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Gold Performance in Coming Rate Hike Cycle

  History shows that whatever the ongoing regime is (be it inflation, disinflation, or accelerating inflation), Gold usually bottoms around the start…

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This article was originally published by The Daily Gold


 

History shows that whatever the ongoing regime is (be it inflation, disinflation, or accelerating inflation), Gold usually bottoms around the start of a Fed rate hike cycle.

 

Considering the five most significant bottoms in the last 50 years (1971, 1976, 1985, 1999, 2016), we find that all but one coincided with the start of a new rate hike cycle.

 

Historically, Gold has tended to perform well (in varying degrees) amid rising short-term rates. However, unlike in the 1970s and 1980s, most recently, the start of rate cuts was a huge catalyst for Gold.

 

How Gold performs after the initial rally will depend on the type of regime that transpires.

 

In the chart below, I plot Gold’s performance following the start of the last three rate hike cycles. Average 2 presumes the beginning of the 2015-2018 cycle was December 2016, rather than December 2015.

 

In most scenarios, the first 12 months entails a rebound and then a correction. Gold will continue to rise if there is accelerating inflation (like in the 1970s) or rising inflation expectations (like in 2005). However, if neither transpires and the Fed can continue hiking, Gold will not begin the next leg higher until the Fed executes its final hike.

 

If we get more fiscal stimulus, that could put Gold on the 1970s or mid-2000s path in which Gold would rise for the duration of the rate hike cycle.

 

The market assumes no fiscal stimulus and is pricing in the Fed, stopping around 1.50% in 2023. If they had to stop sooner, pause their hikes or stop altogether, it obviously would be more bullish for Gold.

 

In any case, the immediate outlook is clear. While there is a risk Gold could decline, it would set up for a major bottom in March or April, when the Fed executes the first rate hike.

 

With that being said, you have to put yourself in a position to take advantage, and you have to make sure you buy the right companies. I suspect that March and April will be the time to buy future 5 and 10 baggers.

I continue to be laser-focused on finding quality juniors with at least 5 to 7 bagger potential over the next few years. To learn the stocks we own and intend to buy, with at least 5x upside potential after this correction, consider learning more about our premium service.



Precious Metals

Oil posts gains, gold calm

Oil gathering momentum as USD 100 oil looks increasingly likely Oil prices are continuing to climb on Wednesday and find themselves only a little shy of…

Oil gathering momentum as USD 100 oil looks increasingly likely

Oil prices are continuing to climb on Wednesday and find themselves only a little shy of USD 90 a barrel. This happened as IEA confirmed that the market looks tighter than previously anticipated as a result of stronger demand, despite omicron, and the inability of OPEC+ to hit its monthly increased production targets. This imbalance has led to surging prices which will further pressure households and businesses already fighting high inflation.

What’s more, not only does the rally not appear to be losing steam, it may have even generated fresh momentum. While USD 90 could have triggered some profit-taking and a minor cooling of prices, this suggests they’ll see no reprieve and we could realistically see USD 100 oil soon.

Can gold break higher as traders speculate about more rate hikes?

Gold is marginally higher again after the easing over the course of the last week. The yellow metal is continuing to struggle around USD 1,833 which has been a surprisingly strong level of resistance over the last six months. But support is returning after it came close to USD 1,800 so a break to the upside remains a strong possibility.

Given the calls for even more rate hikes this year than markets are pricing in, not to mention larger individual increases than we’ve seen for many years, perhaps we are seeing some inflation hedging from traders that don’t think central banks are doing enough to bring price pressures down.

For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/



Author: Craig Erlam

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Precious Metals

Cleantech Boom 2.0: Does Mining Have a Place?

Investment in mining and its resources is an integral part of cleantech as green initiatives to make the energy transition possible.
The post Cleantech…

The climate crisis is back at the forefront of political discussions following COP26 and several initiatives aiming to reduce carbon emissions have been announced. Decarbonising our economy is a difficult but urgent task and continued technological innovation will help. Although new technologies will aid the reduction of carbon emissions, the sheer volume of raw materials required to innovate are significant. Is investment in decarbonisation a reasonable excuse to further dig up the planet?

