Saturday, 3 August 2019

Gold And The Last Snowflake Before The Avalanche: Never Fight The FED... and ECB... and BOJ... and SNB.

Chart by Northstar.


Just a few short months ago we all were holding our breath witnessing the end of the brave scientific experiment performed by FED and their fellow visiting Central Bankers from the BIS Club. The surgery was conducted on the live global economy without any anaesthetics. Coming back to life from the last near-death experience after the Great Financial Crisis was very painful for most of us but worth it for a chosen few.




FED was "normalising rates". This normalisation was finished very abruptly last week after just 225 points level with FED cutting 25 basis points for the first time in 11 years and signifying the change in the trend. There is not a lot of room for any policy mistakes now.




"Growth solves a lot of problems", but what to do when it is not there anymore? US Dollar will be the designated victim and gold is already enjoying FED Summer Party 2019. Last week we had a lot of confusion between very well educated people among investors: the FED was cutting rates with markets at all-time highs. But the simple tweet about new tariffs brought crystal clear clarity for the direction sending US Dollar in a knockout, FED on the ropes and Gold pushing $1,450.




It is very important to note that Gold is breaking out from its bear market to the new 6-year highs when the US Dollar is hitting its own highs. With such powerful allies like POTUS, Currency War and race to the bottom will be very dramatic. POTUS needs a lower US Dollar to reignite the stalling economy.




All Central Banks are easing and flooding the financial system with liquidity again. We have discussed in depth the relationship between Negative Real Interest Rates and Gold already. Today I would like to provide you with my thoughts about the big picture and major drivers for the gold market in the form of a summer digest with links to our recent discussions. You can search for that last snowflake which will start the avalanche. I do not know what will be the last one as we have a hale storm already.




Negative Real Interest Rates have brought us to the last all-time high of $1,889.70 in 2011. Now gold will be climbing on the record pile of negative-yielding debt and we are heading to the new all-time high in gold. How high can we go this time? I would recommend the following of the brilliant @Northst18363337 for graphical technical inspirations, his chart is presented opening this post.




On my part, I can only add here that we are in a very good Gold Club company now having Ray Dalio and Judy Shelton among our members. They have their own audience: billionaires and Central Banks are buying gold.




Never fight the FED... and ECB... and BOJ... SNB. The list of most active in the gold market starts with China and Russia and now is wide open up to Turkey, Poland and the Philippines with many others in between. Central Banks are buying gold.




With gold pushing to the new highs, gold miners will start literally "printing the real money" - produce gold with higher margins. Gold exploration and development companies will provide the most upside for the investors who are making their homework right. Gold investing legend Eric Sprott is on the buying spree again. The chart above from Marin Katusa illustrates brilliantly what will be the next catalyst for the valuations of gold companies with the rising price of gold during The Switch. "Rise to the generational average of 0.23% in gold weighting in the S&P 500 could cause gold stocks to skyrocket." I should only add here that some special situations among gold explorations stocks may now provide a truly unique entry point when some motivated sellers among banksters who turned miners are finally fading out of their abrupt disgraceful appearance in the noble mining history. As always, do your own research, read legal disclaimers and consult your qualified financial adviser before investment decisions.





Gold And Snowflakes Before The Avalanche: Something's Broken, Something Unspoken: "After A $354 Billion U.S. Bailout, Germany’s Deutsche Bank Still Has $49 Trillion In Derivatives."






PDAC 2019: TNR Gold Invites Expressions Of Interest For Shotgun Gold Project, Alaska.





Frank Holmes: "The Gold Bulls Just Regained The Upper Hand - Gold And Metal Miners Have Crushed the Market."





Gold In The Alaskan Elephant Country: Kirill Klip On TNR Gold’s Shotgun Gold Project In Alaska.





TNR Gold Shotgun Project: Gold In The Alaskan Elephant Country - Alaska's Donlin Gold Project Receives Crucial Permits.





Gold In The Alaskan Elephant Country. McKinsey: Can The Gold Industry Return To The Golden Age? It’s Time To Dig For A Solution To The Gold Mining Reserve Crisis.





Gold In The Alaskan Elephant Country: TNR Gold Shotgun Gold Presentation April 2019.





































Saturday, 27 July 2019

Negative Real Interest Rates Propelled Gold To The All-Time High Of $1,889.70 In 2011, Will The Record Pile Of Negative-yielding Debt Do The Same Trick Again?




