barrick, which produced 800,000 ounces of gold in 2018. Barrick manages and funds exploration at the Ngayu project until the completion of a pre-feasibility study on any gold discovery meeting the investment criteria of Barrick. Click Here for More Info

  • Barrick Gold’s Kibali mine beat its 2019 production guidance of 750,000 ounces by delivering 814,027 ounces
  • Kibali is 200km to the southwest of Loncor’s JV with Barrick in search for further Tier Once mining assets

KINSHASA, Democratic Republic of Congo, Jan. 27, 2020 (GLOBE NEWSWIRE) — Barrick Gold Corporation (NYSE:GOLD) (TSX:ABX) - Barrick Gold Corporation’s Kibali mine beat its 2019 production guidance of 750,000 ounces of gold by a substantial margin, delivering 814,027 ounces in another record year.

Barrick president and chief executive Mark Bristow told a media briefing here that Kibali’s continuing stellar performance was a demonstration of how a modern, Tier One gold mine could be developed and operated successfully in what is one of the world’s most remote and infrastructurally under-endowed regions.  He also noted that in line with Barrick’s policy of employing, training and advancing locals, the mine was managed by a majority Congolese team, supported by a corps of majority Congolese supervisors and personnel.

Already one of the world’s most highly automated underground gold mines, Kibali continues its technological advance with the introduction of truck and drill training simulators and the integration of systems for personnel safety tracking and ventilation demand control. The simulators will also be used to train operators from Barrick’s Tanzanian mines.

“The completion of the Kalimva Ikamva prefeasibility study has delivered another viable opencast project which will help balance Kibali’s opencast/underground ore ratio and enhance the flexibility of the mine plan.  Down-plunge extension drilling at Gorumbwa has highlighted future underground potential and ongoing conversion drilling at KCD is delivering reserve replenishment.  All in all, Kibali is well on track not only to meet its 10-year production targets but to extend them beyond this horizon,” Bristow said.

“We’re maintaining a strong focus on energy efficiency through the development of our grid stabilizer project, scheduled for commissioning in the second quarter of 2020. This uses new battery technology to offset the need for running diesel generators as a spinning reserve and ensures we maximize the use of renewable hydro power.  The installation of three new elution diesel heaters will also help improve efficiencies and control power costs.  It’s worth noting that our clean energy strategy not only achieves cost and efficiency benefits but also once again reduces Kibali’s environmental footprint.”

Bristow said despite the pace of production and the size and complexity of the mine, Kibali was maintaining its solid safety and environmental records, certified by ISO 45001 and ISO 14001 accreditations.  It also remained committed to community upliftment and local economic development.  In 2019, it spent $158 million with Congolese contractors and suppliers and in December, it started work on a trial section for a new concrete road between Durba and the Watsa bridge.

NYSE: GOLD
www.barrick.com

Source: https://www.juniorminingnetwork.com/junior-miner-news/press-releases/315-nyse/gold/72431-kibali-soars-past-guidance-to-post-another-record-year.html

Gold at $1,600 Is The ‘Bare Minimum’ for 2020 SPONSOR: Loncor Resources $LN.ca $ABX.ca $TECK.ca $RSG $NGT.to

Posted by AGORACOM-Eric at 11:37 AM on Tuesday, January 21st, 2020
This image has an empty alt attribute; its file name is Loncor-Small-Square.png

Sponsor: Loncor is a Canadian gold exploration company that controls over 2,400,000 high grade ounces outside of a Barrick JV. Exploration is currently being conducted by Barrick. The Ngayu property is 200km southwest of the Kibali gold mine, operated by Barrick, which produced 800,000 ounces of gold in 2018. Barrick manages and funds exploration at the Ngayu project until the completion of a pre-feasibility study on any gold discovery meeting the investment criteria of Barrick. Click Here for More Info

  • Gold is a hedge against inflation that is being used more and more
  • Goldex CEO pointed to a recent Goldman Sachs report that pointed to gold as being a better hedge than oil.
  • This view is the new consensus that will increase demand for gold.

(Kitco News) What can take the gold market from $1,550 to $1,600 and higher? Goldex CEO and founder Sylvia Carrasco told Kitco News that she is not ruling out the $1,900 an ounce level this year if geopolitical and trade tensions escalate in the current economic climate.

There are a number of strong drivers supporting gold prices this year, including geopolitical and trade tensions, global debt, dovish central banks, weakening U.S. dollar as well as the political situation in the U.S., Carrasco said on Thursday.

“Last year, I said that the perfect storm was forming and I think I would use this phrase again. The perfect storm is now happening,” Carrasco noted. “Gold should be around $1,600 if nothing else crazy happens. At this moment in time, I can see gold between the $1,500 and the $2,000 mark during 2020.”

If the market sees a further increase in geopolitical tensions or additional trade concerns this year, gold will surge towards $1,900, Goldex CEO pointed out. And if things do calm down, Carrasco does not see gold falling much below $1,500 an ounce.

“It is going to be another record year,” she said, referring to gold hitting record-highs in many currencies last year. “And it will be mainly due to geopolitical tensions raising prices higher.”

“With the current economic climate, gold should be between $1,500 and $1,600. If on top of that bare minimum, you add very strong geopolitical tensions or commercial trade issues, then you take it from $1,600 up to $1,900,” she added.

At the time of writing, the spot gold price was trading at $1,560.40, up 0.24% on the day and up 2.8% since the start of the year.

Gold is a hedge against inflation that is being used more and more by investors who are realizing the benefits of the yellow metal, Carrasco said.

“Gold is the hedge that people should be using. I wouldn’t build my personal wealth portfolio just on gold. But gold is more and more clearly overtaking oil and any other hedging mechanisms … Gold will be a good trade whether for speculative reasons or for trading,” she noted.

Goldex CEO pointed to a recent Goldman Sachs report that pointed to gold as being a better hedge than oil. Carrasco added that this view is the new consensus that will increase demand for gold.

Gold began the year with a bang as U.S.-Iran tensions flared up and surprised the markets in the first two weeks of January.

“The rally we’ve seen is based on geopolitical tensions between the U.S. and Iran. We need to see also the reasons behind Trump’s approach when it comes to Iran … In September, the U.S. ended up a positive net exporter of oil for the first time in history. That gives you a reason why Trump thinks he is not affected by the tensions even though the rest of the world is affected,” Carrasco described.

Also, U.S. President Donald Trump was driven by the goal to distract the market from the impeachment proceedings against him, she added.

Going forward, gold prices are likely to rise further, especially considering that most of the major central banks around the world are not planning to start raising rates any time soon.

“Central banks using unconventional ways … Is there going to be an increase in interest rates in Europe or in the U.S.? The answer is no. And if interest rates are not going to increase, gold is the first one that is affected,” Carrasco said.

On top of that, the central banks will remain significant gold buyers in 2020. “That’s another reason why gold prices will increase this year,” she said.

Growing debt also supports higher gold prices this year, the CEO added. “We’ve been talking about debt for years — how corporate debt and government debt continues to increase. More debt effectively means a potentially weaker U.S. dollar. The moment the U.S. dollar is weak, where do you go? The only safe place is gold. And I think we are going to be seeing a weakening dollar as the year continues,” Carrasco described.

Source: https://www.kitco.com/news/2020-01-20/Gold-at-1-600-is-the-bare-minimum-for-2020-Goldex-CEO.html

Gold’s Big Picture SPONSOR: Loncor Resources $LN.ca $ABX.ca $TECK.ca $RSG $NGT.to

Posted by AGORACOM-Eric at 12:32 PM on Friday, January 17th, 2020
This image has an empty alt attribute; its file name is Loncor-Small-Square.png

Sponsor: Loncor is a Canadian gold exploration company focused on two projects in the DRC – the Ngayu and North Kivu projects, both have historic gold production. Exploration at the Ngayu project is currently being undertaken by Loncor’s joint venture partner Barrick Gold. The Ngayu project is 200km southwest of the Kibali gold mine, operated by Barrick, which produced 800,000 ounces of gold in 2018. Barrick manages and funds exploration at the Ngayu project until the completion of a pre-feasibility study on any gold discovery meeting the investment criteria of Barrick. Click Here for More Info

From the HRA Journal: Issue 314

The fun doesn’t stop. Waves of liquidity continue to wash traders cares away. Even assassinations and war mongering generate little more than half day dips on Wall St. It seems nothing can get in the way of the bull rally that’s carrying all risk assets higher.

It feels like it could go on for a while, though I think the liquidity will have to keep coming to sustain it. By most readings, bullishness on Wall St is at levels that are rarely sustained for more than a few weeks. Some sort of correction on Wall St seems highly likely, and soon. Whether its substantial or just another blip on the way higher remains to be seen.

The resource sector, especially gold and silver stocks, have had their own rally. Our Santa Claus market was as good or better than Wall St’s for a change. And I don’t think its over yet. I think we’re in for the best Q1 we’ve seen for a few years. And we could be in for something better than that even. I increasingly see signs of a major rally developing in the gold space. It’s already been pretty good but I think a multi-quarter, or longer, move may be starting to take shape.

