Interesting times, based on the daily new cases of CoViD in the US which are currently exploding in Texas, California and Arizona (as well as others states), even if lockdowns are reimplemented, I would expect daily new cases to probably top out above 100,000 cases a day in a couple of weeks give the 7-14 day lag. Treatment of CoViD has improved now that the virus is better understood so mortality as percentage of cases will go down, but I think with exploding new cases, actual deaths which lag by about 3-4 weeks will explode and overwhelm the medical system in the worst affected states. This will deal a body blow to a very fragile US and global economy.
The bond market has started pricing in bad news with 10 year US treasury yields plummeting. The Fed as few levers left with negative interest rates being the last remaining that has not yet been used. Watch the AUD get smacked, RaboBank expect it to be in the low 0.60 area later this year.
Larry McDonald from https://www.thebeartrapsreport.com/ had the following to say on RealVision this week "So gold miners are extremely cheap relative to production. The risk/reward, if you did have this defibrillators moment with negative rates (being implemented by the Fed), the gold miners would probably be up 300%, 400% from here. But I think that the risk/reward is, if you look back to the 2010 period, 2008 to, say, 11, in these types of period where the Fed goes into MMT and aggressive action, silver actually-- the silver miners actually outperformed the gold miners by over 100%, I think, through that period. So your silver miners and your junior miners, that's where your best risk/reward is relative to the GDX"
The ride may get bumpy in the next few weeks, but come Xmas, I expect that I will be very happy to be as long gold stocks as I am with GOR being my biggest position.
In addition, Gold Road looks like a prime take over target for the majors (Gold Fields is not a major) given they need to replace their dwindling gold reserves as a result of minimal exploration over the last ten years.
I could be wrong, but in early February, on 3 February 2020, I said we were likely to be in for a white knuckle ride because of CoViD https://hotcopper.com.au/threads/coronavirus.5195448/page-11?post_id=42706215 . I think negative rates in the US are highly likely in the coming months. Multiple newsletters that I have read said that in previous major downturns that gold equities got smashed in the first phase of the bear market, but after the relief rally, maintained and then strengthened when everything else went to hell in a hand basked.
I don't look forward to this outcome, however, I would rather be in a stronger financial position than a weaker one if it does unfold as I expect.
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Price($) | Vol. | No. |
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