The War On Gold Has Begun
The war against gold has already started. And yet nobody, no media, no government or companies talk about it.
To understand the blueprint of geopolitical developments and the upcoming war on gold, all you have to do is focus on the US dollar SWAP lines.
The swap lines are a big clue to what's happening globally. First, let me explain what a swap line is.
And if your preferred mining inventory has significant production in what I consider negative swap countries, there may be a serious risk.
I have spoken to several CEOs of gold companies and gold fund managers.
Neither did anyone know what a SWAP line was, nor the difference between a + SWAP line nation and a –SWAP line nation.
When I guided them through my concept, everyone agreed that the risk factors would soon be unavoidable.
Are there built-in risk premiums for the prices of certain stocks?
Yes. But not at the expense of creeping state ownership and eventual nationalization.
The Latin expression Premeditatio Malorum tells you to prepare for all evils.
And today I'm going to keep you posted on the overlooked risks for some of your largest gold holdings.
I am not friends with this theory. But I have to prepare my portfolio for the risks.
And what happens next could be the difference whether you're making the biggest profits you've ever seen in your life ...
Or watch your gold investments go to zero in this unprecedented time.
I urge you not to buy any more gold stocks until you understand what's really going on behind the scenes ... and how you can benefit from them.
The Importance of Dollar SWAP Lines for Your Gold Investments
It will take longer than most people expect for the global economy to recover from the psychological and financial impact of the pandemic.
But what the pandemic barrier proved was that the world needs MUCH more US dollars.
As the virus spread internationally and the economies closed, the US Federal Reserve became the "lender of last resort" for almost all of the world.
The Fed began providing dollar-SWAP lines to certain governments selected and approved in the United States.
According to the International Monetary Fund (IMF), the global shortage of US dollars could be crippling for many countries - and the global economy.
The SWAP line is set up by the US and this is just the beginning. What a SWAP line means is that the Fed has pre-approved nations as allies who have accepted the terms to withdraw money.
Here is a list of the countries in which the Federal Reserve's SWAP lines exist (consider them the Fed's lifelines):
Bank of Canada
Bank of England
European Central Bank
Bank of Japan
Swiss National Bank
Reserve Bank of Australia
Banco Central do Brasil
Danmarks Nationalbank (Denmark)
Bank of Korea
Banco de Mexico
Reserve Bank of New Zealand
Norges Bank (Norway)
Singapore Monetary Authority
Sveriges Riksbank (Sweden)
For example, the Bank of Japan has drawn over $ 200 billion on its SWAP line. The reason they do this is because they need access to dollars.
This is just beginning and will accelerate at the next sign of problems. And what this really means is that the U.S. government essentially recognized these nations as real allies. Now I call these positive swap line nations (+ SWAP).
This is why this is so important for gold companies:
If you have a producing gold mine or an asset in a positive swap line nation ...
Foreign governments will not want to mess around with companies backed by Uncle Sam, the United States government, and the United States military.
Yes, taxes will increase across the board. This is the only thing that all politicians in all countries have effectively done over time.
The war on gold increases royalties, taxes, and government takeovers.
In some situations, the foreign-owned mining assets will be fully nationalized.
I own gold stocks in negative SWAP countries. What does that mean?
Swap lines, + SWAP lines, SWAP lines…
To really understand what all of this means and the implications of it, let's go back to the US dollar, the world's reserve currency.
If you take all the central banks around the world, the US dollar makes up just over 60% of the currency reserves of all the world's central banks. The second highest is the euro at around 20%, then the Japanese yen.
But really what happened was that during the