Anglo Australian eliminates all third-party royalties at Mandilla Gold Project

Anglo Australian Resources (ASX: AAR) reached agreements to end royalty payments at its Mandilla Gold Project, located 70km south of Kalgoorlie in Western Australia.

The first royalty holder, which was due to receive $1 per tonne of gold ore mined and treated, will receive 1,142,588 ordinary AAR shares at a deemed issue price of $0.175 per share

The second royalty holder will receive a US$400,000 paylout. The extinguished royalty agreement was pegged at 4% net smelter royalty on gold production in excess of 100,000oz; and a price participation royalty of 10% of every dollar the gold price exceeds A$600 for every ounce produced.

Anglo Australian Managing Director, Marc Ducler, calls the transaction transformational.

"The agreements we have struck with the royalty owners amount to a transformational development for the Company, given our corporate focus on advancing the project as quickly as possible and delivering a maiden Mineral Resource," said Ducler.

“With the Mandilla Gold Project effectively royalty free, we can focus on the ongoing drilling programs – which are progressing well and laying the foundations for a maiden Mineral Resource Estimate later this calendar year. Given the strategic location of the deposit, we are now extremely well-placed to continue to build value in the company and realise full value for the potential ounces in the ground.”

 

By Michael McCrae

For Kitco News

David

A split congress in November would be bad for gold – Forexlive.com

Although the gold market has struggled to hold on to $2,000 an ounce, one market analyst encourages investors to look past the current volatility and focus on the broader trend currently in place.

Adam Button, chief currency strategist at Forexlive.com, said that he sees the current price action as a healthy consolidation period.

"If you think about a long-term bull market, you don't want to see a nonstop parabolic move," he said.

Button said that U.S. central monetary policy and government fiscal stimulus will continue to be the gold market's critical drivers. He added that he doesn't see the current environment of ultra-low interest rates changing anytime soon.

"In the long term, the main one is runaway fiscal spending, and the second one will be easy monetary policy," he said. "And I think we're setting up for a decade of both of those things."

Although Button is bullish on gold, he expects to see more volatility in the near term, especially surrounding the November U.S. presidential and general elections.

Button said that because the gold market is addicted to fiscal stimulus and loose monetary policy, investors will be sensitive to shifting political winds. He added that the worst-case scenario for gold is if Democratic nominee Joe Biden becomes president and Congress remains split with the House staying with the Democrats and the Senate remaining Republican.

"You would consider selling gold on that and just heading to the sidelines for a little bit because that's that fiscal conservatism will come back," he said. "That limits both the economic growth in the United States, but more so than that, runaway fiscal spending that I think is the main tailwind for gold."

The best scenario for gold would be a Democrat sweep on Capitol Hill. Analysts and economists would expect the government to implement aggressive fiscal policies, Button added.

Although a split government would hinder gold prices in the near-term, Button added that it wouldn't ruin the long-term uptrend. He said that the government will have to continue to spend to support economic growth, no matter who is in office.

"So I think we might kind of hover around these levels on electron uncertainty until then," he said. "But then I think after that, there's a good chance that we run up through $2,000, maybe up to $2,200, a by year-end. That's a level I'd look at," he said.

 

By Neils Christensen

For Kitco News

David

The ‘J. Powell Paradox’ and Gold Pricing

The ‘J. Powell Paradox’ is a scenario in which the Federal Reserve begins to send out signals indicating moves in the future, which are then backed up by a more comprehensive explanation of what the Fed is planning on doing, and their intent or desired result from these actions. However, market participants are not quick to react to the anticipated changes. In some cases, this creates a knee-jerk effect opposite to what the Fed had hoped for and the common sentiment.

Yesterday the long-awaited economic summit held virtually began with a keynote speech by, Jerome Powell. For weeks prior the Federal Reserve began dropping subtle hints as to some upcoming changes in their monetary policy. They began to release information prior to Powell’s Keynote address in order to accomplish two things.

First, was to not rattle or shake off the market. They were embarking on a major change in their monetary policy and wanted their ideas to be already on the public’s mind. Secondly, was to have some a semblance of transparency.

