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Powell Doubles Down on Loose Money as Inflation Rages

Precious metals markets are rallying on some early Friday remarks from Jerome Powell. The Federal Reserve chairman is speaking at Jackson Hole…

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Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.

Precious metals markets are rallying on some early Friday remarks from Jerome Powell. The Federal Reserve chairman is speaking at the Jackson Hole virtual gathering of central bankers Friday and Saturday, and he started off by emphasizing the view that high inflation readings will come down soon.

There is still a question of whether anything has changed since the last Fed policy meeting. There, Fed officials had suggested they may soon begin tapering their asset purchases.

Something that could give the Fed’s money masters an excuse to back down on tapering is the recent global surge in COVID cases linked to the Delta variant.

Some countries including Australia are back in full lockdown mode. In the United States, mask mandates are back in many of the more authoritarian jurisdictions and vaccine requirements are increasingly being imposed by businesses and local governments.

Just a few weeks ago, President Joe Biden had touted the vaccine as a ticket to freedom from mask mandates. Now his team of government health bureaucrats is telling everyone to wear masks, calling for more contact tracing, and warning that additional vaccine booster shots will be necessary.

The risk is that the virus keeps mutating to thwart every effort aimed at achieving herd immunity. But optimists on Wall Street are pricing in a robust economic recovery to continue in spite of the threats from the virus and Fed tapering.

It’s unlikely the central bank will get very far into tapering if Wall Street decides to throw a tantrum. The Fed may also face pressure from the big-spending Biden administration to reverse course and ramp up its bond purchases.

Given the political realities, capitalist and commentator Steve Forbes argued in his latest “What’s Ahead” commentary that tapering will likely be short lived.

Steve Forbes: Now, concerning tapering, every month, the Fed has been buying $120 billion of government bonds and mortgages. Thanks to COVID-19 stimulus bills passed by Congress and money previously created by the Federal Reserve out of thin air, the financial system today is awash in liquidity. Corporations hold trillions in cash, banks are loaded with lendable funds, consumer checking accounts are at record levels.

Given all this, the continuation of the scale of the Fed’s bond-buying should be fueling far worse inflation than what we’ve been experiencing. This gets to the fact that the Fed will not be in control of its destiny if Congress passes President Biden’s humongous spending bills. The central bank will face irresistible pressure to buy bonds to help finance this extravagance.

If investors are overestimating the Fed’s ability to rein in liquidity, then they may be underestimating inflation risk and undervaluing precious metals. Gold and silver markets have lagged this year but are showing signs of gathering strength in recent days.

This week gold prices are up 1.5% to trade at $1,814 an ounce. Silver shows a weekly gain of 3.8% to bring spot prices to $23.97 per ounce. Platinum is up by 0.7% since last Friday’s close to come in at $1,015. And finally, palladium is putting in a weekly advance of 6.9% to command $2,471 an ounce as of this Friday morning recording.

Precious metals markets have been basing out during these summer months. While the price action has been frustrating for bulls, it may ultimately be healthy for the long-term bull market outlook. The bigger the base, the bigger the directional move that can follow.

An investor rush into gold and silver for protection from inflation, negative real interest rates, and systemic risks in financial markets remains to fully play out.

There have certainly been many great gold rushes and spectacular booms and busts throughout history. One of the most famous gold manias occurred during the late 1890s in the Klondike region of Canada.

Many prospectors made their way there through a grueling journey on foot from the Alaska panhandle. They risked everything for a chance to strike it rich. A few did. Most didn’t. Many lost everything, including their lives, in pursuit of hitting paydirt.

2021 marks the 125th anniversary of the discovery that inspired gold fever in the Yukon territory. Skookum Jim Mason, his nephew Dawson Charlie, Kate Carmack, and her husband George Carmack made the famous find. Word spread and the rush was on the following summer.

The Klondike gold rush lasted just three short years. But its legacy has been memorialized in special release one ounce gold coins from the Royal Canadian Mint. The 2021 Klondike Gold Rush Series “Panning for Gold” coins are struck in .99999 fine gold. That’s “five nines” – making them the purest gold coins in the world.

The unique design is of a gold pan, with a rich find of nuggets. Each single coin comes attractively packaged in a certified assay card holder. It will make a fine addition to any collection without entailing a high collectible’s premium when purchased from Money Metals Exchange.

