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Gold Continues to Prove its Safe Haven Status SPONSOR: American Creek $AMK.ca $TUD.ca $SII.ca $GTT.ca $AFF.ca $SEA.ca $SA $PVG.ca $AOT.ca $ESK.ca

Posted by AGORACOM at 12:26 PM on Monday, March 30th, 2020

SPONSOR: American Creek owns a 20% Carried Interest to Production at the Treaty Creek Project in the Golden Triangle. 2019’s first hole averaged 0.683 g/t Au over 780m in a vertical intercept. 2020 drilling plans 18,000 to 20,000 metres from 7-10 drill platforms with four diamond drill rigs. The Treaty Creek property is located in the same hydrothermal system as the Pretivm and Seabridge’s KSM deposits and is fully funded for exploration in 2020. Click Here For More Info

Gold continues to deliver strong relative performance and was up 7.31% on a year-to-date basis through Friday’s close. This compares to -20.96% for the S&P 500 Total Return Index.1 

AssetYTD1 YR3 YR*5 YR*
Gold Bullion7.31%24.33%9.07%6.32%
S&P 500 TR Index-20.96%-7.58%4.82%6.42%

* Average annual total returns. Bloomberg. Data as of Friday close, 3/27/2020.

Gold and precious metal equities have been collateral damage during this most recent market correction. The broader markets had become a tinder box with grossly elevated valuation metrics never seen before, coupled with an economy burdened by record amounts of leverage (government, corporate, personal) and widespread investor complacency. All that was required was a spark — enter COVID-19. The speed of the correction was historical. The February to March 30% drawdown was the fastest 30% drawdown of all time (Figure 1). 

For us at Sprott, the corresponding selloff in gold bullion and precious metal equities was not surprising. During violent broader market corrections, liquidity is priority number one. This time was no different as broader markets gapped down in response to the greatest demand shock in modern economic history. This resulted in many entities selling gold bullion to meet liquidity requirements that surfaced because of margin calls, and the shuttering of both credit and debt markets. This pattern is similar to what the market witnessed as the Global Financial Crisis (GFC) unfolded in 2008-2009. 

Figure 1. Feb.-Mar. 2020 Selloff was the Fastest 30% Drawdown in History
Measured by Number of Days

fig 1

Source: BofA Global Research, Bloomberg.

Gold Serves its Function as Portfolio Insurance

Before hypothesizing where we will go from here, it is important to highlight that gold bullion has served its function as portfolio insurance. Year to date through March 27, 2020, gold bullion has appreciated 6.84%, while the S&P 500 Index1 has declined 20.96%. At the same time, gold mining equities have not fared as well gold bullion, because during the early stages of a correction, gold stocks are first and foremost stocks; GDX2 was down 10.45% YTD. 

The GFC as Playbook

As we are seeing today, there was a material demand shock as the GFC unfolded, with demand across economies declining suddenly and sharply.  Although not a perfect analog, the GFC can serve as a playbook. As liquidity became paramount for many market sectors during the GFC, gold bullion was sold to meet liquidity requirements. From the beginning of 2008 to November 12, 2008 (gold bullion’s low price), the S&P 500 fell 41.11%, gold equities (GDX2) cratered 60.60% and gold bullion depreciated by a relatively modest 16.94%. Once the U.S. Federal Reserve (“Fed”) stabilized liquidity conditions, gold bullion and precious metals stocks generated superior absolute and relative returns. From November 12, 2008 to the end of 2009, gold bullion rallied 54.02% and GDX rebounded 138.20%. The S&P 500 declined another 20.62% from November 12, 2008, to its bottom in March 2009 and then appreciated 64.83% to year-end 2009.

Fed Announces Unlimited QE on March 23

This time around, the Fed and the U.S. federal government are pulling no punches. Initially the Fed said it would undertake various operations to provide market liquidity that could total $1.5 trillion. This would include purchases of treasuries across all maturities and repo market operations. President Trump then announced interest on student loans would be waived in addition to a moderate $50 billion emergency aid package. The Fed then announced another $700 billion quantitative easing program which would include purchases of municipal bonds.

This past week, the biggest bazooka of all time was pulled out of the Fed’s arsenal as it amended its previously announced QE program by removing limits on its asset purchases and adding corporate bonds to its list of eligible securities it can purchase. Finally, the U.S. announced a $2.3 trillion fiscal package. The package equates to 10.6% of US GDP. The total budget deficit is expected to widen to at least 11.5% of GDP, which are levels not seen since WWII. The package includes grants (hundreds of billions) and direct payments to taxpayers ($290 billion), both of which are forms of helicopter money.3

This is very good news for gold bullion and gold equities. There is an 80% correlation between the Fed’s balance sheet and the price of gold bullion. Similar to what occurred during the GFC, gold bullion should move first followed by gold equities (see Figure 2).

A Tailwind for Gold and Gold Stocks

This response has not been limited to the U.S. Globally, we are seeing central banks and governments deploying unprecedented amounts of monetary and fiscal stimulus in response to the economic fallout caused by Covid-19. All these actions should debase fiat currencies while providing a tremendous tailwind for gold bullion and gold equities.

We believe the table is set for a move in gold bullion and gold equities that could dwarf the second half of 2008.

Figure 2. Fed Balance Sheet vs. Price of Gold Bullion and Gold Equities

Fed Balance Sheet vs Gold

Source: Bloomberg. Data as of 3/27/2020. The red line represents reserve credit outstanding in $ trillions ($5.125 trillion as of 3/27/2020). The yellow line is the gold spot price based on GOLDS Comdty Index. The blue line is the price of gold mining equities represented by GDX.3

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Posted in All Recent Posts, American Creek Resources Ltd. | Comments Off on Gold Continues to Prove its Safe Haven Status SPONSOR: American Creek $AMK.ca $TUD.ca $SII.ca $GTT.ca $AFF.ca $SEA.ca $SA $PVG.ca $AOT.ca $ESK.ca

Barrick Unveils 10-Year Plan to Become World’s Most Valued Gold Miner SPONSOR: Loncor Resources $LN.ca $ABX.ca $TECK.ca $RSG $NGT.to $GOLD $NEM

Posted by AGORACOM at 11:24 AM on Monday, March 30th, 2020

Sponsor: Loncor, a Canadian gold explorer controlling 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 their Tier One investment criteria. Newmont $NGT $NEM owns 7.8%, Resolute $RSG owns 27% Click Here for More Info

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Barrick unveils 10-year plan to become world’s most valued gold miner
  • Barrick unveiled a 10-year production plan aimed at becoming the most valued bullion company
  • Increasing production to 5 million ounces of gold a year
  • Boosted production at Kibali, Congo’s biggest gold mine, which last year beat its production guidance of 750,000 ounces of gold by a substantial margin, delivering a new record of 814,027 ounces.

