Trade War Fears Send Ripples Across Markets, But Gold May Have a Silver Lining
LOS ANGELES, June 28, 2018 /PRNewswire/ --
FN Media Group Presents USA News Group News Commentary
As language and actions ratchet up, the potential for a trade war seems to have sent ripples of fear through the markets. One of the areas that may hold harbor from the battle is gold, which is currently off its year high, but could rally based on fear alone.
The outcome from the fear of international trade wars is certain to weigh heavily on gold mining companies including Newmont Mining (NYSE: NEM), Corvus Gold (OTC: CORVF) (TSX: KOR), and Agnico Eagle Mines Ltd. (NYSE: AEM) (TSX: AEM).
Another of the domestic gold group, U.S. Gold Corp., has been moving to shore up its interests in the U.S., thereby evading any battle, and instead offering a solid domestic opportunity. U.S. Gold Corp. (NASDAQ:USAU), which is considered highly undervalued, is centered on production in Wyoming and at the same time exploring a well-known gold trend in Nevada where several majors play host to huge gold deposits.
Trading Words Sets the Stage for Fear
Since Donald Trump assumed the presidency in January 2017, a lot of his efforts have been focused on restructuring trade pacts with other countries that he sees as being unfavorable to the US. This has seen the president impose tariffs against many goods coming from some of our biggest trading partners such as Canada, China and the EU. In reciprocation, these markets have started taxing US exports, creating a ripe environment for a global trade war.
Trade wars are notorious as a catalyst for recessions and under those conditions, the commodity market is highly affected.
Gold, as a store of value, is shaping up as the perfect commodity for the times ahead. Since the beginning of 2018, the metal levelled out from a bullish trend sustained from late 2015 and then went into a downtrend after peaking in April. For experienced gold traders bearish market trends are not a cause for concern, but instead represent a boon in the medium and long term. The dynamics surrounding this trend are highly complex and many amateur investors lose out on some of the greatest opportunities because they do not understand them.
Gold's Tug of War
Financial market experts see two dynamics that are pulling in opposite directions. On one hand, interest hikes by the US Federal Reserve as well as a strengthening dollar have increased the opportunity cost of non-yielding bullion. The Federal Reserve's latest hike of the interest rates by 25 basis points to 2% has applied downward pressure on the price of gold, and further hikes are expected.
Conversely, the rising middle class in both India and China are important growth drivers of demand growth. In India specifically, the second half of the year will be particularly important, being that is the festive and wedding season, gold ornaments and other jewelry items will be in high demand. Other areas of demand include greater need from Russian and Turkish central banks, as well as for use in various high tech and smartphone technologies.
Where Gold Gets a Break
When gold moves down, it creates the opportunity to buy back in at a lower level. This has happened time and again. Here's where gold does catch a break; mining and junior exploration companies could easily be the least expensive option when compared to their potential for immediate upside if gold prices rise.
Analysts suggest that domestic US gold plays may offer some key advantages in this climate, especially those that have cash on hand to develop near term production. That pretty well sums up U.S. Gold Corp. and its US interests.
U.S. Gold is advancing its gold-copper project, the Copper King property in Wyoming, towards pre-feasibility. The company just raised enough capital to complete the entire year's work on this and its other star asset: The Keystone Project.
The Keystone Project is located in North Central Nevada and is a district-scale opportunity with multiple, major gold deposit discovery characteristics. It falls on the prolific Cortez Gold Trend, which one of the world's most highly-prospective mineral trends. It's located just 10 miles from Barrick's massive Cortez Hills Mine Complex.
With two promising projects that are state side, U.S. Gold Corp. represents the model for an emerging gold company that could thrive as trade war fears send gold prices vacillating. If prices rise on fear, they represent an even greater value. If they drop, the company will rely on the strong assets and quality personnel that are building real gold assets.
While the next few months may be unpredictable, one thing appears to be certain: the long term price of gold will always be higher in the future. This makes it one of the most stable investments. Because it exists in rare quantities and new supplies are hard to bring online, the supply-demand dynamics are not as volatile as with other commodities.
In times of economic difficulty, a paradoxical rise in gold value tends to happen. Uncertainty arising from growing trade conflict could result in a similar scenario this time round. In anticipation of a possible boon in the gold market, junior mining companies will certainly be in line for a significant portion of the investment.
After a lull of several years, gold production is expected to pick up significantly starting this year, though it will likely even out in the long term. The relatively quiet gold market has also subdued growth in stock prices of gold mining companies adding to the allure of this potentially good time to find the silver lining in gold.
Gold companies seeking with U.S. and North American Gold interests that will be greatly impacted by gold trends affected by trade include:
Newmont Mining (NYSE: NEM) primarily acquires, develops, explores for, and produces gold. It also explores for silver and copper properties. The company's operations and/or assets are located in the United States, Australia, Peru, Indonesia, Ghana, and Suriname.
Corvus Gold (OTC: CORVF) (TSX: KOR) is a North American gold exploration and development company, focused on its near-term gold-silver mining project at the 100% owned Nevada, North Bullfrog project. The company also controls a number of royalties on other North American exploration properties representing a spectrum of gold, silver and copper projects.
Agnico Eagle Mines Ltd. (NYSE: AEM) (TSX: AEM) engages in the exploration, development, and production of mineral properties in Canada, Finland, and Mexico. Its flagship property is the LaRonde mine located in the Abitibi region of northwestern Quebec, Canada. The LaRonde mine has a proven and probable mineral reserve of approximately 3.05 million ounces of gold.
For a more in-depth look into USAU you can view the article at USA News Group: http://usanewsgroup.com/2018/06/19/the-real-money-for-investors-is-focusing-on-gold-mines-that-are-near-term-producers/
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