True to their words through the chairman the Federal Reserve announced yesterday that they had no intent on being hasty to raise interest rates as they work to achieve more economic stability in the United States. By letting inflation run a little hot, it can allow more focus upon the first part of their dual mandate, which is to reach maximum employment.

In the past, during recent periods of economic uncertainty they maintained a maximum target of 2% in regards to inflation. During the points in time in which inflation would get close to that target interest rates were raised, thereby slowing down the economic recovery. On certain instances raising rates too quickly resulting in a setback to aid the United States economy.

Many analysts including myself, believe that if the Fed followed through with this revised monetary policy it would have a bullish effect in the ‘risk-on’ market. Take As well as take the U.S. dollar lower which would concurrently have an extremely bullish effect on the ‘safe haven’ asset class such as gold and silver. However, this assumption did not take into account the enigma that exists as market participants react to changes by the Fed involving their monetary policy.

Price changes that occurred on Wednesday, Thursday and today were all examples of this paradox unfolding. The day prior to chairman Powell’s keynote speech (Wednesday, August 26) gold futures rose dramatically gaining about $40 on the day in anticipation of a major change in monetary policy by the Fed. However, on the day of the keynote speech the anticipated market reaction was 180° different than the traders and investors had anticipated.

Rather than the initial anticipated reaction to the shift in monetary policy. The preliminary reaction resulted in a volatile trading session that sent bullion pricing higher prior to chairman Powell’s speech. At the time the speech began gold futures basis the most active December contract had traded to an intraday high of $1980. Then just as Powell began his keynote speech, gold pricing eroded and then reversed taking gold to an intraday low of $1914.

The majority of analysts, including myself interpreted yesterday’s decline as a direct result of profit-taking. However, a more plausible explanation was that market participants were not able to immediately interpret the ramifications and of such a major shift in the monetary policy of the United States.

This in a nutshell the ‘J. Powell Paradox’ refers to the way market participants react to a shift in monetary policy by the Federal Reserve.

The reaction seems to involve a two-step process. First and foremost is a major knee-jerk reaction which can cause market prices to move strongly in both directions in a single trading session. In the case of yesterday’s activity, the knee-jerk reaction resulted in gold and silver prior to chairman Powell’s address moving sharply higher, and then reverse course and prices moved in the opposite direction that was anticipated.

Secondly, is a time delay before the investment community at large is able to fully comprehend the potential outcome and intended results of this historical move. In the case of the announcement made by the Federal Reserve it would take a full day before traders were able to take ownership of the idea that these actions would have a profound change in gold prices, in essence shifting market sentiment in gold and silver from bearish to bullish, whiles always being underlying bullish.
 

Wishing you as always, good trading,

 

By Gary Wagner

Contributing to kitco.com

 

David

Jackson Hole Wyoming, the economic event of this summer

Since 1978 the Federal Reserve of Kansas City has been sponsoring an annual economic symposium. Central bankers and finance ministers from around the world attend the symposium to focus upon critical economic issues. Former Federal Reserve Chairman Ben Bernanke moved the venue to Jackson Hole Wyoming in 1981.

According to Investopedia, “The Jackson Hole Economic Symposium is one of the longest-standing central banking conferences in the world. The mission of the event is to foster an open discussion. Attendees are selected based on each year’s topic, with additional consideration given to create regional diversity among attendees.”

At each symposium it is the role of the Federal Reserve Bank of Kansas to select a specific topic that the symposium will focus upon. Although the number of individuals attending is only about 120 people, these individuals represent the key global economic policymakers. These policymakers will use this topic as the focal point for their research and submit their findings online.

The 44th Annual Economic Policy Symposium will be held from August 27 to August 28, although on this occasion the symposium will be held virtually due to concerns of the global pandemic.

One of the most startling aspects in terms of this year’s primary topic is in the comparison to the primary focus of the 2019 event. Last year economies worldwide experienced one of the largest economic expansions in history, and the topic of discussion during the symposium was “Challenges for Monetary Policy”.

In his opening remarks Chairman Jerome Powell addressed the current challenges for monetary policy saying, “For the Federal Reserve those challenges flow from our mandate to foster maximum employment and price stability. From this perspective, our economy is now in a favorable place … The current U.S. expansion has entered its 11th year and is now the longest on record. The unemployment rate has fallen steadily throughout the expansion and has been near half-century lows since early 2018.”