Barrick Gold (TSX: ABX) (NYSE: GOLD), the world’s second largest gold miner, has unveiled a 10-year production plan, boosting Barrick’s production to about 5 million ounces of gold a year

The strategy, outlined in its first annual report since its merger with Randgold Resources, includes boosting Barrick’s production to about 5 million ounces of gold a year, with the bulk coming from its North American operations.

President and chief executive officer, Mark Bristow, said Nevada Gold Mines — its recent joint venture with Newmont (NYSE: NEM) — would be the “value foundation” of its business moving forward.

“Already the world’s largest gold mining complex, it holds enormous potential for growth,” Bristow said.

Bristow warned the new guidance might be impacted if operations were disrupted due to efforts to slow the spread of the covid-19.  He called the pandemic “a global disaster which is changing the way we work and live in a radically disruptive process with currently no clear end in sight.”

In the past year, Barrick has been focusing on its tier one assets and has reported strong performance across the group, particularly at Cortez mine in Nevada and Veladero in Argentina.

It has also boosted production at Kibali, Congo’s biggest gold mine, which last year beat its production guidance of 750,000 ounces of gold by a substantial margin, delivering a new record of 814,027 ounces.

Porgera in Papua New Guinea has tier one potential but faces many challenges in the form of legacy issues and an unruly neighbourhood,” Bristow said, adding the mine had exceeded guidance and the company continued to negotiate a 20-year lease extension with the government.

The executive, who took the helm in January 2019, said the work done over the past year had equipped Barrick to move to the next level.

“All in all, I am confident that we are more than capable of delivering on our promise: to build the world’s most valued gold company,” he said.

Bristow noted that Barrick’s definition of value was more wide-ranging and included factors such as economic benefits, the care with which it treated its people, communities and environments, its strategic focus on long-term sustainability and returns for investors.

Barrick unveils 10-year plan to become world’s most valued gold miner

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Posted in All Recent Posts, Lomiko Metals | Comments Off on Barrick Unveils 10-Year Plan to Become World’s Most Valued Gold Miner SPONSOR: Loncor Resources $LN.ca $ABX.ca $TECK.ca $RSG $NGT.to $GOLD $NEM

There Is No Gold.’ Bullion Dealers Sell Out In Panic Buying SPONSOR: American Creek $AMK.ca $TUD.ca $SII.ca $GTT.ca $AFF.ca $SEA.ca $SA $PVG.ca $AOT.ca

Posted by AGORACOM at 10:56 AM on Thursday, March 26th, 2020

SPONSOR: American Creek owns a 20% Carried Interest to Production at the Treaty Creek Project in the Golden Triangle. 2019’s first hole averaged 0.683 g/t Au over 780m in a vertical intercept. 2020 drilling plans 18,000 to 20,000 metres from 7-10 drill platforms with four diamond drill rigs. The Treaty Creek property is located in the same hydrothermal system as the Pretivm and Seabridge’s KSM deposits and is fully funded for exploration in 2020. Click Here For More Info

If you think gold GC00, +1.85% has jumped about 10% in a couple of days to $1,638 an ounce, the official price quoted on Wall Street, think again.

The real price? Nearer $1,800. If you can get it.

“There’s no gold,” says Josh Strauss, partner at money manager Pekin Hardy Strauss in Chicago (and a bullion fan). “There’s no gold. There’s roughly a 10% premium to purchase physical gold for delivery. Usually it’s like 2%. I can buy a one ounce American Eagle for $1,800,” said Josh Strauss. “$1,800!”

Major gold dealers have sold out of coins and gold bars amid panic buying as the U.S. economy plunges and the government agreed to a record $2 trillion emergency lifeline.

Kitco, the Canadian gold dealing giant, reported Wednesday that it was out of almost all standard one ounce gold coins. American Eagles and Buffaloes, issued by the U.S. Mint, were out of stock, it reported. Ditto Canadian “Maple Leafs,” issued by the Royal Canadian Mint, “Britannias” issued by the Royal Mint of Great Britain, and “Kangaroos” issued by Australia.

It was out of Krugerrands, issued by the South African government. Those are by far the most widely traded gold coins in the world.

Kitco did not immediately return an email for comment.

Read: Gold faces unique pricing, supply and delivery challenges amid COVID-19 shutdowns

“Due to extreme order volumes, please expect shipping delays of 15+ business days,” warned gold dealer JM Bullion.

Giant U.S. dealer Apmex admits Krugerrands are also out of stock. Deliveries of other coins, including Maple Leafs and Eagles, are delayed “due to extreme demand.” And it is charging a hefty premium for physical gold.

For a one ounce American Eagle: $1,788.

Meanwhile, over at the U.S. Mint, customer service reports they have Eagles available but to buy them direct will cost you $2,175. The media relations team could not immediately be reached.

Almost nobody on Wall Street has noticed the full price surge for actual gold bars and coins. That’s because financial traders mostly just deal in paper “contracts” for gold. Those are basically gold IOUs—a mere promise to deliver gold if the buyer ever wants.

Gold is among the most contentious financial topics around. It pits passionate true believers against total skeptics. People get heated and angry on both sides. Some say it is “the only true money.” Others call it little better than an unproductive superstition. The late British economist John Maynard Keynes called the gold standard, which pegged paper currency to the value of gold, a “barbarous relic” of a bygone age.

What should the average investor make of it? More critically, right now: Is there a case for putting holding some of your retirement account in gold? If so, how and how much?

“We’ve sold most of our gold as interest rates are rising and gold hasn’t liked that for a long time,” says Dennis Nolte, a financial adviser at Seacoast Bank. He adds: “As an asset class gold does best in certain environments, like declining interest rates. We like to own it tactically but not “all weather” as a core ETF (exchange-traded fund) or mutual fund holding.”

“We don’t view gold as a building block when constructing portfolios,” says Rob Greenman, a financial planner at Vista Capital Partners. “The hopes of appreciation are rooted in speculation—perhaps somebody is willing to pay more per ounce in the future versus the price per ounce today. Gold doesn’t produce any interest or earnings. We believe in building portfolios with mix of productive asset classes like stocks, real estate, and bonds around the globe.”

On the other hand, Thomas McCarthy, a financial planner at McCarthy & Cox, a firm that specializes in retirement planning and estates, says putting some of your retirement portfolio into gold isn’t crazy. “Gold can be a hedge against fear and holding a small 5% position of gold in an IRA or 401(k) (very few offer it) is not a bad hedge,” he says. “For clients looking to do so, we use a gold [exchange-traded fund] as opposed to actually buying the physical gold because its significantly less costly and easier to trade.”

