Category: Gold

Mining people: Asanko, Compass Gold, Ivanhoe, Premier Gold Mines, Unigold  MINING.com

1. Gold down, but well off lows as Federal Reserve fires its bazooka  Kitco NEWS
2. Gold ‘Just Another Asset to Sell’ in Coronavirus Crash, Price Sinks as Bond Liquidity Vanishes, Crude Oil Nears 16-Year Low | Gold News  BullionVault
3. Gold price drops more than $80 an ounce  MINING.com
4. Even Gold Takes a Beating as Broad Market Rout Intensifies  The Wall Street Journal
5. Why gold’s plunge proves it’s a safe haven asset  MarketWatch
6. View Full Coverage on Google News

Coronavirus market meltdown takes gold, silver, palladium and platinum down with it  Kitco NEWS

Gold price hovering back around $1600 as Federal Reserves pumps massive liquidity into markets  Kitco NEWS

Revolut lets you purchase gold  TechCrunch

Gold, silver and platinum are not a hedge  Kitco NEWS

As the coronavirus spreads fear, sickness, and death, a specter haunts investors – the specter of deflation.

Despite central bankers’ attempts to push inflation rates higher, equity and commodity markets are collapsing. Inflation expectations as reflected in tanking U.S. Treasury yields, meanwhile, appear headed toward zero – and perhaps even below.

“I think that we have a real danger of deflation in the economy right now,” former Trump economic advisor Stephen Moore told Fox Business’ Maria Bartiromo last weekend.

Clearly, symptoms of deflation and leading indicators of economic contraction are now manifesting in dramatic ways:

• Wall Street is being hit with the most severe selling wave since 2008.
• Junk bonds are also selling off hard as investors fear a wave of corporate defaults to come.
• Crude oil has suffered its worst plunge in decades.
• Economic growth in Asian and European countries is turning negative.
• The odds of a recession hitting the U.S. this year are now 50%, according to Moody’s Analytics.

But before investors jump on the deflation bandwagon, they should carefully consider the monetary and political forces that could be deployed to reverse a whiff of deflation.

Stephen Moore – who was once floated by President Donald Trump as a nominee to the Federal Reserve Board – is now urging the Fed to reinflate the economy. “I think the Fed should be proactive. I want more dollar liquidity in the economy,” he told Bartiromo.

More rate cuts are coming – markets are currently pricing in a further 75 basis-point reduction in the Fed funds rate – and possibly some unconventional liquidity injections as well.

Meanwhile, President Trump is pitching a payroll tax cut and other fiscal stimulus measures intended to supply consumers with more cash to spend into the economy.

Once the threat of deflation becomes a top concern of central bankers and politicians, it is likely to have already run its course… or have little room left to run. Deflation scares tend to be sudden and severe but ultimately short-lived.

As an investment thesis, deflation lacks a long-term driver.

The reality is that deflation will never persist for very long while our inflationary fiat monetary system remains in place.

Obviously, there are no signs the Fed is going to close up shop anytime soon. Both Democrats and Republicans depend on it to fuel their spending and borrowing priorities. And both parties favor easy-money policies.

The old adage, “Don’t fight the Fed” is worth heeding.

The last deflation scare in 2008 led to Zero Interest Rate Policy, Quantitative Easing, and unprecedented Fed balance sheet expansion. A generational buying opportunity emerged in U.S. stocks. While most on Wall Street expected a bear market rally, few predicted a massive bull market that would last for over a decade.

Initially, all asset classes rose out of their 2008-2009 bottoms. Commodities and precious metals, which had delivered standout gains in the years leading up to the 2008 financial crises, resumed leadership into 2011.

As gold and silver topped out in 2011, the U.S. stock market became the prime beneficiary of monetary expansionism in succeeding years.

Today investors seem convinced that once the Wuhan virus crisis abates, the S&P 500 will bounce back and become the place to be for years more to come.

More likely, the current turmoil in markets – and the central bank response – will effect markets in ways that stock market bulls aren’t expecting.