Defining cleantech

‘Cleantech’ (often used interchangeably with ‘climatetech’) refers to innovative solutions to address the challenges of climate change. These solutions help to achieve the goals of environmental sustainability by storing or generating energy with limited carbon emissions, thus assisting decarbonisation efforts. Investors are recognising the importance and potential longevity of this industry and investment is pouring in.

Electric vehicles (EVs) are one of the leading technologies required to reduce the emissions of the transport industry, but the transition to renewables and EVs will require an abundance of materials and extraction rates are rising.

Investment floods in

While there was a boom in cleantech investment in 2005, it began to be seen as a risky choice and interest dwindled due to investment failures in areas such as biofuels and solar. The investment bubble then burst. However, the urgency to reach net-zero has reignited interest in cleantech and, as innovations in areas such as agriculture and batteries are announced, investors are scrambling for their share. This investment boom is spurring an increase in the number of start-ups, driving the much-needed innovation required to help solve the climate crisis.

Mining activity is on the rise

To deal with the growing number of clean technologies, mining extraction rates are also growing. Various metals and minerals are required in the transition to decarbonisation and minerals such as cobalt and lithium are the building blocks of cleantech. As the world attempts to reach net zero, demand for critical minerals will skyrocket.

According to a 2020 World Bank Report, a low-carbon future will be more mineral intensive as clean energy requires more materials than fossil-fuel-based technologies. The International Energy Agency estimates that EVs require six times the amount of minerals as a typical car and nine times more minerals are required for wind energy plants than gas-fired equivalents. However, ESG concerns around the traditional heavy industry are so far causing investors to look the other way.

ESG in mining

There are several ESG concerns tied to mining, notably, the environmental degradation caused by the erection and operation of mines to meet the growing demand for materials. Social and governance concerns are becoming increasingly apparent and stories of dangerous working conditions, artisanal miners and child labour are common. ESG funds often exclude mining as a result. To counteract this, the mining sector is beginning to show signs that it is taking ESG seriously. A leading example is Glencore, who GlobalData classifies as a climate leader. Glencore has pledged to reach net-zero carbon emissions by 2050. Its carbon reduction strategies include the electrification of mining fleets, which has been pioneered by companies such as Newmont and Boliden.

As investors are increasingly becoming more climate aware, mining companies are recognising the potential upsides of taking ESG seriously. This will drive companies to innovate to establish how they can decouple their growth from emissions.

Investors need to think about the future

A boom in green investment has begun again but shifting investment away from mining will undermine the green energy transition. Mining companies should further implement ESG principles and demonstrate that they are serious about ESG. Green funds should also include these mines in their portfolios instead of blacklisting them. Without the mining industry, the energy transition is not possible and investors should stop shying away from this heavy industry by focusing all their investment on renewable technologies. Currently, the production of these technologies cannot be achieved without mining and the resources it produces. Investors should instead use the power they possess to exert pressure on mining companies to consider ESG strategies. They would then need to prove that they are more sustainable and innovate their techniques to achieve this. Therefore, the boom in green investment can be used to tidy up the mining industry and keep the cleantech bubble afloat.

The post Cleantech boom 2.0: Does mining have a place? appeared first on Mining Technology.

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Canstar Joins the Newfoundland.Gold Alliance

Toronto, Ontario – TheNewswire – January 19, 2022 – CANSTAR RESOURCES INC. (TSXV:ROX) (OTC:CSRNF) (“Canstar” or the "Company") is pleased to announce…

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Toronto, Ontario – TheNewswire – January 19, 2022 – CANSTAR RESOURCES INC. (TSXV:ROX) (OTC:CSRNF) (“Canstar” or the “Company”) is pleased to announce that it has joined the Newfoundland.Gold marketing alliance of industry leaders. Newfoundland.Gold is a strategic marketing alliance comprised of gold exploration and mining companies focused on the advancement of the mineral sector in Canada’s Newfoundland and Labrador province. Collectively these industry leaders are committed to bringing awareness to an exciting and supportive jurisdiction while generating shareholder value through responsible and innovative exploration and development.