Investors who want to participate in the next great gold rush or silver rush need not risk it all like earlier prospectors did. They simply need to convert their depreciating currency and their at-risk financial assets into physical bullion – ideally before the next buying rush begins.

For now, bullion market conditions are favorable to buyers. Spot prices are depressed, premiums have come down, and availability is plentiful for most products.

Well, that will do it for this week. Be sure to check back next Friday for our next Weekly Market Wrap Podcast. Until then this has been Mike Gleason with Money Metals Exchange, thanks for listening and have a weekend everybody.

      

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REZ levels up with maiden Granny Venn gold pour

Special Report: Richard Poole-led REZ has joined the ranks of producers with the maiden gold pour completed from its Granny … Read More
The post REZ…

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Richard Poole-led REZ has joined the ranks of producers with the maiden gold pour completed from its Granny Venn deposit.

Sydney-based Resources & Energy Group (ASX:REZ) has showed off the very first gold bullion produced from its Granny Venn mine, part of the Menzies project in Western Australia.

https://twitter.com/REZ_GOLD/status/1452785965076926468

The first toll treatment for the Granny Venn cut back has reached the midway mark, which resulted in the first gold pours for the project yesterday morning at the Lakewood mill.

A total of 22.84kg of gold doré was produced from the pour and is now being dispatched to the Perth Gold Mint for determination of assay for out-turn certification.

Resources and Energy Group
Plate 2 gold pour and CIL leach bar 14.88kg

Before REZ and BM Mining restarted mining at Granny Venn in early July this year, no mining activity had taken place in 23 years.

Around 17,000 tonnes of Granny Venn ore has been processed since the toll milling campaign began in mid-August.

REZ and BM Mining partnered up under a profit-sharing agreement back in March to exploit the economically recoverable remnant resources at the Menzies project.

BM Mining is part of the BM Geological Services (BMGS) group of companies that have been active in the mining industry in the Goldfields of Western Australia since 2003.

Executive Director Richard Poole said the maiden gold pour represented a pivotal moment in REZ’s growth as it transitioned from exploration to production.

“We would like to congratulate BM Mining, which has done an exceptional job in assisting us in reaching this production milestone and completing the maiden gold pour at the Lakewood mill.” – Executive Director Richard Poole  

“Since acquiring ground in the East Menzies Goldfield, the company has moved rapidly to identify and commercialise resources, whilst maintaining a vigorous exploration strategy which has delivered some outstanding results for gold at Gigante Grande, and for nickel at Springfield.”

REZ’s near-term goal is to mine 120,000 tonnes of ore at an average grade of 2.3 grams per tonne (g/t) to produce 8,800oz of gold.

At today’s high Aussie dollar gold price, that would fetch roughly $21.1m, nicely boosting REZ’s coffers to help fund its continued exploration.

The original Granny Venn open pit, which was developed by Money Mining and Paddington Gold in 1997-1998, was based on a pit design optimised at a gold price of $454/oz. The gold price is now 5x that.

And making it even more lucrative for REZ is the fact that under the profit-sharing deal with BM Mining, REZ didn’t have to shell out a dime to get Granny Venn back in operation, with BM Mining covering the $3m capital outlay required.

The initial production campaign is scheduled to be completed in late December.

 


 

 

This article was developed in collaboration with Resources & Energy Group, a Stockhead advertiser at the time of publishing.

 

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

The post REZ levels up with maiden Granny Venn gold pour appeared first on Stockhead.


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China’s Central Bank Condition Has Consistently Told You Everything About Global (not) Inflation

For several years now, we’ve been harping constantly and consistently about what’s on the PBOC’s balance sheet; or, really, what conspicuously isn’t…

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For several years now, we’ve been harping constantly and consistently about what’s on the PBOC’s balance sheet; or, really, what conspicuously isn’t in very specific line-item numbers. Briefly, simply, if dollars are being extended into China, as has been claimed over the years, particularly the last few, they’re going to show up on the Chinese central bank’s balance sheet.

Specifically, foreign assets. More specifically, foreign reserves.

