I love days like today when both gold and the dollar are green.
Historically, some of the best moves in gold occur as gold and the
dollar move up together for short period of time. Today, of course, is
just one day. And there’s no question that the Trump Government will
need a significantly lower dollar in order to stimulate U.S. industry,
assuming the latter is at all possible anymore.
On the other hand, if somehow Trump manages to get Congress to pass
his border control and excise tax proposals, consumer prices on the
products being imported at prices much lower than the same products can
be produced domestically will soar. Let’s not forget, gold
loves inflation.
In terms of the fundamentals supporting gold, the Fed’s unanimous
decision to leave rates unchanged confirms my suspicion that the likely
next move sometime later this year will be some sort of loosening of
monetary policy. Consumer liquidity continues to dry up. This is
especially evident in the retail sales reports plus the big drop
reported for January auto sales.
In addition, various price inflation reports are starting to emerge.
On Feb 1st, Bloomberg reported that the Citigroup Inflation Surprise
Index, which is a global index that measures price surprises relative to
market expectations, is at its highest in more than five years. Even
the Government-produced inflation reports in the U.S. have been coming
in “hotter” than expected. This is a difficult feat given all of the
hedonic adjustments plus other various gimmicks the Government
statisticians inflict on the data in order to mute the ability of the
index to measure true inflation (note: the manipulation of the CPI was
implemented by the Arthur Burns-led Federal Reserve shortly after Nixon
closed the gold window – they knew what was coming, which was massive
money supply expansion and the resulting price inflation).
In other words, even the Government will be unable to hide fully the
effect that trillions of QE and credit expansion is having on consumer
prices. This will act as a turbo-booster on the price of gold when this
reality eventually grips the capital markets.
In the physical markets, despite China’s week-long closure to observe
the Chinese New Year (Year of the Rooster), the eastern hemisphere
markets continue to “consume” a lot of physical gold. Premiums all week
in India have been high enough to reflect moderate to heavy legal kilo
bar importation. Dore bar imports have been flowing steadily for several
weeks. Additionally, Vietnamese were paying $135 over world spot gold,
indicating voracious demand.
The latest official Swiss gold export report for December shows that
the Swiss exported 154 tonnes of gold to mainland China in December.
This was almost four times higher than exports to Hong Kong and more
than three times the amount of gold shipped from from HK into China’s
mainland. This would be the gold that enters China via Beijing and
Shanghai that goes unaccounted for by the World Gold Council and the
GFMS data-keepers. Additionally, East and South Asian countries
accounted for 87% of Swiss gold exports in December.
Thus, contrary to the popular mainstream financial fake news, China’s
appetite for gold remains voracious. Needless to say, all the “stars
are aligning” for what could be a spectacular year for the precious
metals and mining stocks. Not the least of which is the unpredictability
of, and the undefinable nature of, the Trump presidency.
Most of the above commentary was an excerpt from the February 2nd Mining Stock Journal.
In that issue I reviewed five previous names presented, of which three
are significantly higher from when the MSJ presented the idea. Of the
other two, one is down about the same amount as the sector since August
and the other one is a silver exploration company that is percolating on
top of what may turn out to be one of the larger silver deposits in the
world in addition to containing large quantities of zinc, lead and
gold. I also mentioned an emerging producer that may be acquired before
summer.
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Dave Kranzler spent many years working in various Wall Street jobs. After business school,
he traded junk bonds for a large bank. He has an MBA from the University of Chicago, with a concentration in
accounting and finance, and graduated Oberlin College with majors in Economics and English. Dave has nearly
thirty years of experience in studying, researching, analyzing and investing in the financial markets. Currently
he co-manages a precious metals and mining stock investment fund in Denver and publishes the Mining Stock and
Short Seller Journals. Contact Dave at dkranzler62@gmail.com.
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The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The
views and opinions expressed in this material are those of the author or guest speaker, are subject to change and
may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy,
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