Last time we have discussed here The Big Picture And Gold In The USA with Jim Rickards presenting his new book "Aftermath" - When You Have To Pay The Banks Just To Hold Your Money. We have a tectonic shift in the history of the financial institutions and markets. Negative interest rates have escaped out of the financial labs at Deutsche Bank cooking derivatives for Wall Street into our real life. In Germany, more and more banks are already charging holders of the accounts with more than 500,000 euros with the penalty just to have the privilege of banking. Very soon it's coming to all banks and to all accounts.




For a lot of people, this new sobering narrative and all these ideas about The Switch in the state of perceived reality - the last snowflake before the avalanche - seem to be harder to contemplate when markets are hitting all-time highs. Let's try to dissect it here. What is the relationship between real interest rates and gold? Negative real interest rates have propelled gold to the all-time high of $1,889.70 in 2011, will the record pile of negative-yielding debt do the same trick again? I do believe so and also that it will happen much faster that a lot of people think.




Ray Dalio will be the best person to help us to understand why negative interest rates are a perfect environment for gold. In his recent "Paradigm Shifts" article he provides a very comprehensive picture of the dramatically changing financial landscape. We are entering the financial death spiral:


The enormous amounts of money in no- and low-returning investments won’t be nearly enough to fund the liabilities, even though the pile looks like a lot. That is because they don’t provide adequate income. In fact, most of them won’t provide any income, so they are worthless for that purpose. They just provide a “safe” place to store principal. As a result, to finance their expenditures, owners of them will have to sell off principal, which will diminish the amount of principal that they have left, so that they a) will need progressively higher and higher returns on the dwindling amounts (which they have no prospect of getting) or b) they will have to accelerate their eating away at principal until the money runs out."





For years gold has been mocked for its "fundamental flaw" that it does not provide yield. Quite suddenly, for a lot of people, the pyramid is turning upside down. Record pile of negative-yielding debt cannot compete with gold anymore. "Paradigm Shifts". The Switch. There is no confidence anymore that the US Dollar will provide this precious value of preserving wealth. 





Both red sectors on the chart above were shaped by predominately negative real interest rates and both phases were a positive environment for gold. However, after the gold all-time high at $1889.70 in 2011 negative real rates were in an upward trend. This increased the opportunity cost of holding gold, which created the recent bear market in gold. This will be changed next week with FED cutting rates. Just a few short months ago we were expecting that FED will be able "to normalise" rates and continue to raise them. 




As always with all our brave scientific mental experiments it is important that the real money will be following the new paradigm. As we can see the stealth gold bull market in 2018 has broken out into the headlines in 2019 and gold price is climbing on top of the pile of record negative-yielding debt.




It is important to note that FED was never able to reload its monetary gun in order to be ready to meet the next financial crisis. These are the most dangerous words in investment, but it is clearly different this time. And not in a good sense at all. With markets at the all-time high in the US, the economy in Europe is melting down and ECB is talking about the new alphabet soup of stimulus. Talking heads on the Bubble TV are discussing even before washing their hands that the next step for ECB can be buying stocks just to stimulate the economy. 





Another observation, which is even more important for us here, will be the facts and FED will be cutting rates with the record pile of negative-yielding debt already which is pushing over $14 Trillion and the new historical record low price of gold at $1,400 if we will account properly for the real inflation.






All market manipulations can be working only up to a certain extent and gold has started its powerful move clearing $1,350 and now breaking out above $1,400. The higher prices will come with more allocations to gold investments by the institutions who will be facing "Paradigm Shift" brilliantly explained by the manager of the largest hedge funds in the world. 




We discussed Ray Dalio book in our post "Gold And Commodities In The Debt Cycle: Ray Dalio - "US Dollar Can Easily Depreciate 30% During The Next Debt Crisis" one year ago here. He has his own audience: Central Banks and billionaires are buying gold. We are in a very good company. Never fight the FED and FED would really like US Dollar to go down now. Growth solves a lot of problems, but what to do when it is not here anymore? US Dollar will be the designated victim of the next reinflation QE phase.