There’s a difference between those two which historically has meant quite a bit (we’ll get to that in a moment). Going back to 2017 and 2018, the level of foreign assets (which includes reserves) has been beyond stable, constant to the point of clear manipulation. As I wrote last year:

According to the People’s Bank of China (PBOC), the balance of foreign assets reported on its balance sheet for the month of June 2020 was RMB 21,833.26 billion. At the end of the prior month, May, the balance was, get this, RMB 21,833.33 billion.

Rampaging global pandemic, dollar crashing, dollar smashing, global recession questions, massive, complex economic forces to go along with huge changes in financial conditions, as well as questions about those conditions, and the Chinese system pretty much in the middle of everything. The second largest economy in the world, one which is made (and broken) by incoming (or outgoing) monetary flows of which the central bank has involved itself heavily right from the very start of modern China.

And foreign reserves on the central bank balance sheet, the fundamental basis by which Chinese money exists, this moved by the tiniest RMB 70 million? In case you are wondering, it works out to a monthly change of -0.0003%. Nuh uh. No way. That’s a number which was quite obviously engineered.

Just about sums the whole thing up; as does this chart:


What should grab your attention is the slight, though somewhat more noticeable increase in reported foreign assets during this year. We’re being asked to believe this is Jay Powell’s flood of “too much” money finally making its way into the right places; and this general data from China seems to be at least some level of consistent with the idea.

Once you get into the details, though, what’s going on over at the PBOC actually adds to the evidence of its opposite. Dollar problems, scarcity, maybe even growing and outright global money shortage.

Before we get to that, however, we have to back up and review those details. To do that, we’ll begin all the way back in the pre-crisis period when “too much” eurodollar money was a legitimate, provable condition worldwide.

Dollars between 1995 and 2007 were in such worldwide overabundance even the monetary illiterate like Ben Bernanke couldn’t help but notice them – though, captured by his rigid and rigidly incoherent ideology, the Federal Reserve’s Chairman could only muster some nonsense about a global savings glut.

His Chinese counterparts suffered no such illusions, being forced by the monetary onrush to alter both banking and monetary policies for this “hot money” excess. Up until August 2007, that is. No, this is not a coincidence.

Start with the rising blue mass above which is the PBOC’s definition for all its various foreign assets. I’ve then added the dashed black line to begin breaking out the precise pieces within the category. This line represents that vast majority – but not all – of foreign assets, labeled by China’s central bank as “foreign exchange.”

The remainder is left to two other classes. The first is official gold holdings, which for our purposes we’ll ignore (as much as it pains me, the real world ignores it, too). What’s left is what’s always left over in these things: other foreign assets.

It’s in this “other” where both the fun and monetary literacy begin.

The implications are pretty obvious, as are their connection to the burgeoning Global Financial Crisis in a way that pegs said crisis as the only thing it could have ever been: a global dollar shortage. Not subprime mortgages, a systemic rupture in the bank-centered eurodollar system so bad it forced even invulnerable China into some visible countermeasures.

And here (above) you can see one of those: other foreign assets. What is other? Your guess is as good as mine (OK, maybe I might have a slightly better idea having spent enough time poking around, but even then not so much better because this stuff is left opaque by Communist design). For right now, “what” doesn’t matter.

It does matter that whatever it might be that is in “other”, this shows up at the exact moment the global dollar rupture hits in August 2007. Immediately, two things pop out on the PBOC’s balance sheet: fewer foreign exchange assets but more of other. Eurodollar shortage, fewer dollars organically register as foreign exchange. 

In lieu of market-based dollars, though, look what happens to the growth of total foreign assets which is maintained at a nearly constant growth rate by the addition of other foreign assets. It is a workaround, a fill-in to keep up the flow at the margins. A rescue, of  sorts, to buy some time for the eurodollar world to normalize.

For the first few months of 2008, there seemed to be some hope the Federal Reserve’s (how naïve everyone was) “rescues” could work (TAF, overseas dollar swaps “somehow” being overbid by US banks with mostly German names). Foreign exchange pops back up for the PBOC – but only until March 2008.

Bear Stearns.

Taking a guess as to “contingent liabilities” within “other”, Bear was the final straw for China as most of the rest of the world. Too expensive to maintain, Chinese authorities realized they’d instead have to ride out the growing (not past tense) storm; they’d have to switch to other even more opaque tactics unreported anywhere.

