Buy Low Now

Written by Gerardo Del Real
Posted July 29, 2019

European Central Bank (ECB) President Mario Draghi publicly announced last week that the outlook is getting “worse and worse,” to no surprise of anyone with a calculator and some basic critical thinking skills.

The ECB decided to hold rates steady last week but made it clear that stimulus from the ECB is on the way.

The European Central Bank president also said last Thursday that it is unquestionable that governments will need to pitch in with fiscal measures if conditions keep deteriorating.

An eight-year term filled with negative interest rates and asset purchases has failed to spark anything resembling the lofty inflationary targets set by the ECB.

Meanwhile in Germany, Chancellor Angela Merkel’s administration ran a record budget surplus in 2018 of 1.7% of GDP, or 58 billion euros ($65 billion), and the debt burden is seen dropping to 51% of GDP in 2023.

This despite the 10-year bond hitting a record low -0.40% and a contracting manufacturing sector.

Remember a few weeks ago when I explained to you that incoming ECB President Christine Lagarde would be an advocate for more stimulus and increased asset purchases?

She recently stated that in the next slump the world will need “fiscal stimulus wherever possible.”

The ECB is trapped. It cannot raise rates without crippling EU member state budgets.

Meanwhile, the European Central Bank says it and 21 national central banks in Europe are letting an agreement regulating gold sales expire, saying the deal struck two decades ago to stabilize the market for the precious metal is no longer needed.

The fourth Central Bank Gold Agreement would not be renewed when it expires Sept. 26.

The first agreement was signed in 1999 amid concerns about the impact of “uncoordinated" sales by central banks from reserves mostly concentrated in rich European and North American countries.

Central banks agreed to coordinate transactions to keep the price from swinging excessively.

Sounds like manipulation to me, but that’s a story for another day.

The reason given why the deal was abandoned? Simple, it hasn’t sold significant amounts of gold for nearly a decade, eliminating the need for the deal.

The devil is in the details. What it really means is that central banks don’t plan on selling significant amounts of gold into the market anytime soon.

That bodes well for the yellow metal as it’s the equivalent of an unsophisticated seller removed from the market.

At the end of 2018, central banks collectively held around 33,200 tons of gold, about one fifth of the gold ever mined, according to the World Gold Council.

In the silver space, money managers’ net long in silver futures jumped to over 51,000 contracts from just shy of 28,000 the week before.

If that wasn’t impressive enough, the net silver position is now more than triple the just over 15,000 contracts from two weeks ago.

All eyes are on the Fed this Wednesday as it is expected that we will see the first interest rate cut in a decade.

As I keep repeating, in the end it won’t matter.

What you should be doing is going through the bargain bin of juniors that still aren’t reacting to the new gold bull market.

Buy low, sell high. This is the buy low part. Get it done.

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.

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