There’s an old parable about a farmer and his horse and the waves of fortune. It starts with the farmer losing his most valuable possession, his horse. A neighbor stops by and says to him “I’m so sorry about your horse”, the farmer merely replies, “There’s always some good in the bad.” The neighbor has a hard time seeing what could be good about this, but the next day, the horse comes back with 12 feral horses, leaving the farmer even better off than before.
The recent environment surrounding the trade of gold has been a bit like this farmer’s story, especially considering the roller coaster ride gold went on last year around the election. However, Gold has been on a steady rise since hitting a drastic low in December of last year.6 This month has seen the price of gold finally rise over $1300 again for the first time since November of last year.
However, this has left Fed officials trying to determine when or if these rates should be raised with inflation’s recent lackluster performance playing a major role in those discussions. Analysts and investors alike have been watching these discussions closely, and word from Jackson Hole is expected to reveal news that will only drive the value of the dollar lower.
What this means is that the precious metal may not in fact continue to rise about the 12% increase that it’s seen unless something changes. In a fine example of “Always some good in the bad” the thing that investors are waiting to change is the level of tensions in North Korea at the moment. If North Korea and the United States don’t cool down the political arena, then the tensions are going to escalate. If this happens than we can expect gold to play out true to form, and increase in value as the world tensions increase. Political uncertainty has always played a major role in gold prices, so this situation is under the microscope.1
Miners in particular are happy to hear the news, especially those that have been waiting for new mines to open so they could get back to work. With the price of gold on the rise and tensions rising all over the world, global research firm BMI has indicated that it expects to see projects develop in active markets. In addition to Australia’s gold mining industry, which has been somewhat depressed through the past year, Shandong Gold and Shaanxi Gold of China are also expected to increase their mining operations. So in addition to gold prices being on the rise, it appears that the uncertain times we live in may in fact provide an opportunity for prosperity for many.2
This doesn’t mean that these companies are going to conduct their business recklessly, “We expect firms to remain committed to spending cuts in an effort to reduce debt loads.” was the word from BMI. Given this, while the growth of new mining operations seem to be on the rise, there is expected to be a note of caution involved with cost cutting measures being a primary focus.2
Aggressive growth is expected among Chinese gold firms, with Shandong Gold and Shaanxi Gold expected to invest in mining projects all over the world. Cost cutting measures are expected to continue to remain the focus of these miners with an aim at dealing with future price volatility. BMI had this to say about the current market environment “We expect firms to remain committed to spending cuts in an effort to reduce debt loads”2
10 months is a long time for any asset to see consistent gains, and gold has been remarkably reliable in the past year. It is speculated that there are three major elements contributing to its current growth, the already mentioned weak dollar being foremost among them. Add in a low-yield environment and miners’ past hesitance to expand their production rates, along with newly emerging markets, and you have the perfect environment for gold to thrive and investors to profit.3
One other element that is playing heavily into the rising cost of gold, one that will support the rise for a time but may eventually drop off, is the energy related assets affected by Tropical Storm Harvey. The damage from this storm led to a major drop off in crude oil prices, but bolstered the cost of gasoline. Gold, as it is wont to do in the face of disaster and troubling times, has spiked along with the price of gas.
“The economic impact of Hurricane Harvey is still very hard to determine.” said equity analyst Matt Maley of Miller Tabak & Co. Harvey’s damage is expected to equal close to $30 billion, as every aspect of infrastructure is taking hits. Labor force, transportation, and the power grid have all been affected by this storm, and the costs continue to rise. In sheer economic damage, it may end up being rated among the eight top hurricanes to have hit the US.4 That kind of damage is going to have a serious impact on the marketplace, and creates exactly the kind of unrest and uncertainty that gold needs to thrive.
All of these factors come together to create an atmosphere of uncertainty, from major natural disasters to a growing political unease with North Korea, there’s good news for gold investors all around. The US and North Korea are definitely the leading characters in the worlds political drama, but the current unrest on America’s shores. Combined with recent events in Venezuela all the signs point towards the safe-haven investment of gold being a good one in the current climate.