I usually spend time on all the metals in the first issue of the year. But, because the makings of this gold rally are complex and long in coming I decided to detail my reasoning. That ended up taking several pages so I’ll save talk on base metals and other markets for the next issue.

Eric Coffin
January 7, 2020

Gold’s Big Picture

Après moi, le déluge

No, I’m not writing about Louis IV, though there might be some appropriateness to the analogy, now that I think about it. The quote is famous, even though there’s no agreement on what it was supposed to mean. Most figure Louis was referring to the biblical flood, that all would be chaos once his reign ended.

The deluge I’m referring to isn’t water. It’s the flood of money the US Fed, and other central banks, continue to unleash to keep markets stable. Markets, especially stock markets, love liquidity. You can see the impact of the latest deluge, particularly the US Fed’s in the chart below that traces both the SPX index value and the level of a “Global Liquidity Proxy” (“GLP”) measuring fiscal/monetary tightness and weakness.

You can see the GLP moved lower in late 2018 as the Fed tightened and the impact that had on Wall St. Conversely, you can see the SPX running higher in the past couple of months as the US backed off rate increases, increased fiscal deficit expansion, and grew the Fed balance sheet through, mainly, repo market operations.

Wall St, and most other bourses, are loving these money flows. The Santa Claus rally discussed in the last issue continued to strengthen all the way to and through year end. As it turned out, the Fed either provided enough backstop in advance or the yearend repo issues were overstated. The repo market itself was calm going through year end and a lot of the short-term money offered by the Fed during that week wasn’t taken down.

Everything may have changed in the past couple of days with the dramatic increase in US-Iran tensions. I don’t know how big an issue that will be, since no one knows what form Iran’s retaliation will be or how much things will escalate. I DO think it’s potentially a big deal with very negative connotations, but it may take time to unfold. Someone at the Fed thought so too, as the past couple of days saw a return to large scale Fed lending in the repo market.

I’ve no doubt Iran will try and take revenge for the assassination of its most famous military commander by the US. But I don’t know what form it will take and if this means the US has drawn itself into the Mideast quagmire even more. I fear it has though. The US is already talking about adding 3,000 troops to its Mideast presence and they’re just warming up. Even larger scale attacks, if they happen, may not derail Wall St, but they’re certainly not a positive development at any level.

We know how stretched both market valuations and sentiment were before the Suleimani drone strike. The chart below shows a three-year trace of the “fear/greed index”. You can see that its hardly a stable reading. It flip flops often and extreme readings rarely hold for long. At last check, the reading was 94% bullish.

Sentiment almost never gets that bullish and, when it does, nothing good comes of it for bulls. A reading that close to 100% tells you we’re just about out of buyers. Whatever happens in and around Iran, I think a near term correction is inevitable. The only question is whether it’s a large one or not.

A rapid escalation in US-Iran tensions could certainly make a near term correction larger. If the flood of liquidity continues though, a correction could just be another waystation on the road to higher highs. There are a couple of other dangers Wall St still faces that I’ll touch on briefly at the end of this article. First however, lets move on to the main event for us-the gold market.

It wasn’t just the SPX enjoying a Santa rally this year. Gold experienced the rally we were hoping for that gold miner stocks seemed to be foretelling early last month. Gold’s been doing well since it bottomed at $1275 in June, but it didn’t feel that way during the long hiatus between the early September high and the current move. The gold price currently sits above September’s multi-year high, after breaching that high in the wake of the Baghdad drone strike. And the first retaliatory strike by Iran. Volatility will be very high for a while going forward.

I think we’ll see more multi-year highs going forward. I hate that the latest move higher is driven by geopolitics. Scary geopolitics and military confrontations mean people are dying. We don’t want to profit from misery. And we won’t anyway, if things get ugly enough in the Mideast to scare traders out of the market.

Geopolitical price moves almost always unwind quickly. I’d much prefer to see gold moving higher for macro reasons, not as a political safety trade. I expect more political/military inspired moves. As the Iran conflict unfolds. Make no mistake, Iran is NOT Iraq. Its army is far larger, better trained and better equipped than Iraq. This could get ugly.

The balance of this piece will deal with my macro argument for higher gold prices over an extended period. The geopolitical stuff will be layered on top of that for the next while and could strengthen both gold prices and the $US in risk-off trading. It should be viewed as a separate event from the argument laid out below.

What else is driving gold higher? In part, it was gold’s inverse relationship with the US Dollar. As you already know, I’m not a believer that “its all about the USD, all the time” when it comes to the gold market. That’s an over-simplification of a more complex relationship. It also discounts the idea of gold as its own asset class that trades for its own reasons.

If you look at the gold chart above, and the USD chart below it, its immediately apparent that there isn’t a constant negative correlation at play. Gold rallied during the summer at the same time the USD did and for the same reason; the world-wide explosion of negative real yields. Gold weakened a bit when yields reversed to the upside and the USD got a bit of traction, but things changed again at the start of December.

The USD turned lower and lost two percent during December. US bond yields were generally rising during the month and the market (right or wrong) was assuming economic growth was accelerating. So, neither of those items explains the USD weakness.

If gold was a “risk off” trade, you sure couldn’t see it in the way any other market was trading. So, is there another explanation for recent strength in the gold price, and what does it tell us about 2020 and, perhaps, beyond?

Well, I’ve got a theory. If I’m right, it could mean a bull run for gold has a long way to go.

Some of this theory will be no surprise to you because it does partially hinge on further USD weakness. There are long term structural reasons why the US currency should weaken. But there are also fluctuating sources of demand for USDs, particularly from offshore buyers and borrowers that transact in US currency. That can create enough demand to strengthen the US over long periods. We just went though one such period, but it looks like that may have come to an end, with more bearish forces to the USD reasserting themselves.

How did we get here? Let’s start with the big picture, displayed on the top chart on the next page. It gives a long-term view of US Federal deficits and the unemployment rate. Normally, these travel in tandem. Higher unemployment means more social spending and higher deficits. Government spending expands during recessions and contracts-or should- (as a percentage of GDP) during expansions. Classic Keynesian stuff.

You rarely see these two measures diverge. The two times they did significantly before, on the left side of the chart, was due to “wartime deficits” which acted (along with conscription) to stimulate the economy and drive down unemployment.

You can see the Korean and Vietnam war periods pointed out on the chart.

The current period stands out for the extreme size of the divergence. US unemployment rates are at multi decade lows and yet the fiscal deficit as a percentage of GDP keeps rising. There has never been a divergence this large and its due to get larger.

We know why this is. Big tax cuts combined with a budget that is mostly non-discretionary. And the US is 10 years into an economic expansion, however weak. Just think what this graph will look like the next time the US goes into recession.

We can assume US government deficits aren’t going to shrink any time soon (and I think we can, pun intended, take that to the bank). That leaves trade in goods to act as a counterbalance to the funding demand created by fiscal deficits.

The chart above makes it clear the US won’t get much help from international trade. The US trade balance has been getting increasingly negative for decades. It’s better recently, but unlikely to turn positive soon, and maybe not ever.

To be clear, this is not a bad thing in itself, notwithstanding the view from the White House. The relative strength of the US economy and the US Dollar and cheaper offshore production costs have driven the trade balance. It’s grown because Americans found they got more value buying abroad and the world was happy to help finance it. It’s not a bad thing, but not a US Dollar support either.

The more complete picture of currency/investment flows is given by changes in the Current Account. In simplified terms, the Current Account measures the difference between what a country produces and what it consumes. For example, if a country’s trade deficit increases, so does its current account deficit. If there are funds flowing in from overseas investments on the other hand, this decrease the Current Account deficit or increase the surplus.

The graph below summarizes quarterly changes in the US current account. You can see how the balance got increasingly negative in the mid 2000’s as both imports and foreign investment by US companies increased.

Not coincidentally, this same period leading up to the Financial Crisis included a sustained downtrend in the US Dollar Index. The USD index chart on the bottom of the next page shows the scale of that decline, from an index value of 120 at the start of 2002 all the way down to 73 in early 2008.

The current account deficit (and value of the USD) improved markedly up to the end of the Financial Crisis as money poured into the US as a safe haven and consumers cut back on imports. The current account deficit bas been relatively stable since then, running at about $100bn/quarter until it dipped a bit again last year.

Trade, funds flows and changes in money supply have the largest long-term impacts on currency values. When the US Fed ended QE and started tightening monetary conditions in 2014, the USD enjoyed a strong rally. The USD Index was back to 100 by early 2015 and stayed there until loosening monetary conditions-and lots of jawboning from Washington-led to pullback. Things reversed again and the USD maintained a mild uptrend from early 2018 until now.

There are still plenty of US Dollar bulls around, and their arguments have short-term merit. Yes, the US has higher real interest rates and somewhat higher growth. Both are important to relative currency valuations as I’ve said in the past. Longer term however, the “twin deficits” -fiscal and current account-should underpin the fundamental value of the currency.

Movements don’t happen overnight, especially when you’re talking about the worlds reserve currency that has the deepest and largest market supporting it. Changing the overall trend for the USD is like turning a supertanker. I think it’s happening though, and it has big potential implications for commodities, especially gold.