The chart above from Marin Katusa illustrates brilliantly what will be the next catalyst for the valuations of gold companies with the rising price of gold during The Switch. "Rise to the generational average of 0.23% in gold weighting in the S&P 500 could cause gold stocks to skyrocket." We should only add here that some special situations among gold explorations stocks could now provide a truly unique entry point when some motivated sellers among banksters who turned miners are finally fading out of their abrupt disgraceful appearance in the noble mining history.




Gold In The USA: Kirill Klip GEM Royalty TNR Gold Presentation May 2019 - Gold In The Alaskan Elephant Country.





Barrick Gold is developing together with NovaGold 40MOZ giant Donlin Gold in Alaska - "arguably the most important Gold project in the world." So where will you be looking for the new elephants? Maybe in the Alaskan Elephant Country. Barrick Gold received crucial permits to advance Donlin Gold now and this new developing mining district in the US can make the promise of "Gold In the USA" providing stable supply feasible again and it can become that solution to "The Gold Mining Reserve Crisis" McKinsey is talking about:
"The Company's strategy with the Shotgun Gold Project is to attract a partnership with one of the major gold mining companies. TNR Gold ("TNR") is actively introducing the project to interested parties," commented Kirill Klip, Executive Chairman of TNR. "We may be at the beginning of a great discovery. There is a clear path on how to move this project forward using the geological and geophysical research currently available to target drilling to expand the resource and form the basis of a preliminary economic analysis. The next step is to acquire a partner that shares our vision and recognizes the growth potential and value to be added to the Shotgun project over time."





LEGAL DISCLAIMER

Please read legal disclaimer. There is no investment advice on this blog. Always consult a qualified financial adviser before any investment decisions. DYOR.





Gold In The Alaskan Elephant Country: TNR Gold Shotgun Gold Presentation April 2019.




"The Company's strategy with the Shotgun Gold Project is to attract a partnership with one of the major gold mining companies. TNR Gold ("TNR") is actively introducing the project to interested parties," commented Kirill Klip, Executive Chairman of TNR. "We may be at the beginning of a great discovery. There is a clear path on how to move this project forward using the geological and geophysical research currently available to target drilling to expand the resource and form the basis of a preliminary economic analysis. The next step is to acquire a partner that shares our vision and recognizes the growth potential and value to be added to the Shotgun project over time."






LEGAL DISCLAIMER

Please read legal disclaimer. There is no investment advice on this blog. Always consult a qualified financial adviser before any investment decisions. DYOR.






Wednesday, 24 July 2019

The Big Picture And Gold In The USA: Jim Rickards "Aftermath" - When You Have To Pay The Banks Just To Hold Your Money.



Lynette Zang has produced a great video featuring Jim Rickards and providing us with the opportunity to sit down and dive into FED and monetary history, Jim's journey on the Wall Street and the big picture of the international finance and money. We are discussing here gold as the store of the solid value in the uncertain times and the recent dramatic shift in the financial markets. Goldman Sachs is talking about Yen as "a better hedge than gold", but not a lot of people are buying it anymore. Central Banks are buying gold. 




And then again just check who has the largest derivatives books with ticking financial nuclear bombs on Wall Street. JP Morgan quite suddenly and for a change is talking now about the US Dollar losing its reserve currency status and introducing the idea of gold in the diversified portfolio.




Gold cooperates and after making the buy signal in last December and the golden cross in January is pushing above $1,400 to the all-important $1,500. Only then, finally, banks will call the bull market comeback in gold.




I will leave all the details for you to follow with Jim and his brilliant presentation but would like to point out his very simple explanation of the tectonic shift in our society: money is based on confidence. "Confidence is fragile, it's very easily lost and it's impossible to regain it." There is no confidence anymore that the US Dollar will provide this precious value of preserving wealth.




The new "debt ceiling" deal is opening the chequebook for growth by any means and the US Dollar will be the designated victim. Ray Dalio, the manager of the largest hedge fund, is talking about gold as a safe haven and explaining that record pile of negative-yielding debt cannot compete with gold anymore. Quite suddenly, for a lot of people, the pyramid is turning upside down. "The Paradigm Shift". The switch.




The largest financial institutions including pension funds are not talking about return on invested capital anymore, but only about return of that capital. All expenses and payments out now will be made from principals further eroding the capital. We are entering the financial death spiral.