One surprising development currently taking place is that instead of serving as a traditional safe haven, the U.S. dollar is actually dropping precipitously verses foreign currencies. Consequently, foreign developed and emerging markets are often falling less drastically in dollar terms during big down days than U.S. stocks are.

Meanwhile, the strongest currency in 2020 has been gold – up better than 10% for the year. One of gold’s most under-appreciated functions is that of a deflation hedge. When risk assets are being liquidated, an ensuing flight to quality includes gold and Treasuries.

U.S. government bonds have performed spectacularly in 2020. In fact, bonds have been in a super-cycle bull market for nearly 40 years!

In recent years, many bond skeptics have prematurely called a top. But with rates across the entire yield curve plunging below 1% this week, we are now getting close to the point where it will become mathematically impossible to milk bonds for the kind of returns they have delivered in the past.

There is asymmetric downside risk to bondholders given the possibility that inflation fears reemerge. The real losses on 30-year bonds bought with a yield 0.9% would be staggering if inflation merely averages the Fed’s target rate of 2% over that period.

With the bond bubble having little room left to expand and potentially nearing a prick that will burst it… and with a stock market bubble potentially having just burst, where will investors find the next great bull market?

Perhaps in asset classes that have been depressed for many years. No asset class has been more beaten up for longer than commodities. Narrowing down to the precious metals space, it’s hard to find any market more undervalued than silver.

The white metal is now historically cheap versus gold – selling recently at its largest discount to gold (1/98th the gold price) since 1991. This in part reflects how lopsided the deflation trade has become. Unlike gold, silver is more of a pure play on inflation.

When the powers that be finally succeed in staving off the deflation threat with inflationary injections of fiat currency into markets and pocketbooks, new investment trends will take hold. The coming inflation will lift hard assets in general – and could launch silver explosively higher in particular.

With the spread of the Global Contagion, the demand for physical precious metals has increased significantly. According to the U.S. Mint’s newest update, another million Silver Eagles were sold over the past two days. This brings to total Silver Eagle sales in March at 2.3 million, more than three times the previous month.

On my last update, the U.S. Mint sold a total of 1,345,000 Silver Eagles as of March 9th. Over the next two days, another 975,000 Silver Eagles were sold for a total of 2,320,000.

We haven’t seen this type of buying for quite some time. The U.S. Mint doesn’t sell Silver Eagles directly to the public, but rather to Authorized Purchasers who sell to the public. So, these sales figures represent purchases by the Authorized Dealers. Regardless, if the Authorized Dealers are buying a great deal more Silver Eagles in March, they are doing so because they are experiencing much higher demand from the public.

However, there may be a problem shortly for the Authorized Dealers if the U.S. Mint runs out of stocks of Silver Eagles. Why? Because, the U.S. Mint has cut back on monthly production runs of Silver Eagles due to the decreased demand for the past few years. I doubt the U.S. Mint will be able to supply another 1-2 million Silver Eagles in a short period of time. Thus, we may see the U.S. Mint suspend sales of Silver Eagles shortly until they can increase stocks.

If you do not own any physical precious metals, it may be a good idea to start DIVERSIFYING some assets into Gold and Silver. With the continued spread of the Global Contagion and coming disruptions in the Just-In-Time Inventory Supply Chain, it’s highly likely that demand for precious metals will only increase going forward. With rising demand and constrained supply, we may start to see much higher prices for gold and silver.

Source: Streetwise Reports   03/11/2020

Franco-Nevada’s Q4/19 and full-year 2019 numbers and 2020 guidance are reviewed in a CIBC report.

In a March 9 research note, CIBC analyst Cosmos Chiu reported that Franco-Nevada Corp. (FNV:TSX; FNV:NYSE) significantly beat earnings estimates in Q4/19 due to record sales of gold equivalent ounces and revenues.

Thus, CIBC increased its target price on the gold royalty streaming company to CA$162 per share from CA$157. In comparison, the stock, rated Outperformer by the bank, is trading now at around CA$140.45 per share.

