Ann: Quarterly Activities Report, page-180

Mode, I think SPQ will time Steam Engine with the gold price rise well to take advantage of flat lying shallow deposit and zinc which can come on stream in a relatively short time compared to copper. Of course the likes of RIO could rapidly push that copper value up. The market will raise SPQ price anyway if it is transformational as a huge deposit. Scarce as rocking horse manure.

In reference to your earlier comment, Mode, and considering positioning, given the competing ends in the world, the near failure of fiat the banking system as witnessed by the GFC, a worsening situation since with Covid, climate change and huge transfer payments for those unable to work that has inflated prices, rising input costs on top of other factors such as the Ukraine, gold looked at from another perspective, is indeed valuable.

Consider that the US dollar may also come under pressure when trade normalizes with the rest of the world. Jacking the interest rates up to combat inflation also attracts more capital inflow which returns to source at some point too plus interest. A further issue is the relatively high US dollar compared to the rest of the world ultimately encourages domestic spending on imports in the USA which displaces jobs, and makes selling exports harder because they are dearer. Will a defence led recovery be enough? The ability to pay yield on bonds is ultimately in question given the massive quantitative easing, unless there is further QE. Then you are on a roundabout. Funds ultimately have to be raised from a tax base and assets which seem to be shrinking. Other countries are also catching up with technology too. Currently, US agriculture is in trouble on the West coast due to drought. The Mississippi River is at low levels preventing cheap, large tonnage shipping through the guts of the USA, putting pressure on road transport. Rising fuel costs and the Saudi situation do not help. We already saw China gain a $US4trillion surplus in the past and the US terms of trade go into deficit which Trump piggybacked on. The same problem will exist with the rest of the world unless there is more efficient production in order to sell product.

I would think that those with capital in the USA will get more value investing in other countries producing commodities necessary for mitigating against climate change. Unlike Australia there is no compulsory cash reserve for banks in the USA. The can has been kicked down the road without accountability. If firms fail because of high interest rates due to the capacity to pay (relative to the distant past because larger sums have been borrowed at cheaper rates more recently), some US banks could fail to earn income and fail too, and depositors may lose their money. They are in danger if collateral values decrease. It was well documented that many Americans were direct investing in companies to increase their yield rather than leave money in their banks. Capital always moves to higher yield if it is secure. That sets up capital inflow and direct investment here for critical minerals which will remain profitable even with inflation. Because Australia is a commodity producing nation, then employment will benefit and add to circular flow of income and the ability to maintain transfer payments to maintain a standard of living that is better than most other places.

From the graph below its easy to see why there is inflation in the USA, the money supply has doubled since 2013 and vastly overshadows the GFC of 2008 and current high interest rates dampen consumer spending but also further dampen production - stagflation.






Source: Bald Guy Money, 3 months ago.

Now consider the Market Cap value of world gold. It overshadows some big names.



Gold is also going to underpin the BRICS block of nations which will grow if Saudi Arabia, Turkeye, Thailand and others join them. Australia trades with these nations (except areas limited by sanction). Current free trade arrangements also allow for Australia to trade with their domestic currencies and not depend upon reserve currencies. Given the BIS rulings about gold and a trading basket of currencies, I can see digital gold gaining a direct foothold and a means by which firms or individuals can trade directly in the future. There is no problem in making a trade in several grams with digital claims to it. Gold is divisible, a store of value, a standard of deferred payment and is a means of payment. BIS arrangements have seen the world banking system adhere to this, because it enables delivery on demand. I think the Perth mint is already using this model. We both know of that other company who was planning to supply gold to a digital provider. The paradigm shift for other such companies will be that gold in the ground will be given a token value before it is mined and a token value after it is refined enabling both to be traded. This puts Australia in the box seat as the 3rd biggest gold producer. It will be interesting to see where this goes. Currently the value of trade is determined by an exchange rate. That process transfers a value to a commodity just like barter when you think about it. It is what we are prepared to give up in order to secure a trade but the exchange rate aggregates our production which each commodity contributes to. Commodities like copper, theoretically, could be digitised in the future too. If we think of credits for other minerals they are often seen in terms of the key mineral being mined. So the concept is already established. The benefit in gold, is that there is no counter party risk. So gold is money.