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“Stock-market bulls argue that Fed rate hikes are bullish for stocks,
because the Fed wouldn’t dare raise rates unless the underlying US economy is
really improving.
Meanwhile the stock-market bears believe Fed rate hikes are bearish
for stocks because they mark the end of the easiest monetary policies on
record which levitated the stock markets. It is rather amusing to see stock
markets’ historical action during past Fed-rate-hike cycles support neither
thesis!
If the SPX’s performance during all 11 Fed-rate-hike cycles is
averaged together, it is almost a wash with a mere 2.8% gain.
Gold’s average gain during these same 11 Fed-rate-hike cycles of the
modern era was 26.9%, nearly an order of magnitude greater than the stock
markets’! Gold also rallied in 6 of these 11, but by a far-greater
average of 61.0%. So while stock markets’ performance in Fed-rate-hike
cycles has been ambiguous and directionless, gold’s has proved just the
opposite. Stock-market bulls are betting on the wrong horse.” Stocks
in Rate-Hike Cycles, Adam Hamilton
Loonie Road Kill
Because Canada relies on exports of commodities the multi-year decline in
the prices of metals, minerals, natural gas and oil wrecked havoc on the
Canadian dollar under the Conservatives.
A Federal Liberal win in Canada’s last election ensured the ‘loonie’ will
be crushed further. The Liberals promised deficits less than $10 billion,
within one month after being elected, they reneged on that promise. The
Libertarian Party now says Liberal deficits could now be as high as $25
billion.
The Bank of Canada’s trend-setting rate is currently 0.5 per cent. It
could go to -0.5.
“What we’re saying today is that we now believe that we have roughly a
hundred basis points’ worth of room to manoeuvre underneath our current
interest setting.” Stephen Poloz, governor of the Bank of Canada
Another of the policies that could be implemented is stimulating the
economy through quantitative easing.
Does zero bound interest rates (and perhaps lower), quantitative easing
(QE) and running massive deficits sound familiar?
Regardless of gold’s performance over the last few years, and its near
term performance in reaction to the Fed’s rate increase(s), gold’s
performance is only negative in USD terms.
Gold’s Bottom Line? In no other currency but the U.S.’s is gold in a bear
market. As I write this gold is priced at US$1,065.85 an oz, in Cdn$’s gold
is trading for $1,478.87 an oz, a difference of Cdn$413.02. That’s an
enormous effect on your bottom line if you’re a soon to be miner or already
mining gold in Canada – costs are priced Canadian, profits are priced
American.
 
With disease, famine, drought, floods, climate change, heightened
political tension, outright war, a normalization of U.S. interest rates and
economic collapse all bubbling together to make a witch’s nasty brew,
precious metals look attractive once again.
Conclusion
A Junior exploration company’s place in the food chain is to acquire and
explore properties. Their job is to make the discoveries that the mid-tiers
and majors takeover and turn into mines.
The bottom line for precious metal investors is that junior exploration
companies own the majority of the world’s future gold mines.
This author believes that there is exceptional, and as of yet,
undiscovered value in junior companies with quality assets in safe stable
countries.
Investors seeking leverage to precious metals should focus on these
companies as they have historically provided the best exposure to a rising
precious metals price environment.
Have you got gold and a precious metal junior, with an excellent asset in
Canada on your radar screen? I do.
If you don’t, maybe you should.
Richard lives with his family on a 160 acre ranch in northern British
Columbia. He invests in the resource and biotechnology/pharmaceutical sectors
and is the owner of Aheadoftheherd.com. His articles have been published on
over 400 websites, including:
WallStreetJournal, USAToday, NationalPost, Lewrockwell, MontrealGazette,
VancouverSun, CBSnews, HuffingtonPost, Beforeitsnews, Londonthenews,
Wealthwire, CalgaryHerald, Forbes, Dallasnews, SGTreport, Vantagewire,
Indiatimes, Ninemsn, Ibtimes, Businessweek, HongKongHerald, Moneytalks,
SeekingAlpha, BusinessInsider, Investing.com, MSN.com and the Association of
Mining Analysts.
Please visit www.aheadoftheherd.com
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***
Legal Notice / Disclaimer
This document is not and should not be construed as an offer to sell or
the solicitation of an offer to purchase or subscribe for any investment.
Richard Mills has based this document on information obtained from sources
he believes to be reliable but which has not been independently verified.
Richard Mills makes no guarantee, representation or warranty and accepts
no responsibility or liability as to its accuracy or completeness.
Expressions of opinion are those of Richard Mills only and are subject to
change without notice. Richard Mills assumes no warranty, liability or
guarantee for the current relevance, correctness or completeness of any information
provided within this Report and will not be held liable for the consequence
of reliance upon any opinion or statement contained herein or any omission.
Furthermore, I, Richard Mills, assume no liability for any direct or
indirect loss or damage or, in particular, for lost profit, which you may
incur as a result of the use and existence of the information provided within
this Report.
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