Dollar bulls will tell you the USD is the “cleanest shirt in the laundry hamper”, referring to the relative strength of the growth rate and interest rates compared to other major currencies. That’s true if we just look at those measures but definitely not true when we look at the longer term-fiscal and current account deficits.

In fact, the US has about the worst combined fiscal/current account deficit in the G7. The chart at the bottom of this page, from lynalden.com shows the 2018 values for Current Account and Trade balances for a number of major economies, as a percentage of their GDP. It’s not a handsome group.

Both the trade and current account deficits are negative for most of them. In terms of G7 economies, the US has the worst combined Current/Trade deficit at 6% of GDP annually. You may be surprised to note that the Current/Trade balance for the Euro zone is much better than the US, thanks to a large Trade surplus. Much of that is generated by Germany. Indeed, this chart explains Germanys defense of the Euro. It’s combined Trade/Current Account surplus is so large it’s currency would be skyrocketing if it still used the Deutschmark.

Because the current account deficit is cumulative, the overall international investment position of the US has continued to worsen. The US has gone from being an international creditor to an international debtor, and the scale if its debt keeps increasing. That means it’s getting harder every year to reverse the current account position as the US borrows ever more abroad to cover its trade and fiscal deficits. Interest outflows keep growing and investment inflows shrinking. Something has to give.

The US has to borrow overseas, as private domestic demand for Treasury bonds isn’t high enough to fund the twin deficits. In the past, whenever the US Dollar got too high, offshore demand for US government debt diminished. It’s not clear why. Maybe the higher dollar made raising enough foreign funds difficult, or perhaps buyers started worrying about the USD dropping after they bought when it got too expensive. Whatever the reason, foreign holdings of US Treasuries have been declining, forcing the US to find new, domestic, buyers.

Last year, the US Fed stopped its quantitative tightening program, due to concerns about Dollar liquidity. Then came the repo market. Since September, the Fed’s balance sheet has expanded by over $400 billion, mainly due to repo market transactions.

The Fed maintains this “isn’t QE” because these are very short duration transactions but, cumulatively, the total Fed balance sheet keeps expanding. The “QE/no QE” debate is just semantics.

What do these transactions look like? Mostly, its Primary Dealers, banks that also take part in Treasury auctions, in the repo market. The Fed buys bonds, usually Treasuries, from these banks and pays for them in newly printed Dollars. That injects money into the system, helps hold down interest rates in the repo market and, not coincidentally, effectively helps fund the US fiscal deficit. To put the series of transactions in their simplest form, the US is effectively monetizing its deficit with a lot of these transactions.

The chart below illustrates the problem for the Primary Dealer US banks. They’ve got to buy Treasuries when they’re auctioned-that is their commitment as Primary Dealers. They also need to hold minimum cash balances as a percentage of assets under Basel II bank regulations. Cash balances fell to the minimum mandated level by late 2019- the horizontal black line on the chart. That’s when the trouble started.

These banks are so stuffed with Treasuries that they didn’t have excess cash reserves to lend into the repo market. Hence the blow up back in September and the need for the Fed to inject cash by buying Treasuries. The point, however, is that this isn’t really a “repo market issue”, that’s just where it reared its head. It’s a “too many Treasuries and not enough buyers” problem.

It will be tough for the Treasury to attract more offshore buyers unless the USD weakens, or interest rates rise enough to make them irresistible. Or a big drop in the federal deficit reduces the supply of Treasuries itself.

I doubt we’ll see interest rates move up significantly. I don’t think the economy could handle it and it would be self-defeating anyway, as the government deficit would explode because of interest expenses. And that’s not even taking into account the fact that President Trump would be freaking out daily.

Based on recent history and political expediency, I’d say the odds of significant budget deficit reductions are slim and none. That’s especially true going into an election year. There’s just no way we’re going to see spending restraint or tax increases in the next couple of years. Indeed, the supply of Treasuries will keep growing even if the US economy grows too. If there is any sort of significant slowdown or recession the Federal deficit will explode and so will the new supply of Treasures. Not an easy fix.

Barring new haven demand for US Treasuries, odds are the Fed will have to keep sopping up excess supply. That means expanding its balance sheet and, in so doing, effectively increasing the US money supply.

That brings us (finally!) to the “money shot” chart that appears above. It compares changes in the size of the Fed balance sheet and the US Dollar Index. To make it readable and allow me to match the scales, I generated a chart that tracks annual percentage changes.

The chart shows a strong inverse correlation between changes in the size of the Fed balance sheet and the value of the USD. This is unsurprising as most transactions that expand the Fed balance sheet also expand the money supply.

It’s impossible to tell how long the repo market transactions will continue but, after three months, they aren’t feeling very “temporary”. To me, it increasingly looks like these market operations are “debt monetization in drag”.

I don’t know if that’s the Fed’s real intent or just a side effect. It doesn’t really matter if the funding and money printing continues at scale. Even if the repo market calms completely, the odds are good we see some sort of “new QE” start up. Whatever official reason is given for it; I think it will happen mainly to soak up the excess supply of Treasuries fiscal deficits are creating.

I don’t blame the FOMC if they’re being disingenuous about it. That’s their job after all. If you’re a central banker, the LAST thing you’re going to say is “our government is having trouble finding buyers for its debt”, especially if its true.

With no prospect of lower deficits and apparent continued reduction in offshore Treasury holdings, this could develop into long-term sustained trend. I don’t expect it to move in a straight line, markets never do. A severe escalation in Mideast tensions or the start of a serious recession could both generate safe-haven Treasury buying. Money flows from that would take the pressure off the Fed and would be US Dollar supportive too.

That said, it seems the US has reached the point where a substantial increase in its central bank’s balance sheet is inevitable. Both Japan and the Eurozone have gotten there before the Fed, but it looks like it won’t be immune.

The Eurozone at least has a “Twin surplus” to help cushion things. And Japan, considered a basket case economically, had an extremely deep pool of domestic savings (far deeper than the US) to draw on. Until very recently, Japan also ran massive Current Account surpluses thanks to decades of heavy investments overseas by Japanese entities. Those advantages allowed the ECB and especially the BoJ to massively expand their balance sheets without generating a huge run up in interest rates or currency collapse.

I don’t know how far the US Fed can expand its balance sheet before bond yields start getting away from it. I think pretty far though. Having the world’s reserve currency is a massive advantage. There is huge built in demand for US Dollars and US denominated debt. That gives the Fed some runway if it must keep buying US Treasuries.

Assuming a run on yields doesn’t spoil the party, continued balance sheet and money supply expansion should put increasing downward pressure on the US Dollar. I don’t know if we’ll see a move as large as the mid-2000s but a move down to the low 80s for the USD Index over the course of two or three years wouldn’t be surprising.

It won’t be a straight-line move. A recession could derail things, though the bear market on Wall St that would generate would support bullion. Currency markets tend to be self-correcting over extended periods. If the USD Index falls enough and there is a bump in US real interest rates offshore demand for Treasuries should increase again.

The bottom line is that this is, and will continue to be, a very dynamic system. Even so, I think we’ve reached a major inflection point for the US currency. The 2000s were pretty good for the gold market and gold stocks. We started from a much lower base of $300/oz on the gold price. Starting at a $1200-1300 base this time, I think a price above $2000/oz is a real possibility over the next year or two.

It’s not hard to extrapolate prices higher than that, but I’m not looking or hoping for those. I prefer to see a longer, steadier move that brings traders along rather than freaking them out.

This prediction isn’t a sure thing. Predictions never are. But I think the probabilities now favor an extended bull run in the gold price. Assuming stock markets don’t blow up (though I still expect that correction), gold stocks should put in a leveraged performance much more impressive than the bullion price itself.

There will be consolidations and corrections along the way, but I think there will be many gold explorers and developers that rack up share price gains in the hundreds of percent. That doesn’t mean buying blindly and never trading. We still need to adjust when a stock gets overweight and manage risk around major exploration campaigns. The last few weeks has been a lot more fun in the resource space. I don’t think the fun’s over yet. Enjoy the ride.

Like any good contrarian, a 10-year bull market makes me alert of signs of potential trouble. As noted at the start of this editorial, I’m expecting continues floods of liquidity. That may simply overwhelm everything else for a while and allow Wall St to keep rallying, come what may.

That said, a couple of data points recently got my attention. One is more of a sentiment indicator, seen in the chart below. More than one wag has joked that the Fed need only worry about Wall St, since the stock market is the economy now. Turns out there is more than a bit of truth to that.

The chart shows the US Leading Indicator reading with the level of the stock market (which is a component of the official Leading Indicator) removed. As you can see, without Wall St, the indicator implies zero growth going forward. I’m mainly showing it as evidence of just how surreal things have become.

The chart above is something to keep an eye on going forward. It shows weekly State unemployment claims for several major sectors of the economy. What’s interesting about this chart is that claims have been climbing rapidly over the past few weeks. Doubly interesting is that the increase in claims is broad, both within and across several sectors of the economy.

I take the monthly Non-Farm Payroll number less seriously than most, because it’s a backward-looking indicator. This move in unemployment claims looks increasingly like a trend though. It’s now at its highest level since the Financial Crisis.