After trying to offset the first phase of the GFC1 dollar shortage with “other”, the Chinese then moved to a completely stealth CNY peg (stealth because the back half of whatever transactions don’t show up anywhere). You can see this two-step above; first the jump in “other” while CNY still rises, then total CNY peg as foreign exchange assets stop growing at the same fast pre-crisis rate.

Unlike “new normal” America and Europe, the Chinese emerged from the ensuing Great “Recession” believing their situation/potential hadn’t been altered. A big enough chunk of the eurodollar system seemed to agree – for a time.

Chinese monetary authorities spent 2010 and most of 2011 letting these “other” foreign assets roll off the balance sheet; if actually contingent liabilities, then repaying, terminating and getting out with CNY rising likely making the repayments and retirements economical (and worth whatever cost, so long as nothing really changed for China’s long run).

But, as you can see (two above), a second eurodollar problem erupts in 2011 while the PBOC is still unwinding whatever it had done from late 2007/early 2008. While this meant another stoppage in inbound eurodollar flows, China’s economy appeared able to weather the breakdown (which was focused more on Europe) and with CNY still rising no emergency monetary measures appeared necessary (there was a fiscal “stimulus” package).

At least none of the same outward type which might end up in “other” foreign assets; something else was being done, from September 2011 forward, monetary officials clearly began pegging the aggregate foreign exchange balance on the PBOC’s balance sheet.

The Chinese weren’t so lucky by 2014. Although dollar inflows were restored in 2013 (Reflation #2), there was a serious break during that summer (Summer of SHIBOR) which was consistent with a then emerging emerging market currency crisis (dollar shortage) wrongly blamed on the “taper tantrum.”

Right from the start of the following year, dollars began to disappear again (falling foreign exchange). Already having introduced another batch of “other” intervention right in January 2013, officials instead went back to stealth CNY manipulation (ticking clocks).

It didn’t work, either, as China suffered massive dollar destruction which then caused internal RMB destruction (bank reserves and currency). The freight train of Euro$ #3 hit the system by August 2015, causing CNY to plummet all-at-once, even triggering a flash crash across global stock markets within two weeks from yuan’s crash.

Perhaps understanding what was coming, the PBOC simply got the hell out of its way rather than risk being further sucked into the rising negative money vortex:

A demonstration how even other foreign assets are more like a last resort kind of thing.

The central bank would stay out of the eurodollar’s way until early 2016, coming back in because of the immensely costly damage done to CNY, the RMB system, as well as China’s and the global economy as a whole. The start of ’16 one of those situations that really did demand another last resort.

When confronted by the next one, Euro$ #4, again a clear reluctance to appeal to “other” foreign assets. There had already been a lack of dollars coming back, very few, anyway, during Reflation #3 (2017’s absurdly weak “globally synchronized growth”) leaving China dollar exposed to begin 2018.


Through the middle of 2018, once again the PBOC relied on this other peg to its aggregate foreign exchange balance in the same way it had back in 2012. Only this time, CNY was dropping like a stone, with officials apparently content to accept that outcome.

By October 2018, however, the situation must’ve been judged untenable, at least substantially more serious and dangerous, such that “other” foreign assets began to rise slightly but clearly to somewhat offset foreign exchange assets then declining.

The stealth peg to PBOC’s foreign exchange must’ve been overwhelmed by Euro$ #4’s late 2018 landmine. In its aftermath, CNY would eventually decline more in 2019 despite the offset in China’s “other” foreign assets, as this globally synchronized deflation wore down economies and markets (repo) all over the world.

What does all this mean?

Quite a lot of things we don’t have time or space to get into here, some different things, but among the commonalities is how “other” foreign assets continuously represent a last ditch kind of rescue or at least attempted offset to what therefore has to be among the more serious of already serious dollar shortages. There is no question how these results all fit together.

And, as I began at the outset, it is intuitive. If dollars are actually coming in, in reality rather than Jay Powell’s lying mouth, they show up at the PBOC as foreign exchange.

If they aren’t coming in, China’s balance sheet begins to break down in these specific ways, including, at key times, some sort of increase in other foreign assets.