But, he warns, “Investors in gold need to remember that gold doesn’t pay interest, doesn’t earn dividends and you make money only if the demand pushes the price higher. Many gold bugs who invested heavily in gold at its peak are still waiting many years later just to break even.”

There is no perfect answer because investing in gold ultimately requires someone else to want to buy it from you. It goes not generate income, like a stock or bond. And it’s not useful either—like food or, as people recently discovered, toilet paper.

Gold requires faith.

The good news? In this crisis you don’t have to choose one side definitely. You can be agnostic and keep your options open.

The events of the past month have upended the financial system. The Federal Reserve—and central banks overseas—have promised to print as much money as is needed to keep economies alive. The U.S. government has agreed to spend $2 trillion propping up the economy, and unless the crisis dissipates quickly that may not be the end of it.

Ordinarily, investors who wanted to protect their accounts from the twin perils of depression and inflation would look to appropriate Treasury bonds. But they are already extremely expensive by any historic measure, so they may offer limited protection. So-called “nominal” or regular Treasury bonds, the type most people own, now sport minuscule interest rates. Even the longest dated, 30 year Treasurys, yield just 1.4%. That is below most expected rates of inflation. Meanwhile Treasury inflation-protected securities or TIPS, a type of Treasury bond that is designed specifically to protect your money against any rise in consumer prices, now offer inflation-adjusted yields that are actually slightly negative. In other words, you’re almost guaranteed to lose a small amount of purchasing power over the life of the bond.

In these circumstances, gold ceases to look quite so crazy as portfolio insurance. There is genuine debate about whether gold offers a “long term hedge” against inflation. And no one actually knows what gold is “really” worth, if it is “really” worth anything. Intelligent, sane financial experts can make plausible cases for a range of values from a few hundred dollars an ounce to many thousands.

But gold makes more sense when viewed, not as an investment, but as a type of currency. It doesn’t produce anything, but it can be used as a medium of exchange. And history strongly suggests that it has a low correlation with other assets. In other words, it tends to “zig” when everything else zags.

It’s certainly done that under the current administration. Gold has risen by 38% since Donald Trump’s inauguration. Meanwhile the S&P 500 SPX, +3.85% index of large U.S. companies is up 13%, and the Russell 2000 RUT, +4.32% index of small U.S. companies is down 8%.

“The case for gold is simple,” says Strauss. “You want to own gold in times of financial dislocation and or inflation. And that’s been the case since time immemorial. And gold behaves well in those cases. In those cases stocks behave poorly. It’s a great portfolio hedge. Gold does poorly when you’ve got strong economic growth and low inflation. Tell me when that’s going to happen. Gold held its value during 2008 and after all that money printing it tripled over the next three years.”

Strauss recommends Sprott Physical Gold, PHYS, +1.41% an exchange-traded fund where shares are matched to actual bullion in a vault. He says he holds 25% of his personal wealth in gold. For those who are agnostics? “I think it’s criminal to go below 10%,” he joked, “but start with 5%.”

https://www.marketwatch.com/story/there-is-no-gold-bullion-dealers-sell-out-in-panic-buying-2020-03-25

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Posted in All Recent Posts, American Creek Resources Ltd. | Comments Off on There Is No Gold.’ Bullion Dealers Sell Out In Panic Buying SPONSOR: American Creek $AMK.ca $TUD.ca $SII.ca $GTT.ca $AFF.ca $SEA.ca $SA $PVG.ca $AOT.ca

Blood in the Streets SPONSOR: Affinity Metals $AAF.ca $SII.ca $TUD.ca $GTT.ca $AMK.ca $OSK.ca $RKR.ca

Posted by AGORACOM at 10:32 AM on Thursday, March 26th, 2020
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Sponsor: Affinity Metals Corp. (TSX-V: AFF) is a Canadian mineral exploration company building a strong portfolio of mineral projects in North America. The Corporation’s flagship property is the drill ready Regal Property near Revelstoke, BC where Affinity Metals is making preparations for a spring drill program to test two large Z-TEM anomalies. Click Here for More Info

 Dear Investors:

Are you looking for securities to buy to take advantage of the carnage in the financial markets from the coronavirus? Baron Rothschild, the 18th-century British banker advised that “The time to buy is when there’s blood in the streets, even if it is your own.” He made a fortune buying government bonds in the panic that followed the Battle of Waterloo against Napoleon. But it’s not sovereign debt of the world’s superpowers that is on sale today; it’s not the S&P 500 or Dow either.

US government bonds already had their biggest year-over-year rally ever, and at record low yields, they are no bargain. As for US stocks, it’s only the first month after what we believe was a historic market top. The problem is that the pandemic just so happened to strike at the time of the most over-valued US stock market ever based on a composite of eight valuation indicators tracked by Crescat, even higher than 1929 and 2000. It also hit after a record long bull market and economic expansion. The stock market was already ripe for a major downturn based on an onslaught of deteriorating macro and fundamental data even before the global health emergency.

As we show in the chart above, we believe there is much more downside still ahead for US stocks as a major global recession from nosebleed debt-to-GDP levels has only just begun. Corporate earnings are now poised to plunge and unemployment to surge. These things are perfectly normal. There is a business cycle after all. It must play out as always to purge the economy and markets of their sins and prepare the way for the next growth phase. From the February top for large cap stocks, it would take a 56% selloff just to get to long term mean valuations, a 74% decline to get to one standard deviation below that. In the worst bear markets, valuations get to two standard deviations below the mean. Such realities happened at the depth of the Great Depression, the 1973-4 bear market, and the 1982 double-dip recession. 1932 was an 89% drop from the peak. The initial decline in this market so far is comparable to 1929 in speed and magnitude. There will certainly be bounces, but even after an almost 30% fall in the S&P 500 through yesterday’s close, we are not even close to the “blood in the street” valuations that should mark the bottom for stocks in the current global recession that has only just begun.

But value investors do not have to despair today. There is one area of the stock market that already offers historic low valuations and an incredible buying opportunity right now. Small cap gold and silver mining companies just retested the lows of a 9-year bear market. Last Friday, they were down 84% from their last bull market peak in December 2010! This was a double-bottom retest at a likely higher low compared to the January 2016 low when they were down 87%. Now that is what we call mass murder! In the chart below, we show that precious metals juniors reached record low valuations last Friday relative to gold which is still up 18% year-over-year. Mad value. Look at that beautiful divergence and base. The baby was thrown out with the bathwater in a mass margin call. Last time the ratio was in this vicinity, junior gold and silver miners rallied 200% in 8 months. Crescat owns a portfolio of premier, hand-picked juniors as part of our precious metals SMA and in both hedge funds where clients can gain exposure today. We significantly increased our exposure in our hedge funds amidst the massacre last week.

