Author: Gold News Club

Gold price for 4/17/20  Kitco NEWS

Gold prices to target all-time highs but don’t expect silver to follow – Refinitiv  Kitco NEWS

Hello, and welcome to another edition of the Money Metals Weekly Market Wrap Podcast, I’m Mike Gleason.

First, a quick update on product availability, premiums, and shipping times. Money Metals continues to keep popular items in stock better than most of our competitors — and our shipping delays are either minimal or non-existent. Our expanded fulfillment team here at Money Metals is getting boxes out the door at breakneck speed. Something we are incredibly proud to report on, all thanks to the tireless work of our loyal staff.

Among the key reasons for Money Metals’ high performance in an environment which has caused so many other dealers to stumble is because we also handle our fulfillment inside our own facility — where we also operate a major U.S. depository for precious metals. These capabilities are pretty rare in an industry where so many dealers, particularly online dealers, rely on third parties to handle core business needs.

Now in terms of premiums, they do remain elevated due to continued extreme levels of demand… coupled with major supply disruptions at mints and refiners that are known to struggle in high demand situations, even without the added challenges of a global pandemic.

Our take is that, until spot prices rise substantially from here, especially in silver, we don’t expect much reduction in the premiums currently seen in the retail bullion market. But higher spot prices could eventually result in more secondary market product coming back into the market.

So bottom line is, even with spot silver between $15 and $16 an ounce, don’t expect to be able to buy and take delivery of any physical retail silver bullion item for anywhere less than $20 for the foreseeable future.

But that’s where Vault Metals comes in. Through Money Metals special, storage-only Vault Metals program, you can obtain direct ownership of gold and silver ounces at much closer to the global spot price. Think of it as your own gold and silver savings account. For more information on this great, cost-efficient option, visit MoneyMetals.com or call 1-800-800-1865.

Well now, let’s get into this week’s market update.

Even as the death count from coronavirus continues to climb, investors are finding reasons to be optimistic. U.S. stock market futures jumped Thursday night after President Donald Trump released formal guidelines for opening the economy back up in phases. Investors were also encouraged by reports that Gilead Sciences has developed a drug that shows real promise in combating COVID-19.

But the state of the economy remains grim, with reports this week showing catastrophic drops in retail sales, industrial production, and homebuilder sentiment. Meanwhile, the ranks of people filing for unemployment has surged to a staggering 22 million.

The mining industry is also getting hit hard. Major copper, gold, silver, and platinum group metal mines have been ordered closed in several countries around the world. An estimated 40% of global silver production is now offline.

A collapse in supply combined with an unprecedented surge in fiscal and monetary stimulus aimed at averting a financial collapse is a potentially explosive setup for precious metals markets. And while jewelry and industrial demand remain depressed, bullion demand has been incredibly strong in recent weeks.

This week, gold and silver prices are flat to modestly down, with gold essentially unchanged at $1,705 an ounce as of this Friday recording. Gold had traded up to an 8-year high Tuesday, just shy of $1,800 an ounce, before succumbing to selling. Some more consolidation may be necessary before the yellow metal makes another run toward the $1,800 level and then ultimately new all-time highs above $1,900.

Silver currently checks in at $17.39 per ounce and is showing a weekly loss of 2.0%.

Turning to the PGMs, platinum is showing relative strength – something we don’t often see. Platinum is up 3.0% this week to trade at $783. And finally, palladium now sports a $2,222 per ounce price tag after falling a slight 0.4% for the week.

As I mentioned earlier, premiums on most bullion products remain elevated as inventories remain scarce. Investors who have been awaiting opportunities to buy coins with lower premiums attached to them were dealt another blow by Wednesday’s news of a U.S. Mint closure. The U.S. Mint announced it would shutter its West Point facility indefinitely due to COVID-19 risks. Rumors are that the closure may be somewhat short, but we’ll have to wait and see if it actually plays out that way.

The shutdown will directly impact supplies of gold, silver and platinum American Eagle coins as well as American Buffalo gold coins. A few other mint shutdowns around the world are forcing buyers to opt for alternatives, which in turn is exerting upward pressure on premiums for all bullion products.

Scarcity-driven premium spikes in the bullion market have occurred before and have quickly been resolved by an increase in supply and/or a softening of demand. We’ve seen that start to occur slowly. Unfortunately, this crisis is quite different from anything that has hit bullion dealers before – and market conditions are likely to remain abnormally tight for weeks and possibly months to come.