This year’s topic is “Navigating the Decade Ahead: implications for Monetary Policy”. The severity and long-term implications of the pandemic which began this year are underscored in this year’s topic which is a discussion of the decade ahead, rather than the year ahead.

The global pandemic is the core crisis that all governments are facing. According to the Japan Times, “The Federal Reserve and other monetary authorities have gone to unprecedented lengths to combat the COVID-19 crisis, flooding the global economy with trillions of dollars in liquidity and credit, and in the process have become a towering presence in the financial markets … the pandemic has also exposed an unpleasant reality for the monetary mavens: After decades in which they rode high as overseers of the global economy, they no longer have the firepower to manage the business cycle on their own. They need the help of fiscal policymakers to do that — a fact made painfully clear by the U.S. congressional stalemate over another stimulus package and the threat that poses to the nascent economic recovery.”

The truth is that monetary policy by central banks worldwide have used the majority of their tools to attempt to stabilize their core economies. However, without further fiscal stimulus by the Federal Reserve and other central banks a global economic recovery to that of the pre-pandemic era seems virtually impossible.

While central banks worldwide will continue to play a critical role in the economic recovery, alone they stand very little chance of meeting their objectives.

 

By Gary Wagner

Contributing to kitco.com

David

Gold price starting the week under pressure, market looks vulnerable

The gold market is starting a new trading week on the back foot as the U.S. dollar continues to find new buyers.

December gold futures last traded at $1,942 an ounce, down 0.26% on the day. Meanwhile, the U.S. dollar index last traded at 93.15, roughly unchanged on the day.

Gold's selling pressure comes after it was unable to hold $2,000 an ounce last week.

According to some analysts, after an historic drive since the start of the year, gold has entered into a necessary consolidation period. Analysts have said that they see this as a healthy correction that will help gold maintain its long-term uptrend.

In a recent interview with Kitco News, Ole Hansen, head of commodity strategy at Saxo Bank, said that new momentum in the U.S. dollar could be gold's most significant headwind in the near-term.

Last week speculative bearish interest in the U.S. dollar fell slightly after hitting its highest level in nine years. Hansen said that this trend probably has more room to unwind.

"We are seeing dollar short positioning at extreme levels and these positions right now are squeezable," he said. "That makes bullish gold position squeezable in the near-term," he said.

While gold looks vulnerable to lower prices in the short-term, many investors wonder just how low they could go as it trades near critical support levels.

In a report on Sunday, Christopher Vecchio, senior currency strategist at DailyFX.com, said that it will be important to watch if gold prices can hold initial support at $1,921 an ounce, the yellow metal's previous all-time high, set in 2011.

"Gold prices failing through the former yearly high at 1921.07 would be a major warning sign for gold bulls," he said.

After that, Vecchio said that investors should keep an eye on the August lows.

"A loss of the August low at 1862.90 would be a very important development insofar as redefining the recent consolidation as a topping effort rather than a bullish continuation effort," he said.

In a recent interview with Kitco News, Daniel Ghali, commodity strategist at TD Securities, said that the gold market could see a considerable correction as the momentum trade, which carried prices above $2,000 an ounce, starts to fade.

He added that there could still be room for prices to go higher, but he compared the price action to a rubber band being stretched.

"The rubber band is really being stretched to the limit and some point it's going to give and then we will see some pain."

As to how significant the correction could be, Ghali said that a drop of 17% or more than $300 could be possible. However, he added that once the correction is over, he expects that the fundamental issues that ignited gold's rally, should continue to support prices.

Some analysts have said that gold prices could fall as low as $1,800 an ounce and remain in a long-term bullish uptrend.

 

By Neils Christensen

For Kitco News

David

Warren Buffett was drawn to Barrick Gold for all the usual reasons

Barrick Gold's moat makes the company a natural fit for Warren Buffett and his investment philosophy, said Kitco's special correspondent Paul Harris during the Kitco Podcast recorded on Friday.

