FIAT-PRINTING JUBILEE AND BACKWARDS ECONOMICS: Gold Has Everything It Needs Now!
The drivers for gold in the 2021 year are clear, in my opinion.
Starting on June 28, banks will require a provable one-to-one ratio of physical gold. This has to do with Basel III rules that are being enacted this year.
This is expected to lead to a sanctioned gold reevaluation, making unallocated paper gold riskier and more expensive while ultimately driving physical gold demand, and therefore the price, much higher.
Another driver is low Treasury bond yields. The 10-year U.S. Treasury note yield reached 1.5% earlier this year and rattled mainstream headlines, but it has stabilized at that level and the Federal Reserve has made it abundantly clear that raising interest rates WON’T be a priority.
As for the Fed, its record balance of nearly $8 trillion has nearly doubled in size since March 2020, mainly through its massive $120 billion-a-month program to buy seemingly “risk-free” Treasuries and agency mortgage bonds.
These figures are vital information for gold investors because each fresh round of quantitative easing (even if Fed Chairman Jerome Powell refuses to call it that) makes government bonds less attractive as a safe-haven investment and gold, in comparison, looks better than ever.
We can compare the Fed’s desperate asset-buying binge to an airplane heading straight into the sky but running out of fuel. We’ve never landed the airplane to refuel, and Jay Powell continues to look for ways to do this in the air.
The 50 states and Washington, D.C. are set to receive $195 billion, and local officials are salivating at the thought of spending all that money.
From broadband Internet connectivity to water projects and even free college tuition, governors and other politicians have effectively already spent the funds before they’ve received them.
It’s all part of a helicopter money scheme of epic proportions: if you can believe it, the federal government has pumped about $4 trillion into the U.S. economy since the pandemic began in March of 2020.
That figure will soon be raised to $6 trillion since another $2 trillion of Congress’ approved COVID relief packages has yet to be disbursed, according to the Committee for a Responsible Federal Budget.
There’s a whole lot of pent-up energy in all of the stimulus that’s been printed up until now. Expect more spending in 2021 – spending by individuals, businesses, local governments and undoubtedly the federal government as well.
Naturally, all of this spending will have consequences – it’s already having consequences, in fact. Unfortunately, some folks who think they’re getting “free” money from the government don’t realize that there’s a substantial cost in terms of higher consumer prices.
Year-over-year, the prices of essential goods are absolutely skyrocketing:
Gasoline: Up 47%
Crude oil: Up 31%
Heating Oil: Up 8%
Lumber: Up 70%
Corn: Up 54%
Wheat: Up 41%
Sugar: Up 14%
Cotton: Up 12%
Lean Hogs: Up 56%
Beef: Up 12%
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This puts the American middle class in the hot seat but it also puts gold owners in the driver’s seat. It’s a terrible time to hold large amounts of cash for the long-term, but what’s bad for the dollar is a powerful tailwind for gold.
I truly do believe that the mining stocks will give us the levered exposure to the underlying metals when gold and silver have their material outsized move.
I’ve recently covered Blue Lagoon Resources (CSE: BLLG & US: BLAGF), and I feel privileged to have been introduced to the founder of the company, Rana Vig.
Rana Vig was able to purchase their flagship project, the Dome Mountain Gold Mine Project, for CAD$27M in a SHARE-ONLY DEAL here previous operators had spent CAD$68M!
Notice that the company’s market cap today is close to HALF of what was spent on Dome Mountain to date!
Unlike other projects that may be far out and remote, this project is close to infrastructure and talent – less than a 50-minute drive from a local town.
What I believe to be most notable is that the company is at the final sprinting moment of the marathon in a gold bull market environment.
The company is within spitting distance from completing the regulatory hurdles that come before deciding whether or not to put it into production later this year. To our knowledge, there are very few companies anywhere in the world that are within 90-120 days from making a decision to launch a new gold mine!
Blue Lagoon has just released news making it public that the company is ready to ship 6,000+ tonnes of high-grade mineralized material to the mill for processing.
Read the full PR here…
Blue Lagoon has already spent the CAD$2 million it needed to get the project operational and to the point where they can make a production decision in the next 3-4 months, so we are extremely close to a major milestone.
In fact, Rana Vig, who already owned about 20% of the outstanding shares, along with his associates and family members, recently added more. This is according to a news release dated Feb 22, 2021, with the heading “Blue Lagoon President & CEO Rana Vig adds 1 Million shares to his personal position.”
This is a testament to management’s belief in the company and where we are in this cycle.
Rana Vig is extremely talented, with over 30 years of business experience along with being involved with several publicly traded companies since 2010.
If you invested in gold and silver and believe in the thesis for higher prices, consider further leveraged exposure by investing in the underlying resource companies.
Consider shares of Blue Lagoon Resources (CAD: BLLG & US: BLAGF).
It’s an abundance of printed cash that will find its way into hard assets, which will be sucking in capital like a black hole for fiat currencies over time.
Do yourself a favor and research Blue Lagoon Resources (CAD: BLLG & US: BLAGF) for yourself.
$5,000 gold may seem like a fantasy, but be open to the unprecedented. We already know Bank of America has a conservative target of $3,000 for gold.
I believe gold will continue to outperform the stock market in this environment. Put another way, I believe there to be less risk in holding gold vs. the general stock market going forward here.
Gold has once again recently closed above $1,900 per ounce as the U.S. dollar loses more ground.
I’m not going to beat around the bush; these are the fundamental reasons why I’m bullish on resource companies with exposure to gold.
Chief Editor, CrushTheStreet.com
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