The good news is that investors who want to own physical bullion but don’t necessarily need to take delivery of coins, rounds, or bars can own bullion bars near spot prices via our Vault Metals program. Vault Silver and Vault Gold enable investors to obtain allocated fractional interest in exchange-sized bars stored in secure vaults with Money Metals Depository. For now, this is the best way to own precious metals without having to pay abnormally high premiums or wait for inventory to become available.

Perhaps next month America will start getting back to work, and mines and mints will begin reopening. But the economy will never be the same as before the shutdown. Neither will investors’ priorities and risk appetites.

Even assuming the worst is behind us and the virus doesn’t make a second round resurgence this fall and winter, we could be looking at a federal budget deficit of close to $4 trillion and a Federal Reserve that is still engaging in emergency operations to prop up the financial system.

Crisis conditions won’t end anytime soon. Even if a crisis in the stock market or the junk bond market is seemingly solved by a set of interventions, new crisis “hot spots” will continue to emerge – one week it might be mortgages, another it might be student loans, small business bankruptcies, municipal bonds, pensions, insurers, entitlement programs, the U.S. credit rating, and ultimately the currency itself.

What all this means is that as investors adjust their strategies to the new realities we face, precious metals are likely to play a larger role in safe-haven asset allocation. Times that call for more caution and better preparedness, for self-reliance and resilience, are times that call for ownership of gold and silver.

Well that will do it for this week, thanks for listening. Be sure to check back next Friday for our next Weekly Market Wrap Podcast. Until then, this have been Mike Gleason with Money Metals Exchange, thanks for listening and have a great weekend everybody.

Source: Adrian Day for Streetwise Reports   04/16/2020

Money manager Adrian Day provides updates on some of the resource companies in his portfolio and says he is buying little, but is ready to buy on pullbacks.

Franco-Nevada Corp. (FNV:TSX; FNV:NYSE, US$113.69), following most of its royalty peers, pulled its guidance for both GEOs (gold-equivalent ounces) and energy. Cobre Panama, which had been ramping up well and accounted for 15–20% of its previous 2020 guidance, has shut down because of a virus infection at the work site. The local health ministry said it would remain closed until they were satisfied with quarantine procedures at the mine, suggesting it could come back on stream reasonably soon.

The three largest revenue sources after Cobre all continue to operate; of a total of 56 cash-flowing assets, 11 of them now are shut down or operating at reduced production. Before Cobre Panama was shuttered, the company estimated its annual GEOs would be cut by only around 6–7% because of virus-induced mine suspensions. The energy revenue will be down as well, but with the added potential for write-downs of some assets. The benefit of royalty companies in not being responsible for higher and unusual costs will be very clear in this pandemic environment; they are not responsible for the care and maintenance costs of the shutdown, which will hurt many of the mining companies. Reduced revenue is only deferred.

A time for deals

Franco has around $200 million in cash and over $1 billion undrawn on credit facility. It is still expecting to pay a dividend. It is in a strong position to buy new royalties or streams at a time when some producers will be struggling with lost revenues and higher costs. It has a good pipeline of potential deals with some at $500 million or even $1 billion. At half a billion, Wheaton and Royal are their only competitors; at $1 billion, maybe only Wheaton. Franco was particularly closed-lipped about future deals on its latest quarterly results call, indicating perhaps that a major transaction could be close.

Over the last decade, Franco has a compound annual growth rate of 17% compared with 7.5% for the Dow. In addition to ramp up at Cobre, when it reopens, there is strong near-term growth potential from expansions at Stillwater, and Tastiast (the latter probably
being delayed), and further out, potential from any number of its almost 400-strong pipeline of royalty assets. They won’t all become mines, but some will.

Franco remains my favorite gold company; if I could hold only one, this would be it. But at the current price and valuation, and given the potential for its largest producer to be offline for longer than expected, we are holding, not buying.

Full steam ahead at Wheaton—so far

Wheaton Precious Metals Corp. (WPM:TSX; WPM:NYSE, US$31.98) reported good results, as its main operations continue in operation. It largest revenue source, Salobo in Brazil, is operating as usual and continues with its expansion, now 40% underway. This mine represents over 30% of Wheaton’s NAV and 37% of its projected 2020 GEOs.