Central Banks have been buying gold from the last Great Financial Crisis, they know what is coming. Deutsche Bank is in the news again with it's $50 trillion book of derivatives WMD - nuclear financial weapons on the Wall Street. Its unwinding can propel gold to a much higher level than a lot of people think. It is important to note that all this trouble, record pile of debt with negative rates and FED cutting rates are coming with Gold just above $1,400.




This level is the new historic low for the gold price if we account properly for real consumer inflation. Below you can find more details about this FED Summer 2019 Gold Party and Titanic party organisers.




All this new demand for gold will be meeting the declining production and the Gold Reserves Crisis which is explained very vividly by McKinsey. Now you can better understand the place of Donlin Gold among the gold deposits in the world. Development of this 39M oz giant will build a major mining camp on the US soil and will bring life and infrastructure to the whole south-west part of the great state of Alaska. TNR Gold is advancing Shotgun Gold exploration in the Donlin Gold mining district and is looking for the strategic partner to grow together in "The Alaskan Elephant Countryin the USA.





Gold In The USA: Kirill Klip GEM Royalty TNR Gold Presentation May 2019 - Gold In The Alaskan Elephant Country.






LEGAL DISCLAIMER

Please read legal disclaimer. There is no investment advice on this blog. Always consult a qualified financial adviser before any investment decisions. DYOR.




Gold And Snowflakes Before The Avalanche: Something's Broken, Something Unspoken: "After A $354 Billion U.S. Bailout, Germany’s Deutsche Bank Still Has $49 Trillion In Derivatives."





Something's broken, something unspoken... The chatter about something very serious which is happening in the financial markets is intensifying in Europe. Gold is pushed down today below $1,400 again on the "very solid" NFP numbers, but the resilience of this new Gold Bull is making people talk. Even G20 manipulation was not able to bring gold down and it snapped back above $1,400 almost immediately. Today there will be a lot of talk about the double top in gold, but do not miss the Big Picture with all market noise these days.




In our quest for the answers, maybe, we should go no further than the numerous headlines about "restructuring" of Deutsche Bank today. We should revisit first the blog post from 2016 and the $60 Trillion "derivatives nuclear bomb" on the Deutsche Bank's books. All good things take time, people are getting old and some of us are getting wiser, but here as it looks now - it is not the case.




As Pam Martens and Russ Martens wrote in their article in April: "After a $354 Billion U.S. Bailout, Germany’s Deutsche Bank Still Has $49 Trillion in Derivatives". Even after all efforts "to trim the derivatives exposure" and bailouts Deutsche Bank was still holding ... $49 Trillion in Derivatives in 2018 - the largest derivatives book on the Wall Street.

That Derivatives WMD Bomb has never been really defused. We can only speculate now how this "new restructuring" is affecting Deutsche Bank derivatives portfolio and, hopefully, this "reorganisation" will be happening orderly. Otherwise, as we all know, the financial system can be tested to its core with the systemic shock in case if this largest derivatives counterparty goes dark. It is great to discuss the Net Exposure to derivatives in the financial system when there is somebody to deliver that Hedge. In the case when the major counterparty in all these financial games with derivatives will be gone missing, gold has a very long way to go up recalibrating what will be left of the financial systems.



It is important to note that the record amount of debt with negatives rates and the planed FED rates cut in July are happening with the gold price still at the record low if we will adjust it properly for the real consumer inflation. And yes, a blast from the past, which is now officially confirmed:

"FED has never had a chance to reload "Efficient Central Bankers Economy" gun this time."




Why Gold? Deutsche Bank And $60 Trillion Derivatives - Is It The Last Snowflake Before The Avalanche?

  


  "Dan Stringer wrote a great article covering Deutsche Bank's exposure to derivatives, why it doesn't matter you can read in the official reports. Why it does matter the market is telling us today: DB is at all time low, Credit Swiss is at all time low and Barclays is down another 5% today. As you know, I have a very unconventional theory: that actual state of the financial system is so bad that they will save it by all means now. By the way, if they fail - it will not matter any more anyway. Tomorrow just watch Janet Yellen turning this market around and US Dollar will be the victim. Gold is shining bright now. We will have a very interesting situation with the majority of market participants reversing the trades this year from being Short Gold and other Commodities and Long Us Dollar, once the message from the FED will be clear - we have just made a policy mistake. FED has never had a chance to reload "Efficient Central Bankers Economy" gun this time."