Rob Bruggeman, President & CEO of Canstar, commented: “Recent discoveries in central Newfoundland suggest that this region could be a major new Canadian gold district and we are excited to be a part of that.  Joining the Newfoundland.Gold marketing alliance will help us bring more attention to gold exploration activities taking place in Newfoundland.  The alliance also provides a platform for technical collaboration between member companies, which could help accelerate new gold discoveries.”

 

About Canstar Resources Inc.

Canstar is focused on the discovery and development of economic mineral deposits in Newfoundland and Labrador, Canada. Canstar has an option to acquire a 100% interest in the Golden Baie Project, a large claim package (62,175 hectares) with recently discovered, multiple outcropping gold occurrences on a major structural trend in south Newfoundland. The Company also holds the Buchans-Mary March project and other mineral exploration properties in Newfoundland. Canstar Resources is based in Toronto, Canada, and is listed on the TSX Venture Exchange under the symbol ROX and trades on the OTCPK under the symbol CSRNF.

 

About Newfoundland.Gold

Newfoundland.Gold is a strategic marketing alliance comprised of gold exploration and mining companies focused on the advancement of the mineral sector in Canada’s Newfoundland. Collectively these industry leaders are committed to bringing awareness to an exciting and supportive jurisdiction while generating shareholder value through responsible and innovative exploration and development.

 

Newfoundland.Gold is a member of a collective marketing alliance, NLMines.com, focused on bringing awareness to the collective exploration and mining industry in Canada’s Newfoundland & Labrador. Newfoundland.Gold is open to all exploration and mining companies which have a primary focus on exploration or mining activities in Canada’s Newfoundland.    

 

For more information about Newfoundland.Gold:

214-304-9552

[email protected]

www.newfoundland.gold

@GoldnNFLD

 

For further information, please contact:

Rob Bruggeman P.Eng., CFA

[email protected]

www.canstarresources.com

@Canstar_ROX

 

Forward-Looking Statements

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

 

This News Release includes certain “forward-looking statements” which are not comprised of historical facts. Forward looking statements include estimates and statements that describe the Company’s future plans, objectives or goals, including words to the effect that the Company or management expects a stated condition or result to occur. Forward looking statements may be identified by such terms as “believes”, “anticipates”, “expects”, “estimates”, “may”, “could”, “would”, “will”, or “plan”. Since forward-looking statements are based on assumptions and address future events and conditions, by their very nature they involve inherent risks and uncertainties. Although these statements are based on information currently available to the Company, the Company provides no assurance that actual results will meet management’s expectations. Risks, uncertainties and other factors involved with forward-looking information could cause actual events, results, performance, prospects and opportunities to differ materially from those expressed or implied by such forward-looking information. Forward looking information in this news release includes, but is not limited to, the Company’s objectives, goals or future plans, statements, exploration results, potential mineralization, the estimation of mineral resources, exploration and mine development plans, timing of the commencement of operations and estimates of market conditions. Factors that could cause actual results to differ materially from such forward-looking information include, but are not limited to failure to identify mineral resources, failure to convert estimated mineral resources to reserves, the inability to complete a feasibility study which recommends a production decision, the preliminary nature of metallurgical test results, delays in obtaining or failures to obtain required governmental, environmental or other project approvals, political risks, inability to fulfill the duty to accommodate First Nations and other indigenous peoples, uncertainties relating to the availability and costs of financing needed in the future, changes in equity markets, inflation, changes in exchange rates, fluctuations in commodity prices, delays in the development of projects, capital and operating costs varying significantly from estimates and the other risks involved in the mineral exploration and development industry, an inability to predict and counteract the effects of COVID-19 on the business of the Company, including but not limited to the effects of COVID-19 on the price of commodities, capital market conditions, restriction on labour and international travel and supply chains, and those risks set out in the Company’s public documents filed on SEDAR. Although the Company believes that the assumptions and factors used in preparing the forward-looking information in this news release are reasonable, undue reliance should not be placed on such information, which only applies as of the date of this news release, and no assurance can be given that such events will occur in the disclosed time frames or at all. The Company disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, other than as required by law.

 

Copyright (c) 2022 TheNewswire – All rights reserved.

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