Harris was joined by Kitco editor Neils Christesen and mining audiences manager Michael McCrae. Special guests were the executive team from American Pacific Mining (CSE:USGD), CEO Warwick Smith and president and director Eric Saderholm.

Buffett has long been drawn to company's that have a structural advantage–businesses that can escape competition and demand higher prices.

Harris said Barrick doesn't have a classic moat, but rather put itself "within its own realm" with its decade-long production pipeline, high margins, and strong assets in stable mining jurisdictions like Nevada.

"It does have a moat where it differentiates itself from other companies and makes itself a very investable proposition," said Harris.

The panel also talked gold volatility, the coup in Mali, strategic metals at Pebble and junior-miner partnerships.

 

By Michael McCrae

For Kitco News

David

Should you be buying dips in gold price, silver price?

The U.S. dollar rally has been stealing the attention from gold and silver, making the recovery in precious metals prices more difficult, according to analysts. But can this dollar rally be trusted? Or should investors be focusing on buying the current dips in gold and silver instead?

The dollar-gold correlation will be one of the primary drivers for the precious metal in the short term, MKS PAMP Group said on Thursday. “The correlation between the USD and gold remains intact to dictate price action over the near-term, with the DXY index holding toward 93.00.”

The U.S. dollar index saw a boost after the Fed published its FOMC meeting minutes, which created some confusion.

“At least half of the downturn … in gold was attributable to the evening publication of the minutes of the FOMC meeting on 29 July. They contained no indication of any imminent yield curve control. This is likely to have prompted some market participants who had been betting on this happening to square their positions,” said Commerzbank analyst Carsten Fritsch.

In response, the U.S. dollar began to rise, weighing on gold. "The USD [found] a solid short-covering rally, having its best one-way gain since 30 March (on the USDX),” wrote Pepperstone head of research Chris Weston.

After the Fed minutes were released, the market continued to be concerned with what could potentially be introduced at the upcoming September Fed meeting.

From a trade perspective, the question is whether the markets can trust the current rise in the U.S. dollar?

Weston looked at the daily charts and next week’s Jackson Hole Symposium for answers.

“One point I will make here is on the daily charts, we’ve seen some key day reversal play out in USDJPY, AUDUSD, with EURUSD printing a lower high and a lower low,” he said on Thursday. “I feel the Fed will remain dovish, there is little doubt about that when Congress can’t agree on fiscal [spending], but with the market questioning the September meeting and a definitive change of policy here, will the market alter its short USD position accordingly. It leads us to think next week’s Jackson Hole Symposium will be one to watch and a volatility event.”

This year’s Jackson Hole Symposium, titled 'Navigating the Decade Ahead: Implications for Monetary Policy’, will be held online.

Any additional comments from the Fed chair Jerome Powell will be key next week as questions around yield curve control and inflation targeting are still creating confusion.

“There seems little consensus in the Fed collective to adopt an inflation-targeting regime, which is what so many have positioned for and why I would argue is a factor behind the USD selling of late,” Weston added.

Analysts have cited unlimited money printing, loose monetary policy, weaker U.S. dollar, and currency debasement fears as the primary drivers behind gold’s historic rally this summer, which saw prices hit new record highs above $2,000 an ounce and near $2,100.

So, can this short-term dollar rally and gold price-reversal last?

The dollar rally is looking like a simple recovery from a crowded short-dollar trade, which has dominated the past few months, Phoenix Futures and Options LLC president Kevin Grady told Kitco News. “A lot of people were shorting the dollar. Right now, we are seeing a correction in the market,” Grady said.

However, that does not change the long-term picture, where gold is heads higher and the U.S. dollar lower.

“I don’t think the picture for gold really changed. You continue to see sharp rallies in gold after price pullbacks,” Grady pointed out. “There is a lot of retail players in the gold space right now, trading the micro contracts and playing with short-term speculation. Those are the guys that are moving the market.”

The U.S. dollar is also likely to weaken further once the new U.S. stimulus package is finally approved, he added.

“If another stimulus package comes out, it will weaken the dollar. A lot of people are looking for stimulus and it didn’t come yet, which is also why we are seeing a short-term dollar rally.”