The entire precious metals group was a casualty of a liquidity crisis, the forced margin call selling for stocks and corporate credit at large in the precipitous market decline. But it was also a victim of a meltdown in dubious levered gold and silver ETF products. These products such as JNUG and NUGT already had a horrific tracking error. Nobody should have ever been investing in them in the first place. Gold stocks are volatile enough on an unlevered basis.

The chief culprit in the ETF space last week was the $3 billion leveraged assets, Direxion Daily Jr. Gold Bull 3x ETF. It absolutely imploded, dropping 95% through last Friday from its recent high on February 21. The fiasco in JNUG was insult to injury for long-time precious metals investors, especially those invested in silver and in junior miners. It was also an incredible buying opportunity that Crescat took advantage of, especially in its hedge funds, where the profits from our short positions at large allowed us to step up. Last week’s action may have marked a major bottom for precious metals mining stocks and ideally a bottom for battered silver this week. As of Friday, miners were on track for their worst quarter ever as we show below.

The gold and silver stock selloff has exposed enormous free cash flow yields today among precious metals mining producers of 10, 20, 30, 40, even 50%. This is completely opposite the stock market at large. Meanwhile, the pure-play junior mining explorers have some of the world’s most attractive gold and silver deposits that can be bought at historic low valuations to proven reserves and resources in the ground. These companies are the beneficiaries of under-investment in exploration and development by the senior producers over the entire precious metals bear market. That rebound may have started yesterday in the mining stocks especially the juniors. It is a historic setup right now for the entire precious metals complex. Central banks are coming in, guns blazing.

Meanwhile, the fundamentals have never been better for gold and silver prices to rise making the discounted present value of these companies even better. Global central bank money printing is poised to explode which is important because the world fiat monetary base is the biggest single macro driver of gold prices. Gold itself is already undervalued relative to global central bank assets which targets gold at $2400 an ounce today.

At the same time, the price of gold is the biggest macro driver of the price of silver, which is gold on steroids. Silver today is the absolute cheapest it has ever been relative to gold and represents an incredible bargain. We think silver is poised to skyrocket along with mining stocks in what should be one of the biggest V-shaped recoveries in the entire financial markets in the near term.

As we have shown in our prior letters, when the yield curve first inverts by 70% or more, there is a high probability of a recession and bear market. At that point, historically it has paid to buy gold and sell stocks for the next 2 years. We went above 70% inversions in August 2019. At Crescat, we continue to express both sides of this trade in our hedge funds and our firm at large. The gold-to-S&P 500 ratio is up 28% since last August. The first part of the move was mostly driven by the rise in gold. Since February 19, its been driven by the decline in stocks. Now we’re at the place where historically both legs start to work in tandem, and yesterday that was evident with one of our best days ever in both Crescat hedge funds.

The Fed has not exhausted all its bullets. It has many forms of monetary stimulus. It can print more money and take interest rates into negative territory if need be. As the downturn in the business cycle becomes more pronounced, these policies will become increasingly called upon. That’s precisely what we are seeing today. Rate cuts everywhere, QE announcements, even forms of helicopter money are being implemented. It won’t save the economic cycle from its normal course, instead, it should only invigorate the reasons for owning precious metals. Central bank money printing and inflationary fiscal policy will almost certainly intensify. This is incredibly bullish for precious metals. We are in a global synchronized debasement environment. Gold has already been appreciating in all major fiat currencies in the world over the last year.

While yields continue to make historic lows worldwide, in real terms they have reached even more extreme levels. For instance, the US 10-year yield is now almost 2 percentage points below inflation. This just further strengthens our precious metals’ long thesis.

Even investment grade (IG) bonds are now blowing up. Implied volatility for IG bonds is surging! It’s now at its highest level since the Great Recession. Last week, the LQD (ETF) plunged 8% in 3 days, which is equivalent to a 10 standard deviation move. Declines as such only happened one other time in history, September 2008. We believe the corporate debt market crisis has just begun.

Stocks are acting like it’s the Great Depression again and we believe a recession has already begun. The probability for a US recession, as measure by this Bloomberg indicator, just surged above 50%. It’s currently at its highest level since the global financial crisis. This indicator leads changes in unemployment by 5 months with a 0.81 correlation. It suggests that the labor market has peaked.

We have also recently noted that the number of full-time employed people is now contracting. This was already rolling over in January. With the recent impacts from the virus outbreak, we believe this number will be plunging imminently.

Macro Trade of the Century

Crescat’s “Macro Trade of the Century” has been working phenomenally well since the market top. We believe our in-depth analysis looking at the history of economic cycles and the development of macro models is paying off tremendously. This is just the beginning of this three-legged trade. The global economy has just entered a recession and the fundamental damage of the virus outbreak on an already over-leveraged economy will be greater than anything we have ever seen. We have massive underfunded pensions with governments and corporations record indebted, while wealth inequality is at an extreme across the globe. It is not the ideal mix for asset prices that remain grossly overvalued worldwide.

When investors ask us if our macro themes to position for the downturn have already played out, the answer is absolutely not. There is so much more to go. We explain it in three ways:

1) The bursting of China’s credit bubble, the largest we’ve seen in history, has yet to materialize in its most brutal manner. As macro imbalances unfold worldwide, the Chinese current account should only continue to shrink and exacerbate its dollar shortage problem. We expect that a large devaluation in its currency versus USD is coming soon. We haven’t seen anything yet. We remain positioned for this in an asymmetric way through put options in our global macro fund in the yuan and the Hong Kong dollar.

2) Except for last year, gold, silver, and the precious metals’ miners haven’t yet performed in the way we think they will. Instead they have recoiled in a major way YTD. Meanwhile, central banks are clearly losing control of financial markets and further monetary stimulus appears unavoidable. The entire precious metals’ industry should benefit from this macro backdrop. The near- and medium-term upside opportunity in the entire precious metals complex has never looked more attractive than it does today.

3) Equity markets remain about 30% above their median valuations throughout history. The coming downturn is one that will likely not stop at the median. As we showed above, we believe there is much more downside ahead for stocks at large before we reach the trough of the current global recession.