This brings us back, and up to speed, with the first chart I presented. There has been an increase the PBOC’s reported holdings of total foreign assets which at first might appear on the surface as at least some trickle from the “too much” money we’ve heard all year about. It’s not.

What is it? Other foreign assets. Near entirely:

Foreign exchange assets gained the tiniest sliver, but since June (when CNY went sideways) nothing.

Instead, other foreign assets have picked up going all the way back to January. Yes, the same January.

This January:

There are obviously screwy things going on with the PBOC’s balance sheet, already on top of already screwy things (why a straight line for foreign exchange) that aren’t as obvious. And we know that screwy stuff corresponds religiously to monetary shortages, another eurodollar problem rather than whatever it is Jay Powell is telling the media to report to the public.

Odd developments which long predate delta COVID, aren’t trade wars or subprime mortgages. It’s the same thing repeating since all the way back in August 2007. Again, no coincidence “other” foreign assets showed up at exactly the same moment the eurodollar system broke.

The mainstream theme or narrative for 2021 has all year been inflation, inflation, inflation. In actual monetary terms, which is what inflation must be, shockingly it’s actually been the whole opposite: deflation, deflation, deflation.

You don’t have to take my word for it. The evidence if everywhere (just start with bonds).


Whereas the TIC data is pretty unambiguous about this situation, the PBOC confirms the same from its own figures which are, once you orient them properly, only slightly less explicit even if we have no specific idea the exact transactions the Chinese are being forced into. Yet again.

Whatever those are, China sure isn’t being compelled to undertake them because there’s too much money in what remains the eurodollar’s world.










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Musgrave makes another ‘bonanza’ grade gold discovery in the Murchison

Special Report: Everything Musgrave touches turns to gold (literally!). The company has reported a ‘bonanza’ 898g/t gold intercept as close … Read…

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Everything Musgrave touches turns to gold (literally!). The company has reported a ‘bonanza’ 898g/t gold intercept as close as just 49m from surface at its Big Sky prospect in Western Australia.  

Musgrave Minerals (ASX:MGV) has unearthed yet another near-surface, extremely high-grade gold intercept at its Big Sky Prospect on its Cue Project in the highly fertile Murchison region of Western Australia, while also identifying new gold mineralisation in a footwall dolerite which is open and untested along strike.

Recent drilling delivered an intersection of 28m at 35.9 grams per tonne (g/t) gold, including 1m at 898g/t, from just 49m at Big Sky. Coarse visible gold was identified in the logged sample.

Musgrave says it has also identified a new high-grade gold position within the footwall at Big Sky.

Coarse gold nuggets and gold in quartz sieved from 49-50m down hole in RC drill hole 21MORC277 at Big Sky. One metre interval assayed 898g/t Au.

“This is a very good result and highlights the high-grade potential at Big Sky over the broader 2.6km of strike,” managing director Rob Waugh said.

“It is unusual on the Yilgarn to see such coarse gold in RC drill chips. It validates our belief that there are high-grade zones within the Big Sky trend.”

Notable results returned from drilling into the footwall zone were 7m at 8.6g/t gold from 43m, including 1m at 55.2g/t from 44m; 3m at 13.2g/t gold from 3m; 2m at 6g/t from 94m; 6m at 3.6g/t from 24m; and 2m at 12.0g/t from 110m.

Several of the new high-grade gold intersections came from within a newly identified dolerite-hosted zone in the footwall, which Waugh said could be the southern extension of the same dolerite unit identified to the north on the JV ground with Evolution Mining (ASX:EVN).

“Gold can be hosted in many different rock types on the Yilgarn but dolerites are one of the most prolific host lithologies for large deposits,” Waugh explained.

Musgrave plans to test this new mineralised target zone over an extended strike extent of more than 5km in a separate 9,000m aircore drilling campaign.

Resource definition drilling is continuing at Big Sky in tandem with infill drilling at Target 14 and reverse circulation drill testing of new Starlight-type targets along the Break of Day trend.

“We are drilling full steam ahead to deliver a maiden resource for Big Sky in Q2 2022,” Waugh said.

 


 

 

This article was developed in collaboration with Musgrave Minerals, a Stockhead advertiser at the time of publishing.

 

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

The post Musgrave makes another ‘bonanza’ grade gold discovery in the Murchison appeared first on Stockhead.


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