A Golden 2019?

Written by Gerardo Del Real
Posted January 7, 2019 at 3:50PM

It’s no secret that 2018 was a challenging year for most of us who make our living sharing insight, research, and speculation on junior resource stocks.

Tax-loss selling at the end of 2018 was a nice last kick in the behind to close out the year.

The first week of 2019, however, is off to a very good start with many of the better companies surging 30-40, even 100% in less than two weeks.

Midas Gold (TSX-MAX) (OTC: MDRPF) — a prime takeout target — skyrocketed over 50% from the C$0.65 level just two weeks ago to C$1.10 on heavier-than-average volume.

Advantage Lithium (TSX-V: AAL) (OTC: AVLIF) has skyrocketed from C$0.40 to C$0.62 during that same time period. Good for over 50%.

Nevada Sunrise Gold (TSX-V: NEV) (OTC: NVSGF) has surged from C$0.06 to C$0.14 the past two weeks.

Did Midas Gold have material news? No.

Did Advantage Lithium’s Cauchari asset suddenly become 50% more valuable? No.

Most quality juniors are quite simply bouncing off 52-week lows and despite the recent moves there’s still a lot of runway left.

Advantage and Nevada Sunrise, for example, are each up over 50% the past few weeks but still down 50% from 52-week highs.

Both have assets — at different stages — that justify market caps much higher than where each currently trades and both have the financial wherewithal to continue to develop those assets.

What is different in 2019 is the macro setup. Gold, for the first time in years, is in a win-win situation.

That doesn’t mean it will go straight up but it does mean that prices will be stable enough to support much higher valuations for companies with good assets.

That should encourage more exploration which, in a perfect world, will lead to more discoveries.

Bloomberg recently reported that global debt has increased from $167 trillion ($113 trillion excluding financial institutions) to $247 trillion ($187 trillion excluding financial institutions). Total debt levels are 320% of global GDP, an increase of around 40% over the last decade.

U.S. government debt is approaching $22 trillion, up from around $9 trillion a decade ago — an increase of 40% of GDP.

If the debt can’t be paid back with 0% money, how will it be paid off with rising rates? It won’t. There will be defaults.

There has to be, but not before we try some good-old-fashioned inflation.

Here at home, not only do I not believe that the Fed will raise rates twice in 2019. I think the Fed blinks again and cuts rates.

The market — not the economy — here in the U.S. threw a tantrum over a quarter rate hike. A quarter rate. Why?

Because it realizes that the growth here at home — though stable — is largely dependent on cheap money. Cheap money it’s gotten used to getting for a decade now.

So either we get more tightening from the Fed, which leads to more volatility, or the Fed pauses and backstops the market as it recently indicated it would.

Both scenarios are positive for gold.

Throw in some chaos from overseas (hi Europe) and we finally have ourselves a gold market to get excited about.

The kind of market I hoped for when I launched JMM and the kind of market that will make buying during 2018 well worth it.

To your wealth,

gerardo-sig

Gerardo Del Real
Editor, Junior Mining Monthly and Junior Mining Trader.

For the past decade, Gerardo Del Real has worked behind-the-scenes providing research, due diligence and advice to large institutional players, fund managers, newsletter writers and some of the most active high net worth investors in the resource space. Now, he is bringing his extensive experience to the public through Outsider Club, Junior Mining Monthly, and Junior Mining Trader. For more about Gerardo, check out his editor page.

*Follow Outsider Club on Facebook and Twitter.

Comments

Investing in Marijuana Without Getting Burned