The fundamentals for precious metals remain bullish. “Gold should be above 2,000 by year-end. Trade talks with China are not seeing anything definitive. Also, the amount of stimulus that has gone into the markets and low interest rates will keep a bid in gold,” Grady said.

At the time of writing, December Comex gold futures were trading at $1,953.50, down 0.85% on the day.

Another important point to keep in mind is that weaker U.S. dollar does not necessarily mean that the dollar’s status as the world’s reserve currency is in jeopardy.

“A lot of people are saying that the U.S. dollar is losing its status as the world reserve currency. I disagree with that. A lot of countries have pushed out stimulus packages. The U.S. has just been more aggressive. It will help bring economies out of recession quicker. I don’t see a change in the currency regime,” Grady noted.

In its latest report, Capital Economics also concluded that weaker U.S. dollar does not mean it loses its status.

“Although it has stabilized a bit over the past couple of weeks, the dollar has fallen by about 7% on a trade-weighted basis since its peak in March. And in July it recorded its largest monthly fall against other advanced economy currencies on a trade-weighted basis in more than a decade,” said Capital Economics senior economist Jonas Goltermann.

“While we think the U.S. dollar will weaken a bit further this year, suggestions that its role as the world’s primary reserve currency is in jeopardy are wide of the mark in our view,” Goltermann added.

 

By Anna Golubova

For Kitco News

 

 

David

Jim Rogers gives the best investing advice you’ll hear, talks next big market crash

Jim Rogers, chairman of Rogers Holdings and co-founder of the legendary Quantum Fund, said that the next financial crash could be even worse than what we saw this year.

“This certainly has been the worst in my lifetime. We’ve had a huge rally because governments everywhere have printed and spent staggering amounts of money, but it just means that the next time it’s going to be worse still,” Rogers told Kitco News.

While monetary stimulus may have provided short-term relief to the financial markets, the enormous amount of debt created as a result will create negative consequences for the economy in the long-term, Rogers said.

Rogers’ comments come as the S&P 500 climbed to new all-time highs on Wednesday, with gold prices falling on the trading day.

The S&P 500 last traded at 3,398.34 while spot gold traded at $1,966 an ounce.

The rally in equities since March was largely due to the debt build-up from quantitative easing, Rogers said.

“Six months ago the United States was the largest debtor nation in the history of the world. Never has anybody been so deep in debt. Since then the U.S. has increased its debt by trillions more. If you give me a few trillion dollars, I will show you a very, very good time,” he said.

On gold, prices still have a lot of room left to climb, Rogers said, adding that Warren Buffett did not enter the gold market too late with his recent purchase of Barrick Gold shares.

“If I’m right, gold is going to go much, much, much higher before this is over. Gold may well turn into a bubble. I hope it doesn’t, because if it turns into a bubble, I’ll have to sell it and I never want to sell it. I want my children to have my gold and silver someday,” he said.

Rogers draws on his decades-long investing experience, from his early days on Wall St. to his successes with the Quantum Fund, to give candid advice to any investor looking to win in the long haul.

“You want to know how to be a successful investor, stay with what you know,” he said.

Rogers launched the Quantum Fund in the 1970s with partner George Soros. Over the next ten years, the fund returned 4,200% while the S&P climbed 47% during the same period.

While Rogers never had a formal business education at a business school, he was able to excel on Wall St. after graduating from college by digging deeper into his analysis than his peers.

“I started realizing that if [a key for me] was to find something cheap that was changing and I realized it by the numbers,” he said. “I was once working on reading an annual report and doing a spreadsheet and an experienced guy walks in the room and said ‘people still do that? Nobody looks at spreadsheets anymore.’ He laughed at me. I was embarrassed but I kept doing it,” he said.

Rogers is a long-term value oriented investor, preferring to buy companies that are relatively cheap, while also on the cusp of positive change.

“If you can find something that is cheap and has a positive change, you’re probably going to get very rich,” he said.

His last advice to investors? This is a tough game, he said.

“I want to emphasize again, it’s not easy. This is not an easy way to make money or to even make a living, so it takes a lot of work, like most things in life,” he said.