Chiu highlighted that Franco-Nevada’s strong Q4/19 included record sales of 153,396 gold equivalent (Au eq) ounces. This led to full-year 2019 sales of 516,438 ounces. The total was well above the high end of guidance of 465,000–500,000 ounces (465–550 Koz) and CIBC’s forecast of 498 Koz. The high producer was the Cobre Panama mine in Panama, from which Franco Nevada received 43,554 ounces Au eq, also above guidance of 20–40 Koz.

With the strong sales, Franco Nevada posted total 2019 revenue of $844 million, surpassing consensus’ estimate of $814 million, Chiu pointed out. Full-year oil and gas revenue of $115.9 million contributed about 14% to the total revenue. This was driven by oil and gas revenue in Q4/19 of $30 million, which exceeded projections.

Q4/19 adjusted earnings per share (EPS), cash flow per share (CFPS) and EBITDA all exceeded consensus and CIBC’s estimate. Adjusted EPS was $0.59 versus $0.49, CFPS was $0.98 and EBITDA was $202 million.

At the end of 2019, Franco-Nevada had $132 million in cash and $1 billion-plus in available liquidity.

Chiu also noted that Franco-Nevada’s 2020 production guidance of 550–580 ounces of Au eq is solid and reflects a more than a 10% year-over-year (YOY) increase. A primary contributor will be Cobre Panama, in its first full year of operation. CIBC forecasts 555 Koz and consensus estimates 560 Koz. Guidance is expected to be offset by a YOY oil and gas underperformance of about 25%, assuming a West Texas Intermediate oil price of $45 per barrel. 2020 oil and gas revenue is forecast at $80–90 million.

By 2024, Franco Nevada aims to produce 580–610 Koz Au eq versus CIBC’s projection of 570 Koz.

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Disclosures from CIBC, Franco-Nevada Corp., Earnings Update, March 9, 2020

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Important Disclosure Footnotes for Franco-Nevada Corporation (FNV.TO)

• 2a These companies are clients for which a CIBC World Markets company has performed investment banking services in the past 12 months: Franco-Nevada Corporation
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• 7 CIBC World Markets Corp., CIBC World Markets Inc., and their affiliates, in the aggregate, beneficially own 1% or more of a class of equity securities issued by these companies: Franco-Nevada Corporation

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( Companies Mentioned: FNV:TSX; FNV:NYSE,
)

Source: John Newell for Streetwise Reports   03/11/2020

Technical analyst John Newell charts the Dow-Gold ratio and speculates on where it could be heading.

The Dow/Gold ratio broke a trend-line in past few weeks that could be signaling that gold could be trending higher against the Dow Jones Industrial Index in the next 18 months to two years.

An example might be a ratio of 10 or the Dow at 20,000 and gold at $2,000 (a new all-time high in U.S. dollars) equals 10.

Conversely, if the Dow went to 30,000 and gold went to $3,000, the ratio would equal 10. This is not a prediction but an observation.

What I found interesting was in the mid-1970s gold corrected from ~$200 to ~$100 and the Dow/Gold ratio went up ~260%, as it did again from the 2012 lows into mid-2019 but over a longer period.

John Newell is a portfolio manager at Fieldhouse Capital Management and president and CEO of Golden Sky Minerals Corp. He has 38 years of experience in the investment industry acting as an officer, director, portfolio manager and investment advisor with some of the largest investment firms in Canada. Newell is a specialist in precious metal equities and related commodities and is a registered portfolio manager in Canada (advising representative).

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1) John Newell: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: None. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company currently has a financial relationship with the following companies mentioned in this article: None. I determined which companies would be included in this article based on my research and understanding of the sector. Additional disclosures/disclaimer below.
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5) From time to time, Streetwise Reports LLC 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.

Additional Disclosures and Disclaimer from John Newell, Fieldhouse Capital Management

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This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

John Newell has based this document on information obtained from sources he believes to be reliable, but which has not been independently verified.

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Chart provided by the author.