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Brien Lundin – Looking Beyond The Headline Driven Markets At Upcoming Macroeconomic Drivers For Commodities And Precious Metals

Brien Lundin, Editor of the Gold Newsletter, joins us to share his thoughts on the recent move higher in the in the commodities sector and the precious metals, based on the war premium, higher persistent inflation, and central bank policy.   We start off by discussing the effects of these headline driven markets, and how geopolitical news will eventually fade for more relevant macroeconomic and financial factors as the year continues to unfold.

 

 We discuss that beyond the Fed getting ready to kick off their rate hiking cycle that, it really is more important to look at how long it will persist, how high the Fed’s fund rate can be raised, and at what point the central bank will have to reverse policy.  It is that point where the generalists investors realize there isn’t much more the Fed can do to tame inflation without making the debt unserviceable that may spur more investors into positions into gold.   Brien believes that somewhere around a Fed funds rate near 2% would be that that tipping point and believe it is about 12-18 months out.

 

Next we shift over to the action in the mining stocks and outline the kinds of stocks he’s currently recommending to subscribers in The Gold Newsletter, and they are mostly focused around exploration stocks with promising drill programs, or optionality plays with developers that have ounces in the ground that will be rerated higher along with rising metals prices.  Brien also noted that higher cost producers have a similar optionality torque to rising metals prices, as their margins improve.

Click here to learn more about Brien’s Gold Newsletter.

Discussion
37 Comments
    Mar 03, 2022 03:56 PM

    Global Financial System on the Brink

    by: Stefan Gleason – Money Metals News – February 28th, 2022

    “The global financial system is on the brink of being thrown into chaos. The United States and Europe moved to target Russian central bank reserves and sever the country’s banking system from the SWIFT global financial network.”

    “Moscow considers it to be an act of war. An increasingly bellicose Russian President Vladimir Putin could retaliate against the U.S. and its allies in a number of ways, including cutting off energy supplies, launching cyber-attacks on financial institutions, and further partnering with China to create alternative payments platforms that challenge U.S. dollar hegemony.

    Geopolitical and financial analyst James Rickards tweeted his prediction: “If you ban SWIFT payments, Russia will stop selling oil. That’s about 9% of global output. There’s an energy shortage already. The result will be a global depression.”

    “When the financial system is used as a large-scale weapon of war to freeze assets and deny transactions, it’s not just the immediate targets of the sanctions who will lose confidence in it. The system itself becomes less trustworthy.”

    “Russian authorities had been preparing for a financial doomsday scenario long before they decided to launch an offensive in Ukraine. They have steadily boosted their central bank gold reserves and developed alternative systems for transacting with trading partners – though it remains to be seen how effective their preparations so far will be.”

    https://www.moneymetals.com/news/2022/02/28/global-financial-system-on-the-brink-002486

      Mar 03, 2022 03:08 PM

      Follow The Money: How Russia Will Bypass Western Economic Warfare

      By Pepe Escobar – March 01 2022

      “The US and EU are over-reaching on Russian sanctions. The end result could be the de-dollarization of the global economy and massive commodity shortages worldwide.”

      Hudson remarked how he is “simply numbed over the near-atomic escalation of the US.” On the confiscation of Russian foreign reserves and cut-off from SWIFT, the main point is “it will take some time for Russia to put in a new system, with China. The result will end dollarization for good, as countries threatened with ‘democracy’ or displaying diplomatic independence will be afraid to use US banks.”

      This, Hudson says, leads us to “the great question: whether Europe and the Dollar Bloc can buy Russian raw materials – cobalt, palladium, etc, and whether China will join Russia in a minerals boycott.”

      https://thecradle.co/Article/columns/7385

    Mar 03, 2022 03:19 PM

    ‘Everything is so uncertain’: Fed is worried Ukraine war could push inflation higher, slow growth, says Powell

    Anna Golubova – Kitco News – Thursday March 03, 2022

    With U.S. inflation running at 40-year highs, the Federal Reserve’s priority is to avoid “entrenched” and “self-perpetuating” inflation. But Russia’s invasion of Ukraine and the new sanctions could have “unintended consequences,” Chair Jerome Powell testified on Thursday.

    “Powell confirmed that he plans to support a traditional 25-basis-point hike at the upcoming March 15-16 FOMC meeting. Fed officials will also iron out a plan to reduce the central bank’s nearly $9 trillion balance sheet.”

