Sunday 22 September 2019

Gold In The USA, Alaskan Elephant Country. CITI - Gold Can Smash The Record And Hit $2,000 As FED Cuts Rates To Zero.

Gold is back above $1,515 after two FED rates cuts and "QE light", as Jim Puplava calls it, being unleashed to keep the liquidity flowing in the financial system during the repo scare last week. "The normalisation" is finished. POTUS demands more rate cuts from the FED and pointing out to ECB which is cutting rates and going straight back to a full-blown QE. Europe managed to live without QE only for 9 months and its banking system is sinking in the record pile of debt with negative rates. Wealthy clients are being charged for their deposits. Suddenly for a lot of people, Gold provides a real alternative to cash and negative-yielding debt. After being mocked for years for its lack of yield Gold is acting as the real wealth preservation asset.

CITI is calling the gold bull market and upgrading its medium-term target to $2,000. "We now expect spot gold prices to trade stronger for longer, possibly breaching $2,000/oz and posting new cyclical highs at some point in the next year or two." The bank is basing this upgrade to its bullish case on the trade war tensions, escalating global recession risk and increased Central Banks and investor buying activity.

FED is expanding its balance sheet already with $75B pumped into the system by repo operations last week and now we have a full u-turn in the monetary policy in the US as well. Gold price will be following the expansion of the monetary base, if history is any guide, as demonstrated on the long-term chart below. This "QE light" is planed to support the market next week as well.

Regarding the "one-off" FED rate cut for the "mid-cycle adjustment", I am not buying it personally (and it is easy now - we already had two rate cuts) and POTUS is pushing very hard for more rate cuts to keep economy going into the election cycle. The chart below illustrates the very sobering picture of FED's ability to forecast the future. I have a very strange feeling, that this time FED and all other Central Banks from The BIS Club are acting already in unison as after the crash during the GFC in 2008 even if markets nominally are at all-time highs.

It is almost like the economy and global financial system can only glide on the surface and any dip into the water, like it happened in August with tightening of liquidity, spells immediate trouble for the markets. With markets being the priority for POTUS with the most powerful tools at his disposal, including Twitter, we can witness a very interesting situation. Gold can have a new floor at $1,500, as Kinross CEO has called it, signifying the recalibration of the financial system. Further global liquidity pump and debasement of all currencies will push Gold to CITI's target of $2,000, but the general equities market will be drifting higher as well. In this case, junior miners in gold and copper can provide the life-changing opportunity for investors. We have discussed some confirmations for the Copper Bull in our previous posts.

Chart by Northstar.

After initial hesitation and a small correction, Gold is following the road maps provided by the brilliant Northstar. Every bull will be shaking out the weak hands and nobody knows the future. Always DYOR and you have to pick the winners. These charts and CITI fundamental research are working well today in my personal opinion. We will have corrections, but gold miners will start reporting results with gold priced at $1,500 now, not $500. It makes all the difference. Gold miners are literally "printing money" - producing gold with much higher margins.

Gold ETF inflows support our observations as well. Investors are still very cautious about this rally and ETF provide them with a paper illusion of ownership of gold, but it can be traded easily. Higher prices will bring higher allocations to gold in the investment portfolios and some profits will start to seek higher returns provided by gold mining companies.

Chart by Nicholas Winton.

As we have discussed in details, only new elephant discoveries can address the Gold Reserves Crisis. Majors will start buying resources from juniors. The very talented researcher and trader involved in the junior market, Nicholas Winton, is closely following CDNX - home of junior mining companies and, according to him, we have seen nothing during this very young Gold Bull in the junior mining space. The smart money, like Eric Sprott, are buying heavily into the best names on the market. We have all factors now finally coming together for the potential explosive move in the very small junior mining space.

We all know the pain of the Gold Bear market, the whole generation of the investors was burnt alive, but how was it on another side on the Gold Bull? This table provides some taste for us. History never repeats itself, but it rhymes. Those who make their homework right can be rewarded very handsomely.

Chart by Northstar.

Here you can find links to our summer digest providing more information for your DYOR about the development of this Gold Bull and TNR Gold's strategic plan advancing the Shotgun Gold project.

TNR Gold is developing the Shotgun Gold project in the Alaskan elephant country near Donlin Gold mining district. On the links below you can find more information. Barrick Gold received crucial permits to advance Donlin Gold 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."