In our hedge funds, we added significantly to our precious metals positions with gains from our short sales late last week. We have also recently been harvesting profits in some of the most beaten down of our shorts. We remain net short global equities but much less so than a month ago and with less gross exposure overall. As a value-oriented global macro asset management firm, we believe there is so much more to play out as the economic cycle has only just begun to turn down. We are not perma-bears, but we are determined to capitalize on this downturn.

Crescat Performance Update

We have been telling our hedge fund clients for the past several quarters that we have been tactically positioned for a market and economic downturn ripe to unfold. Indeed, it has finally begun. Below, we show how our hedge funds have been performing since the top in the S&P 500 on February 19:

If you are interested in learning more about Crescat or investing with us, we encourage you to contact Linda Carleu Smith at [email protected] or (303) 228-7371.

Download PDF Version

Sincerely,

Kevin C. Smith, CFA

Chief Investment Officer

 Tavi Costa

Portfolio Manager

© 2020 Crescat Capital LLC

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Posted in Affinity Metals, All Recent Posts | Comments Off on Blood in the Streets SPONSOR: Affinity Metals $AAF.ca $SII.ca $TUD.ca $GTT.ca $AMK.ca $OSK.ca $RKR.ca

American Creek $AMK.ca Announces Its JV Partner Tudor Gold Is Fully Funded for the 2020 Exploration Season at Its Flagship Project Treaty Creek Located in the Golden Triangle $TUD.ca $SII.ca $GTT.ca $AFF.ca $SEA.ca $SA $PVG.ca $AOT.ca

Posted by AGORACOM at 9:11 AM on Wednesday, March 25th, 2020

Cardston, Alberta–(Newsfile Corp. – March 25, 2020) – American Creek Resources (TSXV: AMK) (the “Corporation” or “American Creek”) is pleased to announce its partner Tudor Gold Corp. (TSXV: TUD) (FSE: TUC) (“Tudor Gold”) has sufficient funds to execute a significantly larger drilling and exploration program, than the 2019 program, on the Goldstorm Zone at Treaty Creek project this year. With the capital raised in December 2019, as well as the recent warrants exercises, the Tudor Gold has a good cash position to execute a fully funded and very ambitious drill program at Treaty Creek this year. Tudor Gold is currently in the final stages of finalizing all preparations needed for the upcoming 2020 drill program at Treaty Creek.

Tudor Gold’s Vice President of Project Development, Ken Konkin, P.Geo., states: “The Goldstorm system is currently open at depth and along the northeast axis of the mineralized body. The drill program is designed to extend and to explore the limits of Goldstorm system to the southeast as well as to the northeast and to depth. We anticipate drilling approximately 18,000 to 20,000 metres of HQ and NQ diameter core from 7-10 drill platforms with four diamond drill rigs. Compared to the drill program last year (14 diamond drill holes over 9,781.8 meters), the planned 2020 drill program will be much larger.”

The current known length of the northeast axis of the Goldstorm System is over 850 meters long and the southeast axis is at least 600m across. The system remains open in all directions and to depth. The best mineralization encountered to date is from the two consecutive 150m step-out holes to the Northeast: GS-19-42 yielded 0.849 g/t Au Eq over 780 m with 1.275 g/t Au Eq over 370.5m and GS-19-47 yielded 0.697 g/t Au Eq over 1,081.5m with 0.867 g/t Au Eq over 301.5m.

The best southeast extension came from GS-19-52 which yielded 0.783 g/t Au Eq over 601.5m intercept with 1.062 g/t Au Eq over 336.0m intercept. (results from the company’s NR dated March 3rd, 2020).

Tudor Gold response to COVID-19:

Tudor Gold has introduced additional precautionary steps to manage and respond to the risks associated with COVID-19 virus. This includes, for example the cancellation of all non-essential global travel and the reducing in person meetings and transitioning to teleconferencing where possible. Vancouver office staff are now working from home until government advisories change.

Tudor Gold is regularly monitoring the situation and following local and national health authority requirements and recommendations.

Walter Storm, President and CEO of Tudor Gold stated: “We are taking all appropriate measures to protect the safety, health and well-being of our people and all those who interact with our business. Tudor Gold is following guidance and directives as updated by federal, regional and provincial health authorities in respect of general and drill-site specific protocols. We are very fortunate to have a strong balance sheet amidst the volatile market created by COVID-19.”

Qualified Person

The Qualified Person for this news release for the purposes of National Instrument 43-101 is the Company’s Vice President of Project Development, Ken Konkin, P.Geo. He has read and approved the scientific and technical information that forms the basis for the disclosure contained in this news release.

Treaty Creek JV Partnership

The Treaty Creek Project is a Joint Venture with Tudor Gold owning 3/5th and acting as operator. American Creek and Teuton Resources each have a 1/5th interest in the project. American Creek and Teuton are both fully carried until such time as a Production Notice is issued, at which time they are required to contribute their respective 20% share of development costs. Until such time, Tudor is required to fund all exploration and development costs while both American Creek and Teuton have “free rides”.

Treaty Creek Background

The Treaty Creek Project lies in the same hydrothermal system as Pretium’s Brucejack mine and Seabridge’s KSM deposits with far better logistics.

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The Sulphurets Hydrothermal System

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About American Creek

American Creek is a Canadian junior mineral exploration company with a strong portfolio of gold and silver properties in British Columbia. Three of those properties are located in the prolific “Golden Triangle”; the Treaty Creek and Electrum joint venture projects with Tudor Gold/Walter Storm as well as the 100% owned past producing Dunwell Mine.

More information about the Treaty Creek Project can be found here: https://americancreek.com/index.php/projects/treaty-creek/home

The Corporation also holds the Gold Hill, Austruck-Bonanza, Ample Goldmax, Silver Side, and Glitter King properties located in other prospective areas of the province.

For further information please contact Kelvin Burton at: Phone: 403 752-4040 or Email: [email protected]. Information relating to the Corporation is available on its website at www.americancreek.com

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Posted in All Recent Posts, American Creek Resources Ltd. | Comments Off on American Creek $AMK.ca Announces Its JV Partner Tudor Gold Is Fully Funded for the 2020 Exploration Season at Its Flagship Project Treaty Creek Located in the Golden Triangle $TUD.ca $SII.ca $GTT.ca $AFF.ca $SEA.ca $SA $PVG.ca $AOT.ca

Loncor Increases Interest In Adumbi Mining To 76.29% $LN.ca $ABX.ca $TECK.ca $RSG $NGT.to $GOLD $NEM

Posted by AGORACOM at 8:26 AM on Wednesday, March 25th, 2020
  • Loncor has acquired an additional 5.04% interest in its subsidiary Adumbi Mining
  • Adumbi holds six exploitation licences in the Ngayu Greenstone Belt including the Imbo exploitation licence, where an Inferred Mineral Resource of 1.675 million ounces of gold (20.78 million tonnes grading 2.5 g/t Au

TORONTO, March 25, 2020 (GLOBE NEWSWIRE) — Loncor Resources Inc. (“Loncor” or the “Company“) (TSX: “LN”; OTCQB: “LONCF”) announces that it has acquired an additional 5.04% interest in its subsidiary Adumbi Mining SARL (“Adumbi Holdco”) pursuant to a private transaction with one of the former minority shareholders of Adumbi Holdco.  This acquisition increases Loncor’s interest in Adumbi Holdco from 71.25% to 76.29%.  “Loncor continues to consolidate its dominant position in the Ngayu Goldbelt.  Over the next twelve months we intend to drill the Adumbi gold deposit and several other highly prospective areas of the Imbo license,” said Founder and CEO, Arnold Kondrat.