 

By David Lin

For Kitco News

David

Robert Kiyosaki – America headed for totalitarianism, will flee country with gold

The U.S. used to be a capitalist country, but is now becoming a Marxist society, said Robert Kiyosaki, best-selling author of “Rich Dad Poor Dad.”

Kiyosaki was a veteran of the Vietnam War who had seven uncles fighting in World War 2. “I fought for capitalism,” he said. “America is going Marxist.”

The evolution of socialism in the U.S. started with the anti-war protests following the Vietnam War, Kiyosaki said.

“When I came back [from Vietnam] the hippies were outside just like the protesters are today in Chicago. I got hit with rotten eggs, I got hit with stink bombs, I got spit on and all this, and those were the hippies. Some of them were my classmates: SDS (Students for a Democratic Society), Black Panthers, all of those guys. And what happened to the baby boom SDS members? They became school teachers. A lot of my peers are now teaching in the highest levels of academia,” he said.

Importantly, Americans are starting to lose their basic liberties due to "mob" politics, Kiyosaki said.

"The freedom of speech is gone. Freedom of speech, freedom of assembly, and also the freedom of religion," he said.

Kiyosaki has prepared for a time when he would have to leave the U.S., he said, by holding safe haven assets like gold and silver.

“Way back when I started storing gold in Switzerland and in Singapore, so in case I had to run, plus I had different passports. Gold and silver are flight capital, and as you know, the only people making money today in America are moving vans,” he said.

He added that bitcoin also qualifies as a safety asset because it’s “international currency; it operates outside the Fed and the Treasury.”

 

By David Lin

For Kitco News

David

Here is why gold price uptrend is intact – Standard Chartered

The selloff last week did not impact the longer-term uptrend in gold, according to Standard Chartered, which sees weaker U.S. dollar and lower interest rates as the two driving forces behind the gold price rally.

“Despite the steepest sell-off since April 2013, the longer-term outlook remains constructive for gold,” said Standard Chartered precious metals analyst Suki Cooper.

Before last week's jaw-dropping pullback of nearly $200, gold looked overbought and further price gains looked uncertain.

“It will be key whether this profit-taking materialises as short-term tactical liquidation, or increased vulnerability across gold-backed ETPs, prompting caution about upside risk. Open interest and net outflows suggest that investors have liquidated stale longs, not strategic positions,” Cooper wrote on Friday.

The downside risks for gold for the rest of the summer and fall are COVID-19 vaccine, swift economic recovery, weak physical demand for gold, an increase in recycling, and more ETP outflows on rising real yields, the analyst pointed out.

Important element in all of this is that investors do not appear fatigued by the price action in gold, following a massive summer move up towards $2,100 an ounce.

“Barring further profit-taking, we think the longer-term uptrend is intact given USD weakness and the scale of stimulus and as we expect interest rates to remain low or negative. Price dips are likely to be viewed as buying opportunities as the macro backdrop remains favourable for gold,” Cooper noted.

At the time of writing, December Comex gold futures were trading at $1,993.90, up 2.26% on the day.

All of the long-term drivers remain in place — negative real rates, weak U.S. dollar, and inflation expectations.

“Over the past two weeks, gold prices have signalled greater risk aversion than other assets that usually benefit from a flight to safety, partly as longer-term investors turn to gold as a diversifier. Some of the recent interest in gold has been spurred by expectations of further stimulus measures and concerns that balance-sheet expansion globally could lead to higher inflation,” Cooper said.

The weakest link is the physical demand out of Asia, which is still lacklustre. High gold price in local currencies as well as the coronavirus-related issues are all weighing on demand.

“The local gold price in India has eased from record highs above 56,000 INR/10g, but not by much. The local market has swung sharply back to a premium, but the increase has been driven by lower inventory rather than higher demand during the seasonally slow period for demand. Seasonal demand tends to materialise in September; even though the monsoon forecast should support a recovery in demand, high and volatile prices may offset this,” Cooper said.

Central bank gold buying has also slowed with some central banks proceeding with “modest sales,” the analyst added. “We expect net buying of 360t in 2020.”

Turkey is one of the central banks still buying gold this year, purchasing 220 metric tons year-to-date.

 

 

 

By Anna Golubova

For Kitco News

 

David