It’s not in the danger zone-yet. But its climbing fast. We may need to start paying more attention to those payroll numbers. If the chart below isn’t a statistical fluke, we may start seeing negative surprises in the NFP soon. That won’t hurt the gold price either.

Source and Thanks: https://www.hraadvisory.com/golds-big-picture

Will 2020 Be Junior Mining’s Year? SPONSOR: Loncor $LN.ca $ABX.ca $TECK.ca $RSG $NGT.to

Posted by AGORACOM-Eric at 1:55 PM on Thursday, January 9th, 2020
This image has an empty alt attribute; its file name is Loncor-Small-Square.png

Sponsor: Loncor is a Canadian gold exploration company focused on two projects in the DRC – the Ngayu and North Kivu projects, both have historic gold production. Exploration at the Ngayu project is currently being undertaken by Loncor’s joint venture partner Barrick Gold. The Ngayu project is 200km southwest of the Kibali gold mine, operated by Barrick, which produced 800,000 ounces of gold in 2018. Barrick manages and funds exploration at the Ngayu project until the completion of a pre-feasibility study on any gold discovery meeting the investment criteria of Barrick. Click Here for More Info

Another year of covering commodities and select junior mining stocks is all but done and dusted. 

We’ve seen palladium prices more than double those of platinum, its sister metal, on tight supply and high demand for catalytic converters in gas-powered vehicles, as smog-belching diesel cars and trucks get phased out to meet tighter air emissions standards particularly in Europe and China. 

Indonesia advanced a 2022 deadline for banning the export of mineral ores, including nickel, prompting a massive surge in the price of the stainless steel and electric-vehicle battery ingredient. In September, nickel powered past $8 a pound, before slipping back to around $6/lb after the resumption of Indonesian ore exports and weaker demand from the stainless steel industry.  

Palladium and nickel are both in-demand metals for the foreseeable future, nickel for its use in batteries and stainless steel, and palladium as an important ingredient of catalytic converters found in gas-powered/ hybrid vehicles.

Zinc inventories in February fell to the point where there were less than two days worth of global consumption locked in London Metal Exchange (LME) warehouses. The paucity of the metal used to prevent rusting caused prices to spike to the highest since June 2018. 

Gold started off the year around $1,300/oz, and didn’t do much for the first half on account of higher interest rates holding prices down. In July though, gold started to run when the US Federal Reserve reversed course and began cutting interest rates instead of raising them. The ECB and a number of other central banks followed suit, wanting to keep interest rates low to try and boost flagging economic growth. 

The yellow metal advanced to $1,550 in early September due to a combination of factors including negative real interest rates (always good for gold), a sluggish dollar, and safe haven demand owing to US tensions with Iran, impeachment, Brexit fears, etc.

Silver followed a similar, though more bumpy trajectory. The white metal used more for industrial than investment purposes traded in a tight range (~$1.50) from January to May, bottoming out at $14.38 before jumping Sept. 4 to within two bits of $20 ($19.57). 

Copper had an off year in 2018 over fears of slowing Chinese growth and the US-China trade war, but as we at AOTH have always maintained, the market fundamentals are solid. Over 200 copper mines currently in operation will reach the end of their productive life before 2035. Most of the low-hanging copper “fruit” has been picked. New copper mines will be lower-grade and farther afield, meaning higher capex and production costs.

Although copper prices suffered in the second and third quarter, things are looking up for the essential base metal needed for plumbing and wiring, power generation, communications, 5G networks, and electric vehicles, which use around four times as much copper as a conventional car or truck. 

Energized by a rip-roaring fourth quarter, copper bulls are back on board. From its 52-week low in August of $2.51/lb, the red metal gained an impressive 11%, reaching a pinnacle of $2.83/lb Dec. 12, on expectations of a trade war resolution between the world’s number one and two economies, and the improved economic growth prospects that would entail. Copper has risen 7% in December alone. 

Proven right 

Our predictions for all of these metals have been bang on. We were right to say, as we did last January, that Commodities are the right story for 2019

We pinned our thesis on three key points: 1/ Commodities are cyclical, and the timing is right to get in now; 2/ The US dollar is falling, and will likely continue to fall or be range-bound going forward. A resolution to the trade war between the US and China, and a looser monetary policy by the Federal Reserve (both of which are likely) will weigh on the dollar and be good for commodities; 3/ The need for infrastructure spending is not going to let up. 

Close to a year later, our commodities hypothesis rings true. The dollar’s upward march in 2018 (DXY moved from 89 to 97) did stop in 2019, helping commodities priced in US dollars. The US-China trade war escalated but as we predicted, there was a resolution – not a complete trade deal – but enough hope for one, to send copper, the most important base metal, soaring in recent weeks. 

At the beginning of the year, as stock markets bounced back from their awful fourth-quarter 2018, everyone thought that the US economy was roaring. We weren’t so sure, and presented evidence of a less sanguine picture including negative fallout from the trade war with China and a yield curve inversion which is a very accurate indicator of a coming recession. 

The US Federal Reserve appeared to agree. Worried about low growth, globally and in the US, the Fed slammed the brakes on the interest rate hikes it started in 2015, and began lowering them in July, 2019. That immediately juiced gold and silver. Investors piled into precious metals as an alternative to near-zero or negative-yielding sovereign bonds. Looser monetary policy, check. 

In later articles we showed the bullish cases for zinc, nickel and palladium. 

The palladium price tripled from the start of 2016 to spring of 2019, beating gold just under a year ago for the first time in 16 years. Palladium has been in deficit for eight straight years, because of low mined output and smoking-hot demand from the auto sector. So far in 2019 it has gained 47%. 

Battery companies have been developing nickel-rich batteries in two of the dominant chemistries for EVs, the nickel-manganese-cobalt (NMC) battery used in the Chevy Bolt (also the Nissan Leaf and BMW i3) and the nickel-cobalt-aluminum (NCA) battery manufactured by Panasonic/Tesla. Added to Indonesia’s on and off export ban, a demand boost from nickel’s growing use in electric-vehicle batteries, and dwindling global stockpiles, have helped support nickel prices.

According to the USGS, despite new zinc mines opening in Australia and Cuba, supply failed to keep up with consumption. Some very large zinc mines have been depleted and shut down in recent years, with not enough new mine supply to take their place. As a result, the zinc market was in deficit in 2018. 

Tighter environmental restrictions in China are lessening the amount smelters can produce. National production of refined zinc in 2018 fell to just 4.53 million tonnes, the sharpest downturn since 2013. The result has been a record amount of refined zinc imported by the world’s largest metals consumer, 715,355t in 2018. The high demand in China has also pulled a lot of zinc out of LME warehouses.

In October zinc prices hit a four-month high due to falling zinc stocks – inventories in London Metal Exchange-registered warehouses plunged to 57,775 tonnes – a smidgen higher than the 50,425t in April, the lowest since the 1990s, Reuters said. 

Tough market for explorers

It’s good to see we were right about so many metal markets. 

Regrettably however, the valuations of mineral exploration companies have yet to follow the prices of the metals they are hunting. 

Indeed the junior mining sector has been in a funk since around 2012. 

The juniors’ place in the mining food chain is to provide projects to be turned into mines for larger mining companies whose reserves are running low. This is becoming a growing problem as all the low-hanging, high-grade deposit fruit has been picked. Such is the case for gold, silver, copperpalladium, zinc and nickel, all of which are encountering, or will shortly encounter, supply deficits, amid booming demand for battery metals and precious metals. 

Finding the kind of grades at amounts that will make a mine profitable usually requires going farther afield or deeper – greatly adding to costs per ounce or tonne.

Here’s the problem juniors have been facing: At the same time as investment capital has been pulled out of the mining majors and mid-tiers – by investors tired of seeing falling or stagnant stock prices/ red ink balance sheets – there’s been a dearth of speculative capital flowing into exploration companies.

The ascendance of index funds has also made it harder for juniors to attract money, because they are too small to be in the funds that these vehicle track. 

According to a 2019 report by PDAC – the association that puts on the annual mining show in Toronto – and Oreninc, a junior financing tracker, equity financing in 2018 was 35% less than in 2017 – a decade-low $4.1 billion. 

A good chunk of that cash went to marijuana stocks, as dozens of companies emerged to take advantage of the pot legalization bill passed by the Canadian federal government. Whereas weed stock IPOs attracted $491.1 million in investment dollars in 2018, mining IPOs only accounted for $51.6 million, a startling drop from the $830 million in 2017.

That’s a lot of speculative capital pulled out of resource stocks. However it’s not all gloom and doom, according to TD Securities mining investment bankers, who say “current market conditions and historical precedents make them optimistic generalist investors will return in greater numbers to mining stocks,” Bloomberg reported:

“The current market is reminiscent of the late 90’s and early 2000’s, [TD Securities’ Deputy Chairman Rick] McCreary says. At the time, investors had low interest in mining, and companies found it hard to raise capital. That was followed by waves of consolidation and a mining bull run. A similar trend may be building as this ‘period of consolidation’ rolls on.”

