by James Burgess, Wolf Street:
Global political tensions have not been this palpable since 9/11, when gold prices jumped 32.87% in a single day, and the amount of uncertainty being ushered in for 2017 promises to be great for the precious metal—our age-hold hedge against chaos and instability.
For a fully-funded junior gold miner backed by heavy hitters in one of the world’s hottest venues–Fiore Exploration Ltd (TSXV–F.V) the timing is excellent, the production costs appealing, and the future golden.
What we have right now is a situation in which gold prices are stable, but mining and exploration, which has been all but halted, is very cheap, leaving all kinds of plays up for grabs.
Combine this with the fact that an unpredictable and inflation-bent Trump is preparing to take office in the U.S., the British prime minister is set to trigger a ‘hard Brexit’, China’s economic problems are mounting and most of the world is explosively tense, and you have a situation in which gold is set for a premium.
Gold is the ultimate safe-haven and the ultimate means of payment when all else fails, or when the uncertainty is high enough to fear this failure.
The transition is where billions are made—and the turning point in this story is upon us.
Here is where you look for the small-cap that defies all the risky norms of this class of precious metals miner.
This is exactly where you find Fiore, a company that is backed by a miner so big that raising capital is as easy as snapping your fingers; a company that has chosen a prime jurisdiction right next to an operating gold mine; a company whose management team knows gold better than anyone.
Here are 5 reasons to keep a close eye on this small-cap, heavy hitter:
1. Precious Again: Are you Ready for the Gold Rebound?
Americans are buying gold like never before. U.S. demand for gold bars and coins was up a massive 207% in Q3 2016.
According to the World Gold Council, this surging demand signals a level of interest in gold investment “not seen since the global financial crisis.”
Gold is being rendered even more attractive for Americans amid economic uncertainty most succinctly expressed by billionaire investor Warren Buffett, of Berkshire Hathaway Inc. (NYSE:BRK.A), who noted that the U.S. is “less well equipped to handle a financial crisis today than we were in 2008.”
Central Banks the world over have also been stockpiling the precious metal since 2008, at levels not seen since before 1970.
One of the world’s biggest legends in mining, Canadian billionaire Frank Giustra, who is also the founder of Lionsgate Entertainment Corporation (NYSE:LGF), is pouncing on gold voraciously, and where his gold money goes, markets tend to follow. He’s also the heavy hitter backing Fiore.
Still, gold is under a bit of pressure, and the U.S. presidential elections certainly didn’t help. After climbing back up during the first three quarters of this year to be one of the best performing assets of the year, gold experienced a volatile few days, taking a dive on the ‘surprise’ victory of Trump, with a few unexplained ups and downs, largely because no one could quite figure out what the President-elect would mean for the precious metal.
Finally, during the last week of November, prices stabilized and are presently up about 10% year to date. It’s a solid price for miners—particularly for Fiore—but it’s only the beginning of a new era.
What comes next is what makes billionaires, because gold stocks are still cheap while the fundamentals are good. Kinross Gold (NYSE:KCG), Newmont Mining (NYSE:NEM), Barrick Gold (NYSE:ABX) and IAMGold (NYSE:IAG) are all trading at less than 10 times cash flow from operations per share.
Even with the modest recovery in prices this year, we saw TSX Venture gold stocks create millionaires over night by tripling and quadrupling in value. So imagine what will happen when Trump’s inflationary policies set in, and the world reels from a geopolitical uncertainty that is palpable…
While Election Day and the day after had markets in a state of panicked confusion, the jury now seems to have deliberated, and the verdict is that Trump will be good for gold in two very specific ways:
• Inflation—gold loves it. More to the point, Trump’s build, build, build infrastructure plans and ambitious defense spending visions are phenomenally inflationary. But it is also possible that these policies will not lead to any long-term sustainable growth, which would in turn lead to stagflation, which is an even better friend to gold.
• Geopolitics—gold prices feed on risk, and there will be plenty of it. Even just a change in government creates geopolitical uncertainty, but in this case the situation is more extreme. Trump has indicated he will take an aggressive stance on issues central to West Asia, and in general, we’re looking at a world in which the U.S. may meddle much less and cooperate much less. The power vacuums that ensue are where the uncertainty lies. From the victory of a very divisive U.S. president and the rise of right-wing parties in Europe, to Brexit, China’s economic challenges and Russia’s warmongering, this is the uncertainty that gold loves. Gold is always put on a premium pedestal in times of geopolitical uncertainty, even when it’s not chaos.
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