As predicted a few months ago, the yield curve would uninvert due to QE. Normally a recession would occur, but this is not guaranteed. What is guaranteed is higher inflation and higher stock and gold prices. So prepare yourself now!
woensdag 30 oktober 2019
maandag 28 oktober 2019
There is no inflation
A very interesting chart. Normally bond yields and gold price should move together, because inflation would push both higher. But in today's world gold goes up and bond yields go down. This is because there is no inflation. The only reason why gold goes up is because of monetary policy preventing deflation.
zaterdag 26 oktober 2019
ECB balance sheet forecast
This is how the ECB will print money starting in November. 20 billion per month.
This is what the Fed will do. 240 billion in 4 months and 12 billion per month thereafter. Obviously the USD will weaken against the euro in this case.
woensdag 23 oktober 2019
Germany buys gold?
As expected, with the end of the CBGA, Western central banks would start buying gold.
We need to stay cautious though as this might be a typo as Bullionstar reports.
When we check data.imf.org it indeed was a typo, as September gold holdings were still 108.25m ounces.
Central bank gold demand was the highest growing segment in gold demand in 2019.
vrijdag 18 oktober 2019
woensdag 16 oktober 2019
NVT RVT for Bitcoin
The NVT/RVT of bitcoin are like the P/E ratio of stocks. You buy bitcoin when the NVT/RVT is low.
You can check this ratio here.
Marc De Mesel talks about NVT/RVT:
You can check this ratio here.
Marc De Mesel talks about NVT/RVT:
Chinese Yuan Vs. China Errors and Omissions in Balance of Payments
To keep track of China capital outflows, we need to look at China’s "errors and omissions" line in its balance of payments. This number represents the residual of the main BOP accounts registering
trade and investment flows—in other words, capital that has moved across China’s borders without being documented. The capital outflows accelerated in 2015 and that is when the Yuan started depreciating. So these two are correlated.
dinsdag 15 oktober 2019
Lynette answers question on Repo and QE
Lynette answers my question:
If QE1 sent gold above $1000/ounce, then QE4 will send gold above $2000/ounce.
In 2008, we saw a similar uncontrolled spike in the fed
funds rate as we see today in September 2019. Only in 2019 it is a much
bigger spike with much more debt and deficits. In 2008 we got an
immediate QE of $1 trillion in the Fed balance sheet. Do you expect that
we could get an even larger QE4 today?
If QE1 sent gold above $1000/ounce, then QE4 will send gold above $2000/ounce.
Q2 2019 COFER Update
The U.S. dollar has lost some reserve currency status and is allocated at 61.6%, which is a new low in a decade. The euro has jumped up a bit to 20.3%.
maandag 14 oktober 2019
Umich Household Durables Good Time to Purchase Vs. Unemployment Rate
Umich Household Durables - Good Time to Purchase are correlated to the unemployment rate.
US consumers spend less on critical household purchases when their economic situation deteriorates; alternatively, the decision to reduce spending on key household products, which may come amid concerns for future income and wealth, creates a feedback loop which ultimately results in an economic contraction.
University of Michigan charts can be found here.
US consumers spend less on critical household purchases when their economic situation deteriorates; alternatively, the decision to reduce spending on key household products, which may come amid concerns for future income and wealth, creates a feedback loop which ultimately results in an economic contraction.
University of Michigan charts can be found here.
CME Group to Launch SGE Gold Futures Contracts Today
Today the CME Group launches Shanghai gold futures contracts linked to the Chinese physical gold market.
The spread between China and the West will probably narrow and be more constant as traders can now trade the price difference between London and China. It will also bring the gold futures market closer to the real physical gold market via “Exchange of Futures for Physical” transactions (EFPs).
zondag 13 oktober 2019
Endeavour Silver Struggling With Production Issues
The silver price has been rising from $15/ounce to $17/ounce in 2019 while the gold price has risen from $1300/ounce to $1500/ounce. This turnaround should be reflected in the financials of the precious metals miners.
Endeavour Silver (EXK) should also benefit from this rise in the price of gold and silver, but the company has been missing estimates on production on 2 of the 4 mines. The outlook isn't particularly rosy when you look at the total production numbers. Total production in Q3 2019 was 5% lower than in Q2 2019. The main problem is attributed to lower plant throughput. However, the gold price has risen 20% and the silver price has risen 15% quarter over quarter. So I expect that the financial results in Q3 2019 will be better than Q2 2019 (earnings neutral).
The following chart provides the current production results at the 4 producing mines: Guanacevi, Bolanitos, El Cubo and El Compas.
Guanacevi is on track to become profitable again in Q4 2019 as the new orebodies Milache and SCS are coming into production. Development at Milache is on budget while development at SCS is having some delays in development. The company also acquired an extension at Porvenir Cuatro and is now already drilling and starting to mine there. Grades will be increasing into Q4 2019, so I expect that this mine will grow its production going forward transferring from a non-profitable mine to a profitable one as plant capacity reaches 1200 tonnes a day again (currently 853 tonnes per day).
Bolanitos has a lot of problems as can be seen from the production chart. Its AISC has risen from $10/ounce last year to $19/ounce this year. Production was well below plan in Q2 and Q3 2019 due to lower tonnes and grades, high arsenic in concentrates, equipment availability issues and lack of stope access. The plant should be working at 1200 tonnes a day and it isn't working at full capacity right now (currently 778 tonnes per day). They have now brought back their operations manager from El Compas to Bolanitos and I expect grades and tonnage to go back up. The long term production trend seems to be down. The company will need to find new orebodies here to bring production back on track. This is exactly what they are doing now at Plateros and San Miguel. Drilling at these new discoveries is ongoing and will extend the mine life at Bolanitos. Let's hope they deliver on this plan.