Gold M&A 

As far as that goes, mining companies, especially in the gold space, have realized since the vicious 2012-16 bear market, they have cut as much as they can and the next step is to bring assets and companies together. On top of that, the top gold miners are running out of reserves, and are looking to replace them with high-margin projects that have the right combination of grade, size and infrastructure.

This explains Barrick combining with South Africa’s Randgold, the Barrick-Newmont joint venture in Nevada, the fusing of Newmont and Goldcorp, a $1-billion deal for Lundin Mining to acquire a Brazilian copper-gold mine from Yamana Gold, Newcrest’s 70% purchase of Imperial Metals’ Red Chris mine in British Columbia, and other recent examples of gold mining M&A.

Among December’s gold deals are Zijin Mining’s cash purchase of Continental Gold’s Buriticá project in Colombia, for CAD$1.3 billion; and a $770 million merger between two mid-tier gold miners, Equinox Gold and Leagold Mining. The latter arrangement will keep the Equinox name and create a company valued at $1.75 billion with six mines spread across Brazil, Mexico and the United States. 

Junior resource M&A? 

The goal of every junior resource investor is for the company(ies) they are invested in to get bought out, resulting in a 5, 10, even 20-bagger.

The question is, will the current round of mergers and acquisitions at the major and mid-tier level trickle down to the juniors? PwC appears hopeful. In its 2019 report â€˜Shifting Ground’ the mining consultancy states, 

The heightened level of deal activities, most of which have been in the gold sector, may well spark further moves among intermediate players seeking to grow into multi-project companies. A new phase of industry consolidation could pave the way for more exploration and mine development and boost investor interest and activity.

Another optimistic opinion comes from Tom Palmer, chief operating officer at Newmont, who told the Wall Street Journal that smaller players are waiting to see what the bigger miners sell once they have completed their mergers before they start their own M&A.

“Fast forward two or three years, there will be countless more” mergers, he said.

In fact we are already starting to see this happening. Nevada has witnessed the return of junior gold explorers, and majors, after a lull in activity between 2012 and 2016. According to an industry report, exploration in Nevada increased by 15% in 2017, with 19,040 new claims. The tide has continued to turn in mining’s favor, with 198,337 active claims as of January, 2019 – 7% more than in 2018.

In 2018 Idaho-based Hecla Mining snapped up Klondex Mines for US$462 million, delivering three more Nevada properties – Fire Creek, Midas and Hollister – to Hecla’s stable of mines and adding 162,000 gold-equivalent ounces to its annual production. 

Also in Nevada, last year Alio Gold paid Rye Patch Gold $128 million for the Vancouver-based company and its past-producing Florida Canyon mine. 

The 2019 creation of Nevada Gold Mines (the Barrick-Newmont JV) has piqued the interest of other companies looking to discover and develop new ounces in the golden state. Major miners with new projects include AngloGold Ashanti, Coeur Mining and Kinross Gold. For the details read Getchell’s Gold 

And for an inspiring story of junior mining success in Canada, look no further than Great Bear Resources. Working the historic Red Lake gold camp in Ontario, Great Bear’s drills discovered the “LP Fault Zone” this past May. That eureka moment, the realization that most of the gold on its property is structurally controlled, prompted a massive 90,000m drill program aimed at identifying the parameters. The discovery of three new gold zones with high-grade intercepts, along with the earlier nearby Hinge-Dixie Limb discoveries, caught the market’s attention; within 18 months, Great Bear’s stock catapulted 2,000%. 

Conclusion

I firmly believe that 2019 has been a pivotal year for junior mining. Coming out of 2018’s slump in several commodities, due mostly to the uncertainty associated with the US-China trade war, this year we saw very strong performances from gold, silver, copper, palladium, nickel and zinc – having correctly predicted price corrections for each.

While it’s disappointing not to see a rising tide of junior miner stock prices to accompany these bullish calls, we continue to believe.

After all, we want to own the cheapest most in demand metals we can find to reap the maximum coming rewards. That means buying it while it’s still in the ground.

The fact is junior resource companies – the owners of the world’s future mines – are on sale. If you like their management teams, their projects and their plans for 2020, perhaps now is the time to be acquiring a position.

Courtesy of Richard (Rick) Mills:
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https://aheadoftheherd.com/Newsletter/2020/Will-2020-be-junior-minings-year.html

Loncor $LN.ca – Gold Closes at Nearly 7-Year High $ABX.ca $TECK.ca $RSG $NGT.to

Posted by AGORACOM-Eric at 10:22 AM on Tuesday, January 7th, 2020
This image has an empty alt attribute; its file name is Loncor-Small-Square.png

Sponsor: Loncor is a Canadian gold exploration company focused on two projects in the DRC – the Ngayu and North Kivu projects, both have historic gold production. Exploration at the Ngayu project is currently being undertaken by Loncor’s joint venture partner Barrick Gold. The Ngayu project is 200km southwest of the Kibali gold mine, operated by Barrick, which produced 800,000 ounces of gold in 2018. Barrick manages and funds exploration at the Ngayu project until the completion of a pre-feasibility study on any gold discovery meeting the investment criteria of Barrick. Click Here for More Info

  • Recent strong price gains are a bullish upside technical ‘breakout’ from recent trading levels, to suggest still more price gains are very likely in the coming weeks and months, or longer
  • Bullion’s price has benefited from heightened political tensions but also has enjoyed softness in the dollar,

Gold futures on Monday marked their highest settlement since April of 2013, as the killing last week of a top Iranian military commander, Qassem Soleimani, reverberated through financial markets, momentarily upending appetite for assets considered risky and boosting traditional haven assets like gold.

February gold GCG20, +0.23%  on Comex added $16.40, a gain of 1.1%, to settle at $1,568.80 an ounce, after it briefly touched $1,590.90 in intraday action. The most active contract saw its highest settlement since April 9, 2013, according to FactSet data. Gold also rose for a ninth consecutive session, its longest period of straight gains since an 11-day streak that ran from December 2018 to January 2019.

March silver SIH20, +0.28%  edged up by 2.8 cents, or 0.2%, to finish at $18.179 an ounce, pulling back from a high of $18.55, which was the highest intraday level since late September.

Last week, the most-active gold contract gained 2.3%, its second week of gains, while silver prices added 1.1%, also landing it higher for two consecutive weeks.

Read: Why geopolitical events are not a good reason to buy gold

“History shows that a big spike up in prices amid higher volatility tends to produce near-term market tops sooner rather than later, after that initial spike up,” said Jim Wyckoff, senior analyst at Kitco.com. “That means in the coming days the gold market could put in a ‘near-term’ top that will last for a moderate period of time.”

“However, for the longer-term investors in gold, it’s important to note that the recent strong price gains are a bullish upside technical ‘breakout’ from recent trading levels, to suggest still more price gains are very likely in the coming weeks and months, or longer,” he said in daily commentary.

On Sunday, the Iraqi parliament passed a nonbinding resolution to expel American troops in the wake of the U.S. drone strike that killed Soleimani, leader of the foreign wing of Iran’s Islamic Revolutionary Guard Corps, on Iraqi soil.

That act has intensified tensions in the Middle East, boosting the appeal of assets considered safe during global political conflicts.

Trump has threatened harsh sanctions against Iraq if it expels U.S. troops, and doubled down on earlier comments threatening to target Iranian cultural sites if Iran strikes back. Iran has said it would no longer honor the 2015 nuclear deal with a group of world powers, which the U.S. backed out of in 2018.

Oil prices climbed and the Dow Jones Industrial Average DJIA, -0.30%  and S&P 500 index SPX, -0.27%  opened broadly lower but turned mixed in Monday dealings.

Meanwhile, the benchmark 10-year Treasury yield TMUBMUSD10Y, +0.24% was up at 1.7917%, after tapping a four-week low on Friday after the Iranian military leader’s killing.

Bullion’s price has benefited from heightened political tensions but also has enjoyed softness in the dollar, which has occurred as investors shift to Swiss franc USDCHF, +0.3719% and Japanese yen USDJPY, +0.09%  amid the potential for political turmoil.

The U.S. ICE Dollar Index DXY, +0.33%, a measure of the buck against a half-dozen currencies, was down 0.2% at 96.661 and has posted weekly declines in the last two weeks.

A weaker buck can make gold more attractive to buyers using other currencies, and lower bond yields can also help boost the comparative appeal of gold against government debt.

“Gold continues its breakout higher as it is now at the highest level since April 2013,” wrote Peter Boockvar, chief investment officer at Bleakley Advisory Group, in a Monday research report.

“I remain bullish but caution not to buy it on geopolitical concerns because as stated they are usually temporary. Buy it instead because the dollar continues to weaken and real yields continue to fall,” he said.

Among other metals, March copper HGH20, -0.11%  added 0.1% to $2.79 a pound. April PLJ20, -0.34%  shed 2.4% to $966.20 an ounce, but March palladium PAH20, +0.87%  added 1.7% to $1,989.60 an ounce. Palladium futures notched a record high, as they’ve done each day so far this year and many times throughout 2019.

