It has been a while since my last post. Although written in the...

It has been a while since my last post. Although written in the MOY-space it holds for the whole precious metals mining space. After a hugh run up sentiment changes during the summer times and this got an extra stroke on the head after the election of Mr. Trump. There is no denying that changes in sentiment among investors is the big driver behind this. Changes in central bank buying, consumer buying etc is too small to have this effect in such a short period of time on the POG and therefore the miners. I asked myself what has changed going forward? Perhaps the following points will help you to put things in perspective: because of the election of Mr. Trump the psychology for a lot of investors has changed. Now they are betting on big scale investments in infrastructure in the US. You see prices of raw materials increasing quite a lot (except for oil), you see people betting on higher inflation levels going forward and they are leaving the bond markets. They are buying shares of companies who will benefit from the "infrastructure boom" and selling the laggards in this game. This all happened in such a short notice that Mr. Trump is still caught in the New York traffic headed for Washington DC.
For me the following is important: the increasing US dollars compared to all the other currencies is a " tightening" for the US economy going forward. The FED has to keep this in mind. So are the already higher interest rate levels (especially in the longer part of the curve). So she has a balancing act to do and the most important part will the the speed by which she will continue the interest rate hikes. Do not forget higher interest rates lead to massive losses in the bond market. Losses that will not easily be repaired by interest income on the same bonds because of the low yields at the moment. Another interesting point is that the investments in infrastructure is going to be paid for by more new debt for the US. The current level is already at 20 trillion US. It is calculated that for the last 40 years the average increase in the debt has been a 9% per year. By following on this path the level after the Trump period will be around 28 trillion US. Way above the 100% of GDP. IMHO the US will never be able to repay this amount of debt. So eventually a debt crisis is coming (it will come but the timing of this is very difficult to predict). You can be sure that this will also lead to a US dollar crisis at much higher inflation levels. Sounds familiar? This is not bad for the POG going forward. China sees this coming and have been selling US treasuries on a scale this year never seen before. They probably buy some gold in return. China also is investing in the " old silk road" very heavily. For them this is a way to become less dependent on the US economy and claim there own role in the world arena. The start of the physical Shanghai gold market is also part of this strategy. A new platform to trade oil in renminby is also a possibility. I have not even spoken about the difficulties in my own continent Europe. I am not that optimistic about it. The southern European countries are financially very weak. France is a problem of its own. The UK is leaving, Italy has its referendum as well. Austria will probably have a new president with specific ideas about asylum seekers etc. Difficult times to be one continent at the moment. Problems ahead I would say. In this turbulent times Gold for me is one of the few assets that stands out (it has always been for the last 5000 years, and this will not change). I am not bothered by a period of weakness. This always happens on the way up. For the miners it is good to remember that in the last downturn (which ended in january of this years) they have been working hard on their cost-side. Most of them are redeeming loans to built there balance sheets. The gross margins on one OZ is quite good (name me other parts of the economy where the margins are that healthy). Evolution mining for example has a gross margin of around AUD 600,- per OZ. And they will produce some 850.000 OZ next year. Not a bad business case. Coming to the end of my story the message from my site is that yes we are in period for Gold and the miners where it is more difficult than in the last 10 months. But the world is very turbulent, Mr. Trump cannot change the US in a fortnight and when he does not everybody will be happy with it (what to think of his trade partners, what will they do if he imposes high tariffs), but his debt will be skyrocketing. This is the centerpiece for me: a worldwide debt crisis and a much higher inflation level. Good for Gold and the miners, who are in a much better shape than many years before. Good luck to your all. A little further downward pressure on Gold in the coming weeks is still possible but be patience, Rome is not built on 1 day.