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The Investment I’m Most Grateful For

Summary:
I hope all of my American readers and subscribers had a safe, happy Thanksgiving Day. This year has been exceptionally challenging for a variety of reasons, but I believe there’s still a whole lot to be thankful for. I trust you were able to spend some time with friends and family, whether in person or over Zoom, and found the time to count your blessings. Americans appeared to buck Thanksgiving travel warnings from the Centers for Disease Control and Prevention (CDC), with the number of commercial air passengers hitting a new pandemic high. Nearly 1.05 million passengers took to the skies last Sunday, beating the previous record of 1.03 million people on October 18. That figure was beaten again on Wednesday, when 1.07 million people were screened to fly. One of the things I’m most

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I hope all of my American readers and subscribers had a safe, happy Thanksgiving Day. This year has been exceptionally challenging for a variety of reasons, but I believe there’s still a whole lot to be thankful for. I trust you were able to spend some time with friends and family, whether in person or over Zoom, and found the time to count your blessings.

Americans appeared to buck Thanksgiving travel warnings from the Centers for Disease Control and Prevention (CDC), with the number of commercial air passengers hitting a new pandemic high. Nearly 1.05 million passengers took to the skies last Sunday, beating the previous record of 1.03 million people on October 18. That figure was beaten again on Wednesday, when 1.07 million people were screened to fly.

The Investment I’m Most Grateful For

One of the things I’m most grateful for is how well HIVE Blockchain Technologies has done over the past 18 months. As I’m sure many of you know, I serve as HIVE’s interim executive chairman, and U.S. Global Investors (NASDAQ: GROW) owns 10 million shares of the company, the very first publicly traded cryptocurrency mining firm.

Back in June 2019, HIVE managed to settle all disputes with Genesis Mining, bringing back transparency, accountability and responsibility. Basic corporate governance, in other words.

The settlement agreement also allowed us to drive down costs. This, coupled with higher Ethereum and crypto prices, means that HIVE is doing better now than ever before. 2020 has been marked by healthy expansion in mining capacity, the most recent example being HIVE’s acquisition of a data center campus in Grand Falls, New Brunswick, that will give the company access to an additional 50 megawatts (MW) of low-cost green energy.

So far this year, HIVE shares have soared an incredible 715%, well past Ethereum’s gain of 273%. This is very positive news for shareholders not just of HIVE but also GROW. Cryptocurrency prices remain highly volatile, the same as shares of HIVE, which move in the same direction as Ethereum about 90% of the time.

The Investment I’m Most Grateful For

With that, I invite you to join us this Monday for the HIVE earnings webcast for the fiscal quarter ended September 30. This quarter represents a full year since the company has been 100% in the driver’s seat of its operations, and though I obviously can’t give any details away right now, I’m very excited for you to hear them yourself. STAY TUNED.

Gold Starting to Look Like a Buy

The price of bitcoin swung wildly this week, along with gold, flirting with its all-time high on Wednesday before plunging more than $3,000. The digital currency looked ready for a correction after hovering in overbought territory for about a month, according to the 14-day relative strength index (RSI).

Gold, on the other hand, is starting to look oversold, especially after today’s selloff on hopes of a vaccine and broad economic recovery.

The yellow metal has also been under pressure from rising bond yields. The yield on the 10-year Treasury has been on the upswing, and as I’ve explained a number of times before, this can have a huge impact on the direction of gold prices. Take a look below. Gold hit its all-time high of nearly $2,070 an ounce on August 6, when the 10-year yield traded as low as 0.5%. Remember, this is the nominal yield. Adjusted for inflation, it’s below zero.

The Investment I’m Most Grateful For

I believe gold is a buy at these prices. The following 20-day and 60-day oscillator charts bear this out.

Looking at the 20-day, gold was trading down close to 2 standard deviations from its five-year mean, meaning its well within the “buy” range. The data says we may see a rally in prices in the short term.

The Investment I’m Most Grateful For

The 60-day oscillator chart also shows that gold is oversold, though not as pronounced. The metal was down 1.5 standard deviations from its five-year mean. This is about as oversold as gold has been since September 2018.

The Investment I’m Most Grateful For

Gold Miners Reporting Record Free Cash Flow

Like HIVE, gold miners have put cost controls in place as the price of the underlying metal rose to new all-time highs. This has resulted in record free cash flow, according to Metals Focus.

The Investment I’m Most Grateful For

In a report dated November 25, the London-based group said that cash flow after capital expenditures for the world’s leading gold miners reached a record high of $4.8 billion in the third quarter of this year. That’s a significant increase of $2.7 billion from the previous quarter, an even bigger increase of $3.3 billion from the same quarter a year ago.

According to Metals Focus, “costs have been contained, with companies remaining focused on maintaining operating and capital cost discipline to maximize value from their [existing] mines.”

This is very good news for investors as this may mean higher shareholder payouts in the future.

Still Haven’t Had a Chance to Watch the Mining Expo?

Many of you still haven’t gotten a chance to watch the Virtual Junior Mining Expo, which I co-hosted recently with StreetSmart Live! The event was a huge success, bringing 10 of the most exciting junior metal producers and explorers to curious investors such as yourself.

For those of you who missed it or want to watch it again, a recording is now available. Just click here!

Gold Market

This week spot gold closed at $1,788.39, down $82.60 per ounce, or 4.41%. Gold stocks, as measured by the NYSE Arca Gold Miners Index, ended the week lower by 4.18%. The S&P/TSX Venture Index came in up 0.50%. The U.S. Trade-Weighted Dollar fell 0.61%.