El Cubo's production has dropped more than half from a high of 1.2 million ounces per quarter to a low of 400000 ounces per quarter. This was a planned decrease in production in order to find more reserves. The mine is profitable at an AISC of $11.48/ounce, but grades will continue to go down and the company didn't report significant new reserves from drilling.
El Compas has now been fully built and is running smoothly at half plant capacity. There is more room to increase production if they find more reserves.
As for the Terronera project, there is some good news here as the project has been fully permitted. Endeavour Silver is planning to raise $100 million for the Terronera project. With $20 million in cash, the company will need to raise $60-$80 million in debt to break ground through a bond offering. An equity offering is only second to this, so I don't expect a lot of dilution to shareholders. The final feasibility study will be delivered end this year and construction should start next year with production to start after 18 months of construction. This will double the current production and increase the profit margins of the company.
Drilling at Parral has delivered some great results. A PEA is expected at year end which will outline a two stage project. The first stage is a small scale, high grade toll mine averaging around 200-250 tonnes per day to generate cash flow while evaluating the possibility of a second stage, larger scale, 1,000-2,000 tpd high grade mine that could become a new core asset.
Last but not least, the company is planning to drill several exploration projects in Mexico and Chile in Q4 2019.
Endeavour Silver (EXK) should also benefit from this rise in the price of gold and silver, but the company has been missing estimates on production on 2 of the 4 mines. The outlook isn't particularly rosy when you look at the total production numbers. Total production in Q3 2019 was 5% lower than in Q2 2019. The main problem is attributed to lower plant throughput. However, the gold price has risen 20% and the silver price has risen 15% quarter over quarter. So I expect that the financial results in Q3 2019 will be better than Q2 2019 (earnings neutral).
The following chart provides the current production results at the 4 producing mines: Guanacevi, Bolanitos, El Cubo and El Compas.
Guanacevi is on track to become profitable again in Q4 2019 as the new orebodies Milache and SCS are coming into production. Development at Milache is on budget while development at SCS is having some delays in development. The company also acquired an extension at Porvenir Cuatro and is now already drilling and starting to mine there. Grades will be increasing into Q4 2019, so I expect that this mine will grow its production going forward transferring from a non-profitable mine to a profitable one as plant capacity reaches 1200 tonnes a day again (currently 853 tonnes per day).
Bolanitos has a lot of problems as can be seen from the production chart. Its AISC has risen from $10/ounce last year to $19/ounce this year. Production was well below plan in Q2 and Q3 2019 due to lower tonnes and grades, high arsenic in concentrates, equipment availability issues and lack of stope access. The plant should be working at 1200 tonnes a day and it isn't working at full capacity right now (currently 778 tonnes per day). They have now brought back their operations manager from El Compas to Bolanitos and I expect grades and tonnage to go back up. The long term production trend seems to be down. The company will need to find new orebodies here to bring production back on track. This is exactly what they are doing now at Plateros and San Miguel. Drilling at these new discoveries is ongoing and will extend the mine life at Bolanitos. Let's hope they deliver on this plan.
El Cubo's production has dropped more than half from a high of 1.2 million ounces per quarter to a low of 400000 ounces per quarter. This was a planned decrease in production in order to find more reserves. The mine is profitable at an AISC of $11.48/ounce, but grades will continue to go down and the company didn't report significant new reserves from drilling.
El Compas has now been fully built and is running smoothly at half plant capacity. There is more room to increase production if they find more reserves.
As for the Terronera project, there is some good news here as the project has been fully permitted. Endeavour Silver is planning to raise $100 million for the Terronera project. With $20 million in cash, the company will need to raise $60-$80 million in debt to break ground through a bond offering. An equity offering is only second to this, so I don't expect a lot of dilution to shareholders. The final feasibility study will be delivered end this year and construction should start next year with production to start after 18 months of construction. This will double the current production and increase the profit margins of the company.
Drilling at Parral has delivered some great results. A PEA is expected at year end which will outline a two stage project. The first stage is a small scale, high grade toll mine averaging around 200-250 tonnes per day to generate cash flow while evaluating the possibility of a second stage, larger scale, 1,000-2,000 tpd high grade mine that could become a new core asset.
Last but not least, the company is planning to drill several exploration projects in Mexico and Chile in Q4 2019.
vrijdag 11 oktober 2019
QT failed miserably
Assuming that the repos get repaid, the balance sheet of the Fed will go right back to where it started QT by end next year, which means QT failed miserably.
Fed Eases Liquidity Rules
I have been talking extensively about the LCR which is now at 100%, which puts a burden on banks because they cannot use these high quality liquid assets due to the regulation.
The Fed now announced they would ease these liquidity rules to about 85%. This is a huge drop in liquidity ratio. Since these banks now have more liquidity, they will probably start using it in the economy (for example loans). This would be good for stocks (especially foreign banks) and inflation.
The Fed now announced they would ease these liquidity rules to about 85%. This is a huge drop in liquidity ratio. Since these banks now have more liquidity, they will probably start using it in the economy (for example loans). This would be good for stocks (especially foreign banks) and inflation.