The platinum group markets are “not concerned that recent geopolitical events could derail the global economy and therefore demand for auto catalysts,” analysts at Zaner Metals, wrote in daily note. “Instead, it is apparent that platinum and palladium are being considered as safe haven instruments, with classic physical market fundamentals being pushed to the sidelines.”

https://www.marketwatch.com/story/gold-price-flirts-with-1600-and-highest-settlement-in-nearly-7-years-2020-01-06

Loncor $LN.ca – The Road To Retirement: Millennials Put Their Faith In Bitcoin But Goldman Says Go With Gold $ABX.ca $TECK.ca $RSG $NGT.to

Posted by AGORACOM-Eric at 3:32 PM on Monday, December 9th, 2019
This image has an empty alt attribute; its file name is Loncor-Small-Square.png

Sponsor: Loncor is a Canadian gold exploration company focused on two projects in the DRC – the Ngayu and North Kivu projects. Both projects have historic gold production. Exploration at the Ngayu project is currently being undertaken by Loncor’s joint venture partner Barrick Gold. The Ngayu project is 200km southwest of the Kibali gold mine, operated by Barrick, which produced 800,000 ounces of gold in 2018. Barrick manages and funds exploration at the Ngayu project until the completion of a pre-feasibility study on any gold discovery meeting the investment criteria of Barrick. Click Here for More Info

  • Millennials’ willingness to accept ever-increasing central-planning means gold is the go-to asset to preserve wealth over long-term horizons
  • Goldman keeps its 3,6 and 12m forecasts at $1,600toz.

“Drop Gold” – the ever-present tagline of Grayscale’s Bitcoin Trust TV commercial – appears to be working its magic on a certain cohort of society.

2019 has seen assets under management in GBTC soar…

Source: Bloomberg

And for Millennials, according to the latest data from Charles Schwab, the Grayscale Bitcoin Trusts is the 5th largest holding in retirement accounts (including 401(k)s) with almost 2% of their assets tied to the success (or failure) of the largest cryptocurrency.

For now this remains a relatively small number…

But, given the increasing acceptance of socialist policies, and the historically-ignorant promise of MMT (and don’t forget UBI), Goldman Sachs suggests that Millennials’ willingness to accept ever-increasing central-planning means gold is the go-to asset to preserve wealth over long-term horizons.

And, at least in the short-term, gold has held its value (relative to Bitcoin) as the world’s volume of negative-yielding assets has shrunk on the latest round of optimism that ‘this time is different’…

Source: Bloomberg

Indeed, Goldman notes that gold looks attractive particularly relative to DM bonds. Both bonds and gold are defensive assets which go up in value when fear spikes. Exhibit 5 shows that investment and central bank demand for gold has been highly correlated with US 10 year real rates.

During the next recession gold may offer better diversification value to bonds because the latter may be capped by the lower bound in rates limiting their ability to appreciate materially. This is particularly relevant for Europe where rates are already close to the lower bound. This means that during the next recession when fear spikes, gold may decouple from rates and outperform them.

Specifically, Goldman says that Gold is a particularly good diversifier for investors with long term investment horizon.

If we look at week on week changes in gold they tend to be dominated by the dollar. As a result the gold S&P500 weekly changes correlation looks almost identical to correlation of S&P 500 and the dollar (see Exhibit 7).

However, if we look at 5 year returns gold and S&P 500 display strong inverse relationship with gold performing great during the 1970ies and 2000s when the S&P 500 underperformed (see Exhibit 8).

This makes sense given that gold is ultimately a hedge against systematic macro risks, which can lead to long periods of equity underperformance. Our strategy team also finds that gold historically has been a good hedge against periods of large drawdowns of the 60/40 portfolio. This was particularly true when a drawdown is caused by accelerating inflation as it was in the 1970ies. Therefore, if one is concerned that the low macro volatility of 2010s will be followed by higher volatility in the 2020s, which would hurt equities, gold would be a good addition to the portfolio.

Geopolitical uncertainty is already translating into greater gold demand. CBs globally have been buying gold at a very strong pace, albeit more recently the rate of CB purchases has cooled off as China and Russia have moderated their buying. Nevertheless, 2019 still looks to be a record year for CB gold purchases with our target of 750 tonnes combined purchases likely to be met (see Exhibit 15).

Rising political risk – together with negative European rates – may be an important reason behind the large share of unaccounted gold investment over the past several years.

Exhibit 17 shows cumulative unexplained gold demand based on World Gold Council (post 2010) and GFMS (pre 2010) balances data. It surged since 2016. Similar dynamics can be seen when we look at implied vaulted gold stocks built in the UK and Switzerland, which is calculated as implied cumulative total net imports minus transparent ETF gold stocks. In fact, since the end of 2016 the implied build in non-transparent gold investment has been much larger than the build in visible gold ETFs. This is consistent with reports that vault demand globally is surging.

Political risks, in our view, help explain this because if an individual is trying to minimize the risks of sanctions or wealth taxes, then buying physical gold bars and storing them in a vault, where it is more difficult for governments to reach them, makes sense. Finally, this build can also reflect hedges by global high net worth individuals against tail economic and political risk scenarios in which they do not want to have any financial entity intermediating their gold positions due to the counterparty credit risk involved.

Finally, Modern Monetary Theory (MMT) – which advocates for central bank financed fiscal deficits – has been gaining more airtime recently, with former Fed Chair Ben Bernanke and former Fed Vice Chair Stanley Fischer offering similar proposals. The logic is that persistent low inflation and lack of borrowing capacity in many developed markets means that direct CB financing of government deficit is warranted. This is especially true for countries where monetary policy is close to the limits of its capacity. Whilst there are arguments to be made in favor of MMT there are also risks associated with it. Notably some economists stress that if not used responsibly it could lead to a material acceleration in inflation.

In the next recession, our US economists do not expect governments to adopt direct monetary financing and expect inflation to remain firmly anchored. But this doesn’t necessarily prevent an increase in debasement concerns if conversations around MMT become more widespread — a potential boost to demand for gold as a debasement hedge. False debasement concerns have led to gold rallies in the past. Post 2008 aggressive QE in the US led to a considerable push into inflation protected assets including gold (see Exhibit 19). These inflationary concerns did not materialise and the allocation to gold and inflation protected bonds fell sharply in 2013. Another period, currently is less talked about, is the Great Depression when the Fed pumped a lot of money into the economy leading to debasement concerns (see Exhibit 20). What followed was actually disinflation and the gold price eventually moderated.

Overall, while Goldman acknowledges the risks related to still high gold positions we believe the strategic case is still strong, particularly for investors with long term horizons.

This is based on a deteriorated attractiveness of long term DM bonds as portfolio diversifiers and real return generation instruments, exposure to growing EM wealth, limited mine supply growth, elevated political risks and a potential increase in debasement concerns sparked by rising airtime of Modern Monetary Theory.

As such Goldman keeps its 3,6 and 12m forecasts at $1,600toz.

So – will Millennials keep saying “bye gold” or come over the ‘dark side’ and “buy gold”?

Loncor $LN.ca – Gold is Looking More and More Attractive $ABX.ca $TECK.ca $RSG $NGT.to

Posted by AGORACOM-Eric at 1:42 PM on Monday, November 25th, 2019
This image has an empty alt attribute; its file name is Loncor-Small-Square.png

Sponsor: Loncor is a Canadian gold exploration company focused on two projects in the DRC – the Ngayu and North Kivu projects. Both projects have historic gold production. Exploration at the Ngayu project is currently being undertaken by Loncor’s joint venture partner Barrick Gold. The Ngayu project is 200km southwest of the Kibali gold mine, operated by Barrick, which produced 800,000 ounces of gold in 2018. Barrick manages and funds exploration at the Ngayu project until the completion of a pre-feasibility study on any gold discovery meeting the investment criteria of Barrick. Click Here for More Info

Rising US liabilities for entitlements could undermine the dollar

The Dutch Central Bank recently argued in an article that if there were to be a major monetary reset, “gold stock can serve as a basis” to rebuild the global monetary system. “Gold bolsters confidence in the stability of the central bank’s balance sheet and creates a sense of security.”

Talk of gold, however, does not. Investor Ray Dalio recently spooked attendees at the Institute for International Finance conference when he mentioned the possibility of a flight to gold because of his concerns about America’s fiscal position.

That is not a new point. Since at least 2016, financial titans including JPMorgan chief Jamie Dimon and hedge fund manager Stanley Druckenmiller have pointed out that unfunded pension and healthcare entitlements are a looming iceberg for the US economy. Indeed, one theory about the recent crisis in the “repo” overnight lending market is that it was caused by the federal deficit and the increasing unwillingness of investors outside the US to fund it.

But Mr Dalio went further, concluding that the American entitlement crisis meant the US Federal Reserve would have to continue to inflate its own balance sheet indefinitely, and keep rates low (or even negative) well into the future so the US could keep paying its bills.

That would depreciate the US dollar. Taken to its extreme, that never ends well. Prior experiments with rapidly falling currencies include late-third century Rome, Germany’s interwar Weimar Republic and Zimbabwe. At some point, Mr Dalio argued, nobody would want to own US debt or the dollar, and investors would look to other assets for safety. “The question is, what else?” he asked. “That’s the environment I think that we’ll be in. And there’s a saying that gold is the only asset you can have that’s not somebody else’s liability.”