    “What we know so far is that commodity prices have moved up significantly, energy prices in particular. That is going to work its way through the U.S. economy. We’re going to see upward pressure on inflation, at least for a while. We don’t know how long that will be sustained for,” Powell explained. “In addition, we could see risk sentiment declining. We could see lower investment, people holding back on spending. It is hard to see what the effect on both supply and demand will be. I would just echo that we need to be alert and nimble as we make decisions in what is quite a difficult environment.”

    https://www.kitco.com/news/2022-03-03/-Everything-is-so-uncertain-Fed-is-worried-Ukraine-war-could-push-inflation-higher-slow-growth-says-Powell.html

    Mar 03, 2022 03:23 PM

    Interest In Gold And Its Utility Will Only Grow – Sprott’s Grosskopf

    Neils Christensen – Kitco News – Thursday March 03, 2022

    “In a recent interview with Kitco News, Peter Grosskopf, CEO of Sprott Inc, said that investors need to ignore the daily price swings and focus on the market’s broader long-term uptrend. While gold prices have pushed above $1,900 an ounce, the market is well off last week’s highs as a rush of safe-haven demand flooded the market.”

    Looking at gold’s broader prospects, Grosskopf added that more and more investors are turning to gold for various reasons. “We’re on the front lines of gold business, and what we are seeing is more investors moving into gold and adding it to their portfolios at higher percentages. That’s the underlying bid for gold,” he said.

    Grosskopf added that the market is no longer reserved for just “gold bugs.” He noted that endowments, family offices, and pension funds are looking at gold. “Almost every big state pension fund in the U.S. is looking at gold,” he said. “Only a few years ago, it was maybe two out of 50 funds that were interested in gold.”

    As to what has changed in the last few years, Grosskopf said that “investors finally realize the threat of rising inflation on the global economy. As consumer prices rise, consumption falls, which in turn will lead to lower economic activity and lower profits for public companies,” he said.

    https://www.kitco.com/news/2022-03-03/Interest-in-gold-and-its-utility-will-only-grow-Sprott-s-Grosskopf.html

    Mar 03, 2022 03:25 PM

    Commodities-Gas And Aluminium Hit Fresh Records; Oil, Wheat Soar On Supply Turmoil

    Reuters Reuters – Thursday March 03, 2022

    https://www.kitco.com/news/2022-03-03/Commodities-Gas-and-aluminium-hit-fresh-records-oil-wheat-soar-on-supply-turmoil.html

      Mar 03, 2022 03:28 PM

      Silver Strong as Metals Maintain Momentum

      Jonathan Da Silva – Thursday March 03, 2022

      “Perhaps the strength in gold has begun leaking into Silver, which outperformed Gold intraday; the signs of that catch-up trade are beginning to manifest. Platinum bulls broke price through $1065 again, and should expect some congestion between $1100 and $1035. Palladium leads the complex, trading up to $2780 overnight, putting in another higher high, dating back to its December low.”

      https://www.kitco.com/commentaries/2022-03-03/Silver-Strong-as-Metals-Maintain-Momentum.html

        Mar 03, 2022 03:32 PM

        Gold, Copper Prices Are Not Done Rallying, Here’s What’s Next – BMO’s Colin Hamilton

        Kitco News – Mar 3, 2022 #VIDEO

        https://youtu.be/drSTW3Iacl8

          Mar 03, 2022 03:17 PM

          Zuckerburg claims Americans will live in Metaverse and leave reality, zuck your too late it has already happened. When China attacks Taiwan they can put on their virtual reality headsets and watch the invasion on a mind screen. LOL!
          I can just imagine the blunders that The West will make when they try to sanction China. The American media will start dusting off the posters of Chairman Mao, only the people with their Metaverse machines made in China won’t know who Mao is. LOL!

          Gold has no where to go but up. DT

            Mar 03, 2022 03:25 PM

            Agreed DT. I’ve watched a few “investing” videos on buying real estate (residential and commercial) in the Metaverse, and how some areas are going for hundreds of thousands of dollars already… in a simulated world (not the real world). I talked to my sister last night and she mentioned logging in to the metaverse to try and explore and shop and pick things up, but within minutes she was being surrounded by teen boys trying to hit on her in all kinds of costumes, and her avatar was a hotdog (not exactly sexy as a female) but I guess some people hate their real lives and can escape and be whoever they want to be in the Metaverse.

            It reminds me of the scenes from the Spielberg film “Ready Player One.”