Wheaton has continued to reduce its debt, down over 35% in the last year. It has cash of just over $100 million, but liquidity of $1.2 billion. It reiterated that it sees debt as more attractive than equity for financing new transactions. It said it was currently conducting due diligence of 10–12 streaming transactions, three of them over a half-billion dollars and one at $1 billion. As expected, most of the counter parties are base metals producers.

Why the discount?

Even after the Canadian tax dispute has been settled, Wheaton is trading at a discount to Franco, largely because of its greater asset concentration (two assets, Salobo and Penasquito, representing virtually 50% of GEOs), and its higher debt. Now, given relative stock performance, it is trading at a small premium over Royal. We think Wheaton has the potential to trade at higher multiples over time, but given the recent strong stock performance, we are holding not buying.

Results in Quebec but no activity in Mexico

Cartier Resources Inc. (ECR:TSX.V, 0.105) reported more drill results from its Chimo project in Quebec, which validate the concept and provide potential for resource expansion. In this environment, we favor larger and stronger companies, so are holding Cartier for now.

Azucar Minerals Ltd. (AMZ:TSX.V; AXDDF:OTXQX, CA$0.095) continues to see good drilling results on its large El Cobre copper/gold porphyry exploration property in Mexico, currently on shutdown. Fortuitously, the company has just completed its most recent drilling program before the government shutdown order was issued earlier this month. The last three of the drill holes will be assayed and released while the company is working with an outside consultant to evaluate the results and program going forward.

The company continues to be well financed, not yet having expended all the funds from the 2018 equity placement by Australia’s Newcrest, and a top-up last year. Given the slow pace of results and the lack of near-term news, as well as our preference for larger companies in this environment, we are holding.

Almadex Minerals Ltd. (DEX:TSX.V, 0.165) is the junior member of the Almaden/Azucar family, focusing on a range of early-stage exploration in Mexico and British Columbia. To us, it is arguably the most undervalued, and it has exposure to both of the others’ projects through royalties. It has a strong balance, though it lent its gold to Almaden, which is unlikely to be repaid until Ixtaca, Almaden’s property, is in production. All Mexican exploration activities are on hold during the virus shutdown. We would pick away at Almadex on weakness but there is no need to chase prices.

TOP BUYS NOW: Given the uncertainty and probability of a deep economic contraction, as well as the volatility in the stock market, we are being particularly disciplined about buy targets. Given recent stock rallies, we are not buying much right now. The Business Development Companies, for example, are up 20–25% from the prices in our March 22nd Bulletin, and we are standing back for now. Of the stocks on our list, best buys would be Altius Minerals Corp. (ALS:TSX.V, 7.89), Midland Exploration Inc. (MD:TSX.V, 0.56), Fortuna Silver Mines Inc. (FSM:NYSE; FVI:TSX; FVI:BVL; F4S:FSE, US$2.42), and Kingsmen Creatives Ltd. (KMEN:SI, 0.185).

Originally posted on April 12, 2020.

Adrian Day, London-born and a graduate of the London School of Economics, heads the money management firm Adrian Day Asset Management, where he manages discretionary accounts in both global and resource areas. Day is also sub-adviser to the EuroPacific Gold Fund (EPGFX). His latest book is “Investing in Resources: How to Profit from the Outsized Potential and Avoid the Risks.”

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Disclosure:
1) Adrian Day: I, or members of my immediate household or family, own securities of the following companies mentioned in this article: Franco-Nevada, Altius Minerals, Midland Exploration. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: None. Funds controlled by Adrian Day Asset Management hold shares of the following companies mentioned in this article: All. I determined which companies would be included in this article based on my research and understanding of the sector.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
4) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article until three business days after the publication of the interview or article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Franco-Nevada, Altius Minerals, Almadex and Midland Exploration, companies mentioned in this article.

Adrian Day’s Global Analyst disclosures: Staff may have positions in securities discussed herein. Adrian Day is also President of Global Strategic Management (GSM), a registered investment advisor, and a separate company from this service. In his capacity as GSM president, Adrian Day may be buying or selling for clients securities recommended herein concurrently, before or after recommendations herein, and may be acting for clients in a manner contrary to recommendations herein. This is not a solicitation for GSM. Views herein are the editor’s opinion and not fact. All information is believed to be correct, but its accuracy cannot be guaranteed. The owner and editor are not responsible for errors and omissions. © 2020.

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