I haven’t bought any gold yet myself, though I did sell out of equities entirely in August. That decision has been somewhat painful given the recent upsurge in the S&P 500, and yet it is one that I do not regret. There is logic in believing — as I do — that US blue-chips and bonds are no longer a safe haven while also believing that prices could stay high for some time to come. After all, holding two seemingly contradictory thoughts in your head at once is the sign of a mature mind. I believe US stock prices are staying up for precisely the same reason that investors might need to be in gold someday.

Analyst Luke Gromen laid out the mathematical logic of this very well in a recent newsletter. He calculates that US annual entitlement payments, which he defines as Medicare, Medicaid and Social Security, plus defence spending plus interest on the federal debt adds up to 112 per cent of US federal tax receipts.

That total has risen from 103 per cent only 15 months ago and 95 per cent two years ago, as government revenue fell due to President Donald Trump’s tax cuts. The proceeds of those cuts helped to further inflate equity prices. The US has become “utterly dependent on asset price inflation for tax receipts”, Mr Gromen writes, adding that the only way the US will be able pay its yearly bills is for asset prices to climb on their own, or for the Fed to “print enough money to make asset prices rise”.

I expect the Fed will, like every central bank before it, do what is politically required. Neither the US nor the world can afford for America to nominally default on its Treasury bills. So, stock prices will rise — for now. The essence of economic policy is, as Joseph Schumpeter reportedly put it, “politics, politics, politics”.

Share price inflation has been under way since the Fed switched gears and began lowering rates in July. It will probably be helped along by the easing of financial regulations enacted after the 2008 crisis, and possibly even a new round of tax cuts before the 2020 elections. Mr Trump measures his own success by that of the market.

But in the longer run, this financially engineered growth must erode confidence in the dollar, particularly at a time when the US and China are going in different directions. China is now the world’s largest natural gas buyer, and is looking to start setting prices for this and other commodities in its own currency. China is also doing more business in euros, as it tries to woo Europe into its own economic orbit. China recently issued its first euro-denominated bonds in 15 years. It is also moving away from buying oil in dollars and strengthening ties with EU companies such as Airbus.

The de-dollarisation of Eurasia would support Mr Dalio’s worldview. So would a shift to a non-dollar reserve asset such as gold. Such a change would force the US to sell dollars in order to settle its balance of payments in the new, neutral reserve asset.

One could argue that even if the US dollar were to weaken and creditors to lose faith in America’s ability to repay its debt, markets might still remain high for a period of time. But we are undergoing a period of deglobalisation. And history shows that when that happens, it eventually tends to trigger asset price collapses in whatever country is associated with the “old order”. No wonder gold bugs abound.
Source: [email protected]

Loncor $LN.ca – Technical Studies Indicate Possible Bottom and Support for Gold $ABX.ca $TECK.ca $RSG $NGT.to

Posted by AGORACOM-Eric at 1:54 PM on Wednesday, November 13th, 2019
This image has an empty alt attribute; its file name is Loncor-Small-Square.png

Sponsor: Loncor is a Canadian gold exploration company focused on two projects in the DRC – the Ngayu and North Kivu projects. Both projects have historic gold production. Exploration at the Ngayu project is currently being undertaken by Loncor’s joint venture partner Barrick Gold. The Ngayu project is 200km southwest of the Kibali gold mine, operated by Barrick, and produced 800,000 ounces of gold in 2018. Barrick manages and funds exploration at the Ngayu project until the completion of a pre-feasibility study on any gold discovery meeting the investment criteria of Barrick. Click Here for More Info

While it is an accepted fact that fundamental events shape the financial markets, many analysts use technical indicators as a way to mathematically quantify market sentiment. One of the simplest and most widely used technical indicators used to determine a current trend for a stock or commodity are moving averages. 

The use of a simple 200-day moving average is used to determine on a long-term basis whether a financial market is currently in a bullish or bearish trend. The use of a 50-day moving average is commonly accepted as determining the short-term trend. In both cases if current pricing is above the moving average than the trend is bullish.

Another widely accepted technical study is based upon the mathematician Leonardo Fibonacci’s golden ratio is Fibonacci retracement theory.

According to Investopedia, “A Fibonacci retracement is a term used in technical analysis that refers to areas of support or resistance. Fibonacci retracement levels use horizontal lines to indicate where possible support and resistance levels are. Each level is associated with a percentage. The percentage is how much of a prior move the price has retraced. The Fibonacci retracement levels are 23.6%, 38.2%, 61.8% and 78.6%. While not officially a Fibonacci ratio, 50% is also used.”

In this article we will use two Fibonacci retracement studies. The first study will be a long-term study; however, this study will utilize much less data then chart number two. The study will begin at the end of 2015 when gold hit a bottom of $1045 per ounce, and concludes at this year’s current high of $1565 per ounce. The second study will be derived from another long-term Fibonacci retracement study which begins in 2008, and concludes in the middle of 2011 when gold reached its record high price against the U.S. dollar.

Of particular interest in the first study are the Fibonacci retracement areas found at the .23%, and .382% retracement levels. Currently gold futures are trading at $1457.40, which is a net decline of $5.50 on the day. This continues the current bearish trend which has been predominant since gold hit its highest value this year in August. When you look at the .38% retracement level on this chart you can see that it precisely defines a level of resistance at approximately $1370.

This was the defined and unbreakable resistance level which began in 2016, the first occurrence of hitting this price point and then trading lower. This resistance was unbreakable throughout 2017 and 2018. In fact, it was not until June of this year that gold was able to breach that price point and trade to its highest value since bottoming out at the end of 2015.

The other level of particular interest is the .23% Fibonacci retracement level which occurs at $1446 per ounce. Currently gold pricing is approximately $11 above that price point. While this study alone will not confirm a potential bottom or support at $1446, it can when combined with other technical indicators, be highly effective in providing price targets for support and resistance.

The second study uses an extremely large data set from 2008 to the middle of 2011 defining the rally which took gold to its all-time record high. Of particular interest is the .38% Fibonacci retracement level which occurs at $1451 per ounce. This defines the lowest price point gold has traded to this month. It also occurs within dollars of the .23% Fibonacci retracement level we looked at on chart 1. When you have two different time sequences which have key Fibonacci retracement levels occur at the same price point, we label this a Fibonacci harmonic.

While one should never use these technical indicators alone, they are excellent tools to define price points to look at when a market is in a corrective stage, which is the current scenario in gold pricing

https://www.kitco.com/commentaries/2019-11-11/Technical-Studies-Indicate-Possible-Bottom-and-Support-for-Gold.html

Loncor $LN.ca – Loncor Announces Additional Drill Targets Identified by Barrick on Loncor’s Ngayu Joint Venture Project $ABX.ca $TECK.ca $RSG $NGT.to

Posted by AGORACOM-Eric at 9:20 AM on Thursday, November 7th, 2019

Loncor Resources Inc. (“Loncor” or the “Company”) (TSX: “LN”; OTCQB: “LONCF”), a Canadian gold exploration company with significant projects in the Democratic Republic of the Congo (“DRC”), is pleased to provide an update on exploration activities undertaken by Barrick Gold Corporation (NYSE: “GOLD”; TSX: “ABX”) (through its subsidiary, Barrick Gold (Congo) SARL) (“Barrick”) on Loncor’s Ngayu Joint Venture Project in northeastern DRC.  Recent exploration has focussed on the major Imva fold structure where a number of drill targets have been developed.  Drilling is now expected to commence during the coming dry season.  

The opening of the Mambati airstrip in September is expected to assist in expediting the forthcoming drilling program.  The Ngayu Archaean Greenstone Belt is 200 kilometres southwest of Barrick/AngloGoldAshanti’s Kibali Gold Mine.  Barrick’s exploration at Ngayu during the most recent quarter has focused on four priority areas all located along the 30 kilometre-long Imva fold structure (see Figure 1 below).  These blocks are Bavadili/Bavanidi, Bakpau, Lybie (Matete east)/Salisa and Bikira-Makasi.

At Bavadili, further trenching was undertaken to test the concept of a mineralized northwest trending shear corridor parallel to the interpreted F2 axial plane.  Results were encouraging and included 24 metres @ 0.94 g/t Au and confirmed the mineralized corridor with mineralization associated with brecciated cherty “BIF” (Banded Ironstone Formation) with disseminated limonite, weak hematite alteration along with sugary quartz veins and fine cubic boxworks (~ 5% pyrite).  The mineralization occurs along a strongly foliated northwest-southeast structure between dolerite to the south and basalt to the north.  Results support and confirm the model of a +1.5 kilometre potential mineralized structure from Bavadili Hill to Bavanidi.  At Bavadili Hill, additional trenching undertaken to test the continuity of the folded, mineralized cherty BIF, 250 metres southwest from the mineralized cherty BIF intersected in trench BVTR0114A, gave results of 24 metres @ 0.94 g/t Au.

Additional work involved a geological re-assessment of the Bavadili Block, integrating all data including gold and multi-element soil geochemical and geophysical data to improve the understanding of the regional model.  The new interpretation highlights more than 6 kilometres of multiple folded layers of anomalous BIF displaying two sets of regional F1 and F2 folds with the P1 axial plane, trending northeast, reactivated by P2, trending east-northeast, producing the S-shape fold configuration which is interpreted to host the mineralised shoots within the Bavadili Block.  The interpretation further suggests the same BIF continues 12 kilometres to the east of the Lybie/Salisa targets.