We’ll leave you with the words of one of the world’s largest money manager, Russ Koesterich of Blackrock. He states that while he has “no special insight into the Greek drama that is modern day Washington… bet on gold’s diversifying properties…” So gold investors, it’s an excellent time to continue managing your gold portfolio and building security against uncertainty in an uncertain world, taking advantage of that good in the bad.5
Dr. Kal Kotecha
© 2010 Junior Gold Report and TechMoney360
Junior Gold Report and TechMoney360 Newsletter: Junior Gold Report’s and Tech Money 360’s Newsletter is published as a copyright publication of Junior Gold Report (JGR) and TechMoney360 (TM360). No Guarantee as to Content: Although JGR/TM360 attempts to research thoroughly and present information based on sources we believe to be reliable, there are no guarantees as to the accuracy or completeness of the information contained herein. Any statements expressed are subject to change without notice. It may contain errors and you should not make any investment decisions based on what you have read on here. JGR/TM360, its associates, authors, and affiliates are not responsible for errors or omissions. By accessing the site and receiving this email, you accept and agree to be bound by and comply with the terms and conditions as set out herein. If you do not accept and agree to the terms you should not use the Junior Gold Report and TechMoney360 sites or accept this email. Consideration for Services: JGR/TM360, it’s editor, affiliates, associates, partners, family members, or contractors may have an interest or position in the featured companies, as well as sponsored companies which compensate JGR/TM360 as such our opinions are biased. We may hold potions in and trade these stocks of the companies we profile and as such our opinions are biased. JGR/TM360 and its’ owner and affiliates/associates may buy/sell and trade the featured companies from time to time. JGR/TM360 has been paid by the companies. Thus, multiple conflicts of interest exist. Therefore, information provided here within should not be construed as a financial analysis but rather as an advertisement. Conduct your own due diligence: The author’s views and opinions regarding the companies featured in report(s) are his/her own views and are based on information that he/she has researched independently and has received, which the author assumes to be reliable. You should never base any buying/selling/trading decisions off of our emails, newsletter, website, videos or any of our published materials. JGR/TM360 aims to provide information and often stock ideas but are by no means recommendations. The ideas and companies featured are highly speculative and you could lose your entire investment – consult a licensed financial advisor if you are considering investing in any of the featured companies. Subscribers/readers are encouraged to conduct their own research and due diligence. The companies mentioned are high risk and considered penny stocks that contain a high risk of volatility, therefore consult your investment advisor and do your own due diligence before purchasing. Never base any investment decision on information contained from our emails, newsletter, website, videos or any of our published materials. No Offer to Sell Securities: JGR/TM360 is not a registered broker dealer, investment advisor, financial analyst, stock picker, investment banker or other investment professional. JGR/TM360 is intended for informational, educational and research purposes only. It is not to be considered as investment advice. No statement or expression of any opinions contained in this report constitutes an offer to buy or sell the shares of the companies mentioned herein. Links: JGR/TM360 may contain links to related websites for stock quotes, charts, etc. JGR/TM360 is not responsible for the content of or the privacy practices of these sites. Information contained herein was extracted from public filings, profiled company websites, and other publicly available sources deemed reliable. Information in this report was taken on or before writing and dissemination and may not be updated. Do you own due diligence as information and events can and do change. Published reports may reference company websites or link to company websites and we disclaim and responsibility for the content and accuracy of any such information or website. Release of Liability: By reading and/or watching videos by JGR/TM360, you agree to hold JGR/TM360, its associates, sponsors, affiliates, and partners harmless and to completely release them from any and all liabilities due to any and all losses, damages, or injuries (financial or otherwise) that may be incurred.
Forward Looking Statements
Except for statements of historical fact, certain information contained herein constitutes forward-looking statements. Forward looking statements are usually identified by the use of certain terminology, including “will”, “believes”, “may”, “expects”, “should”, “seeks”, “anticipates”, “has potential to”, or “intends’ or by discussions of strategy, forward looking numbers or intentions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results or achievements to be materially different from any future results or achievements expressed or implied by such forward-looking statements. Forward-looking statements are statements that are not historical facts, and include but are not limited to, estimates and their underlying assumptions; statements regarding plans, objectives and expectations with respect to the effectiveness of the Company’s business model; future operations, products and services; the impact of regulatory initiatives on the Company’s operations; the size of and opportunities related to the market for the Company’s products; general industry and macroeconomic growth rates; expectations related to possible joint and/or strategic ventures and statements regarding future performance. Junior Gold Report/TechMoney360 does not take responsibility for the accuracy of forward looking statements and advises the reader to perform their own due diligence on forward looking numbers or statements.