Sneak Peek: Junior Mining Monthly on Gold, Silver, Copper, and China

Written by Adam English
Posted October 9, 2019

Today we're bringing you the introduction to the latest issue of Junior Mining Monthly by Gerardo Del Real.

We've seen some serious upward swings for precious metals along with some serious contrarian opportunities in base metals, both of which Gerardo regularly covers in detail.

There are even some fantastic opportunities in more exotic metals that we won't see again.

Read on for a sneak peek of Gerardo's coverage.

Take care,

Adam English
Editor, Outsider Club



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Gold continues to be resilient and the pullback I’ve been anticipating has thus far not really materialized.

For the year, gold is trading up nearly 20%.

Technically, gold needs to close above last month's high of $1552 and $1560 in NY Gold Nearest Futures in order to continue higher. On the downside, as long as we hold $1,385 on a closing — not intraday — basis then the march higher remains intact.

Silver, meanwhile, has shown life as gold’s more volatile cousin. What it has failed to do is break out. Unlike gold, which has broken out of its sideways pattern, silver needs to break $20.57/oz. in order to convince me the rally is sustainable.

As far as the Fed and monetary policy goes, expect another rate cut before the year is over.

I wrote about the Fed intervention earlier this month so I won’t rehash those details. You can read that here.

I will repeat the main takeaways. There is serious dissent among all central bank committees about what course of action is best. Spoiler alert, they’re going to continue to lower rates.

Had the Fed not intervened, there would have been a serious dislocation. Short-term rates spiking to 10% is all the proof you need.

Lastly, there is a global shortage of dollars. That is why I’ve said for years that the U.S. is the cleanest dirty shirt in the laundry basket. It’s also why I’ve explained repeatedly that, in order for gold’s move to be sustainable, it needs to be able to rise alongside the dollar.

So far, so good.

What’s not so good is that quantitative tightening has cut the amount of dollar reserves and that became painfully clear with the spike in short-term rates.

Foreign holdings of U.S. debt increased from an estimated $6.2 trillion to $6.6 trillion in the past year (July 2018 to July 2019).

Expect lower rates. Expect one more cut this year and possibly one in early 2020. As the election nears closer the Fed will only cut if it absolutely has to.

Overseas, the ECB has a new incoming president, Ms. Christine Lagarde, and I don’t think it’ll be long before she presses the gas in a desperate effort to avoid the unavoidable. Tick, tock... It’s not going to work.

Just like trade wars don’t work, which brings me to one of two favorite bear markets — copper. 

China & Copper

The trade war with China has resulted in casualties on both sides but, as I said when this started, trade wars are not sustainable and the U.S. is in an enviable position of power if it comes down to a war of attrition.

Global mined copper input dropped by 1.4% in the first six months of the year. The drop was mostly due to weather disruptions in Chile and a drastic drop in Indonesian copper concentrate output.

Indonesia’s copper concentrate output fell 55% due to the transition of Grasberg into block caving and the Batu Hijau mine to Phase 7.

The global refined copper market ended the first half of 2019 with a supply deficit of about 220,000 tonnes.

Despite lower supply the real distortion has come from the demand side as the trade war with China has put pressure on base metal prices, the populace on both sides, and on Chinese President Xi Jinping.

Between protests in Hong Kong, rising food prices, and multi-decade low growth, China is under pressure to negotiate an acceptable deal.

A large part of the discontent from the Chinese populace is coming as a result of rising pork prices.

Swine fever pushed up the price of pork nearly 50% in August. There is a pork shortage of approximately 10 million tons.

On the demand side the mega-trend that is the “electrification of everything” is as real as it was when I started writing about it a few years ago.

The latest example is Amazon’s recent pledge to reach 80% renewable energy use by 2024 and 100% by 2030, up from 40% today.

Amazon has placed an order of 100,000 electric vehicles from a startup it has backed — Rivian Automotive. The first Rivian vehicles will arrive in 2021.

A trade deal will be reached. When it does, expect the copper price and the better copper names to resume the upward momentum they had before the tit-for-tat.

Until then, ease into the better copper names in the space.

To your wealth,

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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.

 



To get more insights and full issues from Gerardo, check out this Special Presentation from Junior Mining Monthly.

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