Adumbi Holdco, which recently changed its name from KGL Somituri SARL, holds six exploitation licences in the Ngayu Greenstone Belt including the Imbo exploitation licence, where an Inferred Mineral Resource of 1.675 million ounces of gold (20.78 million tonnes grading 2.5 g/t Au,) was outlined in January 2014 by independent consultants Roscoe Postle Associates Inc on three separate deposits, Adumbi, Kitenge and Manzako.  76.29% of this gold resource is now attributable to Loncor.

About Loncor Resources Inc.
Loncor is a Canadian gold exploration company focussed on the Ngayu Greenstone Belt in the Democratic Republic of the Congo (the “DRC”).  The Loncor team has over two decades of experience of operating in the DRC.  Ngayu has numerous positive indicators based on the geology, artisanal activity, encouraging drill results and an existing gold resource base.  The area is 200 kilometres southwest of the Kibali gold mine, which is operated by Barrick Gold (Congo) SARL (“Barrick”).  In 2019, Kibali produced record gold production of 814,000 ounces at “all-in sustaining costs” of US$693/oz.  Barrick has highlighted the Ngayu Greenstone Belt as an area of particular exploration interest and is moving towards earning 65% of any discovery in 1,894 km2 of Loncor ground that they are exploring.  As per the joint venture agreement signed in January 2016, Barrick manages and funds exploration on the said ground at the Ngayu project until the completion of a pre-feasibility study on any gold discovery meeting the investment criteria of Barrick.  In a recent announcement Barrick highlighted six prospective drill targets and are moving towards confirmation drilling in 2020.  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.

In addition to the Barrick JV, certain parcels of land within the Ngayu project surrounding and including the Makapela and Adumbi deposits have been retained by Loncor and do not form part of the joint venture with Barrick.  Barrick has certain pre-emptive rights over the Makapela deposit.  Loncor’s Makapela deposit (which is 100%-owned by Loncor) 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).  Adumbi and two neighbouring deposits hold an Inferred Mineral Resource of 1.675 million ounces of gold (20.78 million tonnes grading 2.5 g/t Au), with 76.29% of this resource being attributable to Loncor via its 76.29% interest.   

Resolute Mining Limited (ASX/LSE: “RSG”) owns 25% 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. 

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

Qualified Person
Peter N. Cowley, who is President of Loncor and a “qualified person” as such term is defined in National Instrument 43-101, has reviewed and approved the technical information in this press release. 

Technical Reports
Certain additional information with respect to the Company’s Ngayu project is contained in the technical report of Venmyn Rand (Pty) Ltd dated May 29, 2012 and entitled “Updated National Instrument 43-101 Independent Technical Report on the Ngayu Gold Project, Orientale Province, Democratic Republic of the Congo”.  A copy of the said report can be obtained from SEDAR at www.sedar.com and EDGAR at www.sec.gov. 

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Sprott Gold Report – Point of No Return SPONSOR: American Creek Resources $AMK.ca $TUD.ca $SII.ca $GTT.ca $AFF.ca $SEA.ca $SA $PVG.ca $AOT.ca

Posted by AGORACOM at 11:49 AM on Friday, March 20th, 2020

SPONSOR: American Creek owns a 20% Carried Interest to Production at the Treaty Creek Project in the Golden Triangle. 2019’s first hole averaged of 0.683 g/t Au over 780m in a vertical intercept. The Treaty Creek property is located in the same hydrothermal system as the Pretivm and Seabridge’s KSM deposits. Click Here For More Info

Credit Deflation and Gold

Gold and precious metals mining shares are casualties of panic selling across all financial markets. The scenario is similar to what happened in 2008 during the global financial crisis (GFC). When the general selling exhausted itself in late 2008, gold and mining shares delivered superior absolute and relative performance for the following three years. We believe that this pattern is likely to repeat following this sell-off.

While COVID-19 outbreak is grabbing the headlines, the far bigger story is the deflation of financial assets that it has triggered and the resulting loss of investment confidence. Markets that had been priced for perfection must now reckon with a likely recession, soaring fiscal deficits and the very real possibility of a sustained bear market.

In our opinion, even though the economy will recover from the downturn and the health scare will prove to be temporary, financial asset valuations are unlikely to return to pre-crash manic levels. In mid-February, the Wilshire 5000 Stock Index1 traded at approximately 145% to gross domestic product (GDP),2 its second highest level since 1950, and only slightly below the 2000 peak (see Figure 1). At this writing, the ratio has fallen to 114% (as of 3/17/2020), which is still very expensive by historical standards. Valuations are driven by investor psychology, leverage and the liquidity necessary to support leverage. All three may have been critically impaired for the near to intermediate term.

Figure 1. Total U.S. Corporate Equities and U.S. GDP (1950-2020)

Source: AdvisorPerspectives.com. Data as of 3/3/2020.

Gold Will Continue to Do its Job

If financial assets struggle, interest in gold is very likely to widen. Gold may have been caught up in the recent stampede for liquidity, but it has delivered good relative performance on a year-to-date basis; gold bullion is up 0.73% as of March 17, compared to -25.17% for the S&P 500 Index.3 The 12-month figures (as of 3/17/2020) are even more impressive: gold has returned 17.19% vs. -8.54% for the S&P 500.

On a peak-to-trough basis for the last few weeks, gold has declined roughly 12%. Other safe haven assets have experienced the same pressure. For example, the yield on 30-year U.S. Treasury bond rose from less than 1.0% to 1.5% in only a few days, a drawdown of more than 30%. What this shows is that quality assets will be sold by portfolio managers desperate to reduce leverage. Low-grade assets cannot be sold quickly enough to meet margin calls.

It was leverage that inflated valuations, not fundamental economic growth and strong year-over-year earnings. In fact, corporate pre-tax profits have been declining since Q3 2014. Figure 2 shows pretax profits on a quarterly basis since 2014.