            ___________________________________________________________________________________

            Ready Player One – Official Trailer

            https://youtu.be/cSp1dM2Vj48

            Mar 03, 2022 03:55 PM

            I need retraining…I don’t know the words I hear…
            Why does the Western World think they will be part of the economic solution, when they created the economic problem?

    Mar 03, 2022 03:31 PM
    Mar 03, 2022 03:51 PM

    This ain’t no metaverse: pray that the Russian shelling of Ukraine biggest nuclear power plant doesn’t cause it to blow up

    Mar 03, 2022 03:34 PM

    Good evening to all! To the ones who have followed me for a long time or enjoyed my calls it is with great displeasure that I’m taking some time off! You can thank Mr lake and Terry for my layoff.. You will be in great hands with pessimistic daily garbage led by these two cons.. thank them.. sorry

    Glen

      Mar 04, 2022 04:15 AM

      Sorry you feel that way Glen….. if others opinions or comments affect you that way,you need to do what’s best for you…..personally I’ve learned to just ignore……

        Mar 04, 2022 04:15 AM

        Agreed Wolfster. If someone doesn’t like someone else’s contribution then just scroll on by…. pretty simple.

      Mar 04, 2022 04:58 AM

      I’m going to do the same. Best to you Glenfidish.

        Mar 04, 2022 04:19 AM

        Well keep us posted occassionally on the Aussie and Hong Kong listed Uranium and PM stocks from time to time at least. Many times what happens in overseas trading is a precursor to what we see in North American markets when things open up.

    Mar 04, 2022 04:07 AM

    Good news
    Despite the higher than expected employment numbers put out this morning … the metals and oil futures prices continued to go up and did not have an immediate hit.
    As Matthew indicated, it may be a good day. (Glen: nothing personal, but my negativity is a result of my account going down 40% since November. And of course, most of it occurred since Jan when physical paper gold had a positive action)
    “Down in my books is negative no matter what the paper metal prices or general markets do.”
    Just a quirk I have.

      Mar 04, 2022 04:15 AM

      Lakedweller2 your input is appreciated, and you are one of a handful of contributors here that regularly posts about companies you are buying, selling, or holding which I find helpful and engaging for investing in resource stocks. Your negativity towards the corrupt central banksters cabal and JP Morgan is justified.

        Mar 04, 2022 04:29 AM

        (Glen)
        Most of what I write includes humor and”sarc” as I am prone to write about things I believe are associated with market intervention. If I believe in market intervention, then I also believe that those that intervene do things that “affect” direction in the markets. If I believe they can intervene in the markets to determine direction, then I also believe that Regulators permit these interventions and then that”politics” allows the interventions since no corrective action is taken.
        Since affecting market direction has been historically an illegal market action, and it is not currently regulated, then, I also believe that those that are involved in affecting market direction are most likely not publicly going to admit they are manipulating markets as there is no requirement in the legal framework of corruption that they do so.
        Therefore I as an investor, have no one to complain to about an illegal activity.
        Therefore I complain to the world using humor and sarc about what my “experiences” in real life are telling me about events.

        Edit: 9:35 EST : all the paper metals and oil are green and looking good. My account down -$4000. Refresh Screen: down $10,000. I rest my case. It is now 9:38.

          Mar 04, 2022 04:17 AM

          (Glen)
          Let’s talk criminal prosecutions.
          Why are criminal cases handled as civil cases by the SEC.
          1). SEC does not have criminal powers.
          2). Civil cases have no jail time.

          Why does the SEC not refer criminal cases to the Justice Department.
          1). Good question
          2). The Justice Department is required to put cases before a Grand Jury which places the power to indict in the hands of “the people” and not the criminals.

          Why are former Wall Street Bankers placed in charge of the SEC. see above.
          Why in the Criminal Case against JPM that involved over $900 million in fines and Victim’s payments did the following happen:
          1). Victims of “commodity manipulation” were defined to be only those that traded paper contracts and not those that bought physical metals or mining stocks.
          2). Why were defendants defined as the “corporate person” under Citizens United rather than the actual criminals in JP Morgan who committed the fraud.
          3). Why was a large fine required to be paid to the Federal Government who is merely performing a governmental function and was not an actual “victim” of the crime, and people that were scammed by JPM action considered not to be victims (those actually in the markets).
          4). Why, when I submitted a claim through the Justice Department Victims Service Office, indicating that I as well as all of you that read this site, were victims of JPM market manipulation, and not the Federal Government…why did I never get a response?
          5). I also provided information about my 22 years experience in a State District Attorneys Office and how the law (based on Federal Law) requires criminal fraud cases and victims to be determined.
          That is but one issue…