At Lybie, encouraging results from trench NZTR0006 confirmed a continuous mineralized corridor of +1 kilometre hosted within volcanoclastic and brecciated cherty BIF within an interpreted fold limb.  The trench revealed at least two continuous mineralized structures – the northwestern most of the two structures is from colonial trenching which returned 20 metres @ 0.58g/t Au, whereas trench NZTR0006 returned 20 metres @ 0.54g/t Au.  

At Salisa, results from rock sampling assayed up to 3.75 g/t Au in volcaniclastic and 3.05 g/t Au hosted in BIF and coincide with the soil source line trending northeast-southwest.  To better trace the mineralized system and constrain the potential and the source of the higher grade rock samples, a scout trenching program is underway.

At Bakpau, trenching has been completed on northwest-southeast and north-south trending sections on widely spaced trench lines.  The two trenches, BKTR0005 and BKTR0006, respectively, at 500 metres northeast and southwest of trench BKTR0001 (70 metres @ 0.34g/t Au), returned 26 metres @ 0.35 g/t Au and 30 metres @ 0.12 g/t Au, respectively.  These trenches have exposed and confirmed the continuity of anomalous grade, near surface mineralization in the Bakpau East Zone over a strike length of 1.2 kilometres.

At Medere, trenching on the +800 metre long 80ppb soil anomaly along the northeast trending hill, focused on establishing the controls on mineralization (structure and alteration) and trends of mineralization along strike between the zones exposed in previous trenches and artisanal pits.  Significant gold results from the first trench across quartz stockwork style mineralization were received during the most recent quarter with a trench intersection of 48 metres @ 0.51g/t Au and is still open to the southeast.  The current trenching has only been able to expose the margin of the soil anomaly due to thick scree/talus cover on the hill slopes towards the southeast.

In addition to outlining drill targets along the Imva fold, drilling is also planned to be undertaken during the forthcoming drill campaign at the Anguluku prospect area (including Golgotha, Baberu and Bayinga) in the southwest side of the Ngayu greenstone where a sequence of fine grained metasediment, carbonaceous shale, metabasalt and BIF trend approximately east-west and dip moderately to south-southwest within an antiformal structure.  An initial 10 core hole (2,490 metres) drilling program is proposed to test 4,500 metres of potential strike.

A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/0534ef90-fef8-4230-b2b1-3ceb21b3f74c

About Loncor Resources Inc.
Loncor is a Canadian gold exploration company focused on two projects in the DRC – the Ngayu and North Kivu projects.  Both projects have historic gold production.  Exploration at the Ngayu project is currently being undertaken by Loncor’s joint venture partner Barrick Gold Corporation through its DRC subsidiary Barrick Gold (Congo) SARL (“Barrick”).  The Ngayu project is 200 kilometres southwest of the Kibali gold mine, which is operated by Barrick and in 2018 produced approximately 800,000 ounces of gold.  As per the joint venture agreement signed in January 2016, Barrick manages and funds exploration at the Ngayu project until the completion of a pre-feasibility study on any gold discovery meeting the investment criteria of Barrick.  Subject to the DRC’s free carried interest requirements, Barrick would earn 65% of any discovery with Loncor holding the balance of 35%.  Loncor will be required, from that point forward, to fund its pro-rata share in respect of the discovery in order to maintain its 35% interest or be diluted. 

Certain parcels of land within the Ngayu project surrounding and including the Makapela and Yindi prospects have been retained by Loncor and do not form part of the joint venture with Barrick.  Barrick has certain pre-emptive rights over these two areas.  Loncor’s Makapela prospect has an Indicated Mineral Resource of 614,200 ounces of gold (2.20 million tonnes grading 8.66 g/t Au) and an Inferred Mineral Resource of 549,600 ounces of gold (3.22 million tonnes grading 5.30 g/t Au).  Loncor also recently acquired a 71.25% interest in the KGL-Somituri gold project in the Ngayu gold belt which has an Inferred Mineral Resource of 1.675 million ounces of gold (20.78 million tonnes grading 2.5 g/t Au), with 71.25% of this resource being attributable to Loncor via its 71.25% interest. 

Resolute Mining Limited (ASX/LSE: “RSG”) owns 27% of the outstanding shares of Loncor and holds a pre-emptive right to maintain its pro rata equity ownership interest in Loncor following the completion by Loncor of any proposed equity offering.  Newmont Goldcorp Corporation (NYSE: “NEM”; TSX: “NGT”) owns 7.8% of Loncor’s outstanding shares.

Additional information with respect to Loncor and its projects can be found on Loncor’s website at www.loncor.com. 

Loncor $LN.ca – Hard Asset Digest October 2019 Gold Market Update $ABX.ca $TECK.ca $RSG $NGT.to

Posted by AGORACOM-Eric at 2:34 PM on Friday, November 1st, 2019

Sponsor: Loncor is a Canadian gold exploration company focused on two projects in the DRC – the Ngayu and North Kivu projects. Both projects have historic gold production. Exploration at the Ngayu project is currently being undertaken by Loncor’s joint venture partner Barrick Gold (Congo) SARL (“Barrick”). The Ngayu project is 200 kilometres southwest of the Kibali gold mine, which is operated by Barrick and in 2018 produced approximately 800,000 ounces of gold. As per the joint venture agreement signed in January 2016, Barrick manages and funds exploration at the Ngayu project until the completion of a pre-feasibility study on any gold discovery meeting the investment criteria of Barrick. Subject to the DRC’s free carried interest requirements, Barrick would earn 65% of any discovery with Loncor holding the balance of 35%. Loncor will be required, from that point forward, to fund its pro-rata share in respect of the discovery in order to maintain its 35% interest or be diluted. Click Here for More Info

The first thing is gold 

It’s true that gold has made a significant upward move from $1,300 per ounce in May to currently around $1,500 per ounce with at least some of that move being attributable to bullish market fundamentals. Yet, we can also count on a lot more whipsaw action as gold continues to be ping-ponged about from geopolitical headline to geopolitical headline. 

The devaluation of fiat currencies in the face of rising and unsustainable debt loads across all developed economies will be the true driver of the long-term bull market that’s beginning to take form now.

 US government spending is so wildly out of control, and has been for more than a decade, that the federal debt will become unmanageable in the very near future. 

 Not that long ago, economists didn’t really have to think in terms of “Trillions of Dollars.” Yet today, we’ve grown accustomed to the fact… however dire it may be…that our federal debt is ballooning at a rate of nearly $1.5 Trillion each and every year. It’s simply not sustainable. 

At this rate, it will only be a few years until America can no longer afford to service its federal debt — no matter where interest rates go. 

Add to that the fact that we’re seeing this exact pattern of excessive money printing combined with unsustainable debt accumulation emerge across all developed economies. 

The end result can be only one thing: A devaluation of all fiat currencies. 

This doomed race to the bottom will leave gold, along with silver, standing alone as the only real store of value.

The EU is nearing recession

The Eurozone continues to experiment with negative interest rates in an attempt to spur economic growth by encouraging bank lending and also by boosting exports. Yet, the bottom line is that banks simply cannot make money in a negative deposit rate environment. 

 As much as banks may continue to try and sway lenders to do something more useful with their money than simply parking it with the European Central Bank, it’s doubtful such an ill-devised monetary policy can stave off recession. 

Thus far, growth has remained anemic, raising the specter of a recession hitting the Eurozone sometime next year.  

US/China Trade War: A trickle down effect across Europe’s largest economies

Germany, Europe’s largest economy, is suffering its worst manufacturing downturn in almost seven years as the US/China trade war spills over into european economies. 

 It’ll be interesting to see if Germany resorts to injecting fiscal stimulus (aka, the printing of even more money!) to boost its sagging export-reliant economy. Growth forecasts for 2020 have already fallen below the key 1% threshold.

Britain, Europe’s second largest economy, remains mired in its self-induced Brexit maelstrom, which certainly isn’t helping things from an economic standpoint. 

In what looks to be a warning sign of impending stagnation, the British economy took its first step backward (in Q2) in more than 7 years. Amid all the turmoil, it seems increasingly doubtful Britain will be exiting the EU on October 31st, with or without a deal, as the Brexit cloud continues to darken.

New reports are also revealing weakness in Europe’s third largest economy, France. In fact, the export sectors of both France and Germany – which includes their high-profile automobile industries – are being hit hard by flagging demand from China.

 The luster is coming off the Chinese economy

While growth in China held steady at 6.4% in Q1 this year, it proceeded to slip to 6.2% in Q2. Economic numbers over the last few months reveal that the worst may not yet be over for China with analysts projecting weakening third quarter data. 

 A recent survey by China Beige Book reveals slowing growth and soaring debt levels for the world’s second largest economy.

 Here at home, the trade war continues to stoke recession fears

US gross domestic product grew at a 2% annual pace from April to June, which was in-line with expectations. Yet, how long can that last?