Figure 2. U.S. Corporate Pre-Tax Profits Have Been Declining ($Billions)

Source: Federal Reserve Bank of St. Louis Economic Research. Data as of 3/16/2020. 

The illusion of earnings growth that has captivated investor psychology was achieved through share buybacks and increased leverage. Growth of earnings per share, not the same as profit growth, has been juiced by financial engineering. The same can be said for returns on financial assets. The amount and location of leverage within the economy and financial markets is opaque but may well have reached high tide for many years. A post-recession economic recovery will not necessarily, and does not have to, translate into strong returns from investing in financial assets.

Global Debt Has Increased +100% Since 2007

In popular thinking, the current U.S. administration, or the one that follows it, will pull every trick out of the bag to stimulate the economy. This belief will likely excite investors from time to time in anticipation of a rebound. Unfortunately, the financial markets are experiencing a deflationary bust that could spread to general economic activity. Public policy has all but exhausted the potential benefits of resorting to traditional monetary and fiscal solutions. The marginal benefit to economic growth from heaping on new layers of debt is capped by the law of diminishing returns, as shown by Figure 4 from Rosenberg Economics. Since 2007, global debt increased 110% vs. 46% for global GDP:

Figure 3. Global Debt vs. Global GDP ($ Trillions)

Source: Rosenberg Economics. Data as of 12/31/2019.

Central banks have few conventional tools remaining to combat credit deflation. An impotent response can be expected from new rounds of monetary stimulus, rate reductions or central bank balance sheet expansion. Global debt, public and private, measures 287% vs. global GDP ($244 trillion divided by $85 trillion). The debt burden will most assuredly grow, a post coronavirus rebound notwithstanding. The world’s debt structure is already incapable of withstanding even a minute rise in rates. More debt relative to GDP will only make matters worse. All that remains is currency destruction.

Gold has been rising for the past eighteen months side by side with a strong stock market and no inflation. Conventional wisdom said that wasn’t supposed to happen. As shown in Figure 4, gold has outperformed equities and bonds since 2000, the dawn of radical monetary experimentation by central bankers. We think gold has been sensing the endgame for Keynesian policy prescriptions, mainstream economic thinking and hyper-leveraged investment practices.

Figure 4. The Modern Era of Gold
Gold Bullion vs. Stocks, Bonds, Oil, USD (2000-2020)

For the period from 12/31/1999 to 3/16/2020, gold has provided posted an average annual return of 8.55%, compared to 5.44% for U.S. bonds, 4.44% for U.S. stocks, 0.57% for oil and -0.19% for the U.S. dollar. 

Source: Bloomberg. Period from 12/31/1999 –3/16/2020.4

Gold Miners are Poised to Perform

During the 1930s credit deflation, gold and gold mining stocks performed well in relative and absolute terms. When credit deflates, and counterparties cannot be trusted, gold is the ultimate safe asset. In the 1930s, the metal price rose, costs of producing gold declined and the miners generated strong earnings and paid handsome dividends. We believe that this is a sequence that will repeat.

At the moment, mining company valuations appear extraordinarily cheap. It is one of the few industries that will report solid year-over-year earnings gains for the remainder of this year and perhaps into the next. 

Buying low is never easy but now is the time to do it.

https://sprott.com/insights/sprott-gold-report-point-of-no-return/?

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Is There a Real Shortage of Physical Gold and Silver? SPONSOR: Affinity Metals $AAF.ca $SII.ca $TUD.ca $GTT.ca $AMK.ca $OSK.ca $RKR.ca

Posted by AGORACOM at 11:44 AM on Thursday, March 19th, 2020
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Sponsor: Affinity Metals Corp. (TSX-V: AFF) is a Canadian mineral exploration company building a strong portfolio of mineral projects in North America. The Corporation’s flagship property is the drill ready Regal Property near Revelstoke, BC where Affinity Metals is making preparations for a spring drill program to test two large Z-TEM anomalies. Click Here for More Info

Bob Moriarty
President: 321gold

Every time the price of gold and silver go down in a big way, the manipulation/conspiracy crowd come creeping out of their rat holes to start preaching about naked short selling and a disconnect between physical metals and paper markets. As you will see, both issues tend to reveal how little these guys understand about how markets and people work in the real world. And an utter display of their basic ability to think for themselves.

A little Econ 101 first.

Commodity markets go down because of an excess of motivated sellers. Anyone who actually knows how commodity markets work understands that for every contract there is one buyer and one seller. That’s why it is impossible for there to be anyone doing “naked short selling.” You can sell first or you can buy first but you will do both eventually. If somehow someone managed to dump trillions of dollars worth of commodity contracts “naked” on the market, at some point they would have to buy those contracts back.

A lot of people like to believe that commodity prices go down because there are more sellers than buyers but since every contract requires an equal and opposite party on the other side, if ten contracts are sold, someone has to buy ten contracts. There is never any other alternative. One buyer, one seller. Both margined or having the ability to fulfill the contract either as a supplier or a consumer.

So if the prices of gold and silver have plummeted, and they have, why are people reporting shortages of the physical metals? And let me remind my readers, there were people predicting this crash with great accuracy.

I’ll give you a hint; none of the manipulation/conspiracy crowd got it right. They never do call anything correctly but are always forgiven because they tell people what they want to hear, just like TV preachers and successful politicians.

To understand why there is an apparent shortage of physical metals, you have to try thinking for yourself if only this once.

Pretend you want to go into the business of buying and selling silver bars. You have rented a shop, hired an assistant, set up an accounting program. On the 6th of March a customer walked in, your first. He wanted to sell this nice shiny 100-ounce silver bar. You looked at either Kitco or the futures market to see what you should pay, there being zero difference between the physical and paper market at the time.

For the 6th of March the spot silver price varied between a low of $17.08 and a high of $17.55. Since as a businessman you have to make money you pay him $1700 for the bar. He’s thrilled; you’re thrilled with your first purchase.

Time passes and since you are new to the game you don’t do any business. After all it takes time to build a customer base. But the bell rings and another potential customer walks in. Lucky for you, he wants to buy a 100-ounce silver bar, shiny if possible, and you just happen to have one in stock.

The two of you go to Kitco or look at the spot price of silver on the futures market and it shows $12.27. What do you do? Do you sell it for $12.27 and a small premium or do you tell him you are out of stock? At this point, the price of physical and paper is the same.

Or alternatively do you point out that the “Experts” are saying customers are willing to pay a 50% premium. So you tell him that the price is $1800 for the bar. If you quote him $1800, just how likely do you think it is that he will bite?