Date Event Survey Actual Prior
Nov-24 Hong Kong Exports YoY 9.0% -1.1% 9.1%
Nov-24 Conf. Board Consumer Confidence 98.0 96.1 101.4
Nov-25 Initial Jobless Claims 730k 778k 748k
Nov-25 GDP Annualized QoQ 33.1% 33.1% 33.1%
Nov-25 Durable Goods Orders 0.8% 1.3% 2.1%
Nov-25 New Home Sales 975k 999k 1002k
Nov-30 Germany CPI YoY -0.2% -0.2%
Nov-30 Caixin China PMI Mfg 53.5 53.6
Dec-1 Eurozone CPI Core YoY 0.2% 0.2%
Dec-1 ISM Manufacturing 57.8 59.3
Dec-2 ADP Employment Claims 430k 365k
Dec-3 Initial Jobless Claims 768k 778k
Dec-4 Change in Nonfarm Payrolls 500k 638k
Dec-4 Durable Goods Orders 1.3%

Strengths

  • The best performing precious metal for the week was palladium, up 4.26%, perhaps on optimism for a stronger economy. Gold rose for the first time in three days on Wednesday, before ending the week lower. Applications for jobless benefits unexpectedly rose, demonstrating the new surge in virus cases in spurring more layoffs, writes Bloomberg’s Yvonne Yue Li.
  • Bullion looks relatively cheap, according to Goldman Sachs. Analysts including Mikhail Sprogis and Jeffrey Currie wrote in a report that the recent gold correction is a “churn versus a turn” and prices should climb when more evidence of inflation emerges. “If we look at the ratio of value of mined gold supply to EM dollar GDP, which is our preferred measure of wealth, we see that the most recent move makes gold look relatively cheap.”
  • Polyus shares rose as much as 3.7% in Moscow trading on Tuesday after announcing the repurchase of as much as $343 million in shares. Elemental Royalties Corp, a gold-focused royalty company, doubled in size after an agreement to acquire three gold royalties and one non-gold royalty in Australia from a subsidiary of South32 Limited.

Weaknesses

  • The worst performing precious metal for the week was silver, down 6.63%, to be expected with the weak gold tape.
  • Gold tumbled to just above $1,800 an ounce as the Dow Jones hit 30,000 for the first time on Tuesday. Ole Hansen, head of commodity strategy at Saxo Bank, says that with vaccine news occupying the headlines and other positive economic data, gold is “likely to struggle.” Bullion then fell below the key $1,800 level on Friday.
  • The largest gold-backed ETF, the SPDR Gold Trust, is headed for its largest monthly outflow since 2017. The ETF has already lost over 50 tons of bullion so far in November. Gold is heading for a fourth straight monthly decline and ETFs are set for the first month of outflows this year, after holdings hit a record in October.

The Investment I’m Most Grateful For

Opportunities

  • Credit Suisse wrote that the gold selloff after positive vaccine news is just “a bump in the road” as fundamentals are still intact to support the precious metal. Analyst Fahad Tariq said the factors in place include a weakening U.S. dollar, accommodative monetary and fiscal policy and lower real rates. Canaccord analyst Carey MacRury writes that gold’s selloff is just a “price correction rather than the start of a bear market.” MacRury added that reinflation will be the key driver of bullion over the next six to 12 months and recommends buying on the dips.
  • World Gold Council (WGC) chief market strategist John Reade said at a conference this week that the virus vaccine will not cure the economy and that a recovery will take time and further monetary action. Reade emphasizes that a combination of risks, low interest rates and positive price momentum are among the factors supporting gold investment demand. “We continue to advocate that gold should make a strategic component for portfolios, even more so after the recent correction.”
  • President-elect Joe Biden’s choice of former Fed chair Janet Yellen as Treasury secretary could set up another big round of stimulus for the U.S. economy. This spending and lower-for-longer interest rates could be a big boon for gold.

Threats

  • According to research from International Crisis Group, more than $1.5 billion worth of gold is smuggled out of Zimbabwe each year, depriving the stricken economy of crucial foreign-exchange revenue. The report noted how gold is illegally shipped from small-scale miners to Dubai. Zimbabwean law requires miners to sell their gold to the central bank, paying 70% in dollars and the rest in local currency, which is worthless outside the country and is below black-market rates. Payments to these miners are “considerably lower” than the spot price of gold, prompting sellers to look for more lucrative markets.
  • Iamgold is preparing to temporarily lay off 70% of its underground workforce at its Westwood gold mine after a seismic event disrupted operations. Bloomberg reports the cause of the seismic event is unknown and under investigation. 
  • Gold bull Eddie van der Walt published a bearish macro view on gold and is looking for a price collapse of more than 9%. Bloomberg’s Mark Cudmore notes that gold has lost one of its biggest supporters. The bearish views come amid a lack of demand for usual sources – in this case the outflows from gold-backed ETFs.

Index Summary

  • The major market indices finished up this week. The Dow Jones Industrial Average gained 2.21%. The S&P 500 Stock Index rose 2.20%, while the Nasdaq Composite climbed 2.96%. The Russell 2000 small capitalization index gained 3.84% this week.
  • The Hang Seng Composite gained 1.23% this week; while Taiwan was up 1.10% and the KOSPI rose 3.13%.
  • The 10-year Treasury bond yield rose 2 basis points to 0.843%.

Read the remainder of the article at http://www.usfunds.com/investor-library/investor-alert/the-investment-im-most-grateful-for/

By Frank Holmes
CEO and Chief Investment Officer
U.S. Global Investors

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