            Mar 04, 2022 04:32 AM

            Lake…………. this is just ONE BIG CON JOB……….. the USSA….. is just a big Scam Job…..
            WE THE PEOPLE have ZERO influence…… on any of the MICC…..
            All you have to do is do the background checks on the players in office……

    Mar 04, 2022 04:57 AM

    GLEN…………… HANG IN THERE…………. I took some time off……. been gardening…. got to get the trash out of the garden, so the plants get the sunshine…. LOL………… 🙂

    Mar 04, 2022 04:02 AM

    Take it easy BOYZ…………… this is a LONG GAME……….. Gold is going higher for SURE…….. depend on it.
    J. THE LONG …. 🙂
    1971………. gold $35
    2021…………gold $1900
    2022……….we will see………… War is Hell…….. more printing is in the cards.

      Mar 04, 2022 04:56 AM

      The precious metals complex rebounded strongly in February as other markets faltered. Gold bullion1 is up 4.36% YTD through February 28, 2022,

      and silver bullion2 has increased 4.90%. Gold mining equities3 rallied strongly and gained 10.17% YTD. This compares to a decline of 8.23% for the S&P 500 TR Index6 and losses in bond markets.

    Mar 04, 2022 04:37 AM

    Any thoughts on KGC? 20% of its revenues came from Russia and it had mining projects there too.

    I would be selling at a significant loss at this point, but I could use the proceeds and buy a miner like HL, AG or EXK.

    Any thoughts?

    Mar 04, 2022 04:05 AM

    The more considerable risk beyond Russia converting its gold (not just a repo operation) would be a systematic financial system crisis leading to a repeat of credit liquidity freezing similar to what occurred during the Lehman Bankruptcy Crisis of 2008 and during the March 2020 COVID market crisis. Gold becomes the only liquid immediately fungible asset (no one’s liability, so no counterparty risk). There is an initial short-lived price drop as desperate sellers sell gold for U.S. dollar liquidity. Once system liquidity unfreezes, what follows is a massive demand for gold as “outside money” (no one’s liability) becomes a coveted bank asset in a world awash in credit and liquidity risk. By this time, central banks will be on their way to launching massive QE (quantitative easing) programs, USD swap lines and other liquidity facilities. In turn, interest rates will fall (especially real yields), the money supply will explode higher along with debt and there will be a concerted effort to bring the U.S. dollar lower — all the basic building blocks of a gold bullion bull market.
    https://www.zerohedge.com/news/2022-03-03/gold-bullion-breaks-out-safe-haven-flight

    Mar 04, 2022 04:08 AM

    I posted before about the Russian sanctions having an impact on Global fertilizer supply, well now sanctions have been put on Belarus as well. Belarus is the #3 exporter of Potash. This does not bode well for those countries that are under financial stress already due to covid. Debt defaults by these Countries could become a problem.

    Mar 04, 2022 04:15 AM

    Gold has inched higher but hasn’t broken out. That led to some criticism of the yellow metal. Critics say the fact that it hasn’t gone much higher proves that gold is losing relevance. It’s no longer a safe haven or an inflation hedge. Peter called this “a gift-horse gold-buying opportunity.

    This is like a deer in a headlight. The price of gold, I think, is going to move in a major way. The only question is what’s the catalyst that’s going to spark the rise? But it is coming. And it is coming soon. And the people who are questioning why gold is not going up should just be buying gold right now with both hands.”
    Peter Schiff………. today……….

    Looking at the broader economy, Peter said he thinks it’s pretty clear the US is heading toward a recession.

    Mar 04, 2022 04:57 AM

    Pippa Malmgren on Macro Voices. Absolutely the best interview I’ve heard this year. Do yourself a favor and listen. Certain outcomes on the Russia/Ukraine issue might be a positive for the world and a negative for gold? My thought only. Probably one I’m hoping for. https://www.macrovoices.com/

      Mar 04, 2022 04:48 AM

      SD
      Thanks for the Pippa interview. Excellent.

    Mar 04, 2022 04:40 AM

    Paper metals and oil prices now look better than they did at open.
    My account moves from – $10,000 to
    – $ 13,000 for the day.

      Mar 04, 2022 04:15 PM

      Finally: account moved to + $12000 plus all 3 Oil Stocks in the green. Now that is positive…doesn’t mean it will close that way, but at least it is trying.

        Mar 04, 2022 04:41 PM

        30 mins later (3:40EST) goes negative again. The daily wipe out in process.