If you charge him $12.27 an ounce, you go out of business. If he is willing to pay a 50% premium, give him my contact details because I have all the silver in the world at a 50% premium.

The price of silver went down because the sellers were more interested in dumping than buyers were in scarping it up. There is no shortage of silver and there is no disconnect between the price of physical and paper. If you really believe dealers are short of silver, take in a 100-ounce bar and see just how much the physical price varies from the paper price.

I can tell you. It’s zero. If you own gold or silver you paid for it with paper and if you sell gold or silver you are going to be paid based on the paper price.

Supply and demand really does work. If the price of silver bars stays low, all the people who rushed to buy at the top will be just thrilled to sell at the bottom. They always do.

http://www.321gold.com/editorials/moriarty/moriarty031920.html

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Gold is Setting Records Dating Back Over 5,000 Years — Against Silver SPONSOR: Affinity Metals $AAF.ca $SII.ca $TUD.ca $GTT.ca $AMK.ca $OSK.ca $RKR.ca

Posted by AGORACOM at 4:00 PM on Tuesday, March 17th, 2020
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Sponsor: Affinity Metals Corp. (TSX-V: AFF) is a Canadian mineral exploration company building a strong portfolio of mineral projects in North America. The Corporation’s flagship property is the drill ready Regal Property near Revelstoke, BC where Affinity Metals is making preparations for a spring drill program to test two large Z-TEM anomalies. Click Here for More Info

Gold hasn’t been such a terrific hedge of late against the turmoil from the coronavirus pandemic that has upended financial markets.

Over the last month, gold futures GC00, 3.014% have retreated by 5%. While that’s a long way better than the 28% decline in the S&P 500 SPX, 5.485% , it trails the performance of other assets that are perceived as safe, such as government bonds. The iShares 7-10 Year Treasury Bond ETF IEF, -2.167% , for instance, is up 7% over the last four weeks.

But where gold is looking lustrous is relative to silver SI00, -0.593% .

According to Marshall Gittler, head of investment research at BDSwiss, the ratio of gold to silver is the highest it’s been for 5,120 years.

Yes there’s data back into Pharaoh Menes’ time in ancient Egypt, when the ratio was a more modest 2.5, and it was 6 in King Hammurabi’s day in Babylon.

On Monday the ratio reached nearly 124. On Tuesday morning, the ratio slipped to 119.

Gittler said the best correlation he has found is with the 10-year U.S. breakeven inflation rate — but the gold-to-silver ratio goes up when inflation expectations are down.

“Lower expected inflation would mean a) central banks cut their policy rates, and lower interest rates tend to boost the gold price, and b) lower expected inflation probably stems from lower expected economic activity, which might imply less industrial demand for silver – although I must admit I couldn’t find a clear link between industrial activity and the price of silver,” he writes.

Aakash Doshi, an analyst at Citi, also pointed to that connection with expected inflation.

“Even as the excessive collapse in inflation breakevens may be viewed as a headwind for gold upside, the yellow metal should outperform silver in a deflation and growth shock scenario,” he said.

https://www.marketwatch.com/story/gold-is-setting-records-dating-back-over-5000-years-against-silver-2020-03-17?mod=mw_latestnews

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Why You Should Buy Gold Now! SPONSOR: Labrador Gold $LAB.ca $RIO.ca $WHM.ca $SIC.ca $NXS.ca

Posted by AGORACOM at 12:54 PM on Thursday, March 12th, 2020

SPONSOR: Labrador Gold – Two successful gold explorers lead the way in the Labrador gold rush targeting the under-explored gold potential of the province. Exploration has already outlined district scale gold on two projects, including a 40km strike length of the Florence Lake greenstone belt, one of two greenstone belts covered by the Hopedale Project. Recently acquired 14km of the potential extension of the new discovery by New Found Gold’s Queensway project to the south. Click Here for More Info

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  • Gold is known as the safe-haven asset, and whenever we see a meltdown in the equity markets or prospects of loose monetary policy, its price begins to explode to the upside.
  • Currently, the gold price has a strong negative correlation with the equity markets meaning when the equity markets fall; investors pour money into gold and vice versa.  
Gold and SPX chart shows negative correlation

The fact is that the current sell-off in the global equity markets is only a start because there is a lot more to come. After all, the economic weakness isn’t fully baked into economic data, let alone in earnings. Thus, there is no better time to buy gold.

Why?

First, the equity markets are in major turmoil as a 1000 point move for the Dow Jones index has become the norm. Secondly, the Coronavirus has pushed the Federal Reserve into a corner, and it’s being forced to keep its monetary policy on the dovish side. The Fed cut the interest rate by 50 basis points only a couple of weeks ago, and yet the market expects further cuts.

Gold which is up nearly 10% year-to-date is likely to score serious gain in the coming weeks. The reason is that we have a situation where monetary policy itself isn’t enough to calm the markets; however, governments are trying to provide support on the fiscal front as well. For instance, Donald Trump has pitched the idea of no payroll tax for this year to soften the blow of Coronavirus. So far, we have not seen a green flag which is why investors are still nervous. Donald Trump may achieve some of his goals, but it won’t be enough, the economic damage is too considerable, and the Coronavirus is still nowhere close to coming under control.

Going back to the monetary policy action and why there is serious potential for the gold price to increase; at present, traders and Wall Street are expecting further interest rate cuts from the Fed during their meeting next week. An interest rate cut of 50 basis points is the minimum that investors expect, and according to bigger banks like Goldman Sachs and JP Morgan, we can expect 75 basis points and a full percentage point.

Regarding the price action, an interest rate cut isn’t priced in at all, if it had been, the price would have been trading much higher. Currently, it’s trading near $1,661.

The Play

If the Fed cuts the interest rate by 50 basis points, this could push the gold price above 1700 again. Anything more than 50 basis points, especially a whole percentage point, could pump the price to 1750 or higher.

The Flow

If we look at the total gold ETF holding data, it supports our thesis that the gold price is likely to increase because the total holding in ETFs is sitting at a record level, and the inflow continues to rise. It appears that investors are discounting this current price weakness and using this opportunity to buy more.

The chart shows all gold ETFs holding at a record high level

 The Bottom Line

 The current retracement in the gold price is an enormous opportunity for traders to get back in the game or add to their position, similar to the institutions. If for some reason, the Fed doesn’t cut the interest rates during the meeting, it will create more panic in the equity markets, which would be a positive sign for the gold price.

SOURCE: https://www.forbes.com/sites/naeemaslam/2020/03/11/why-you-should-buy-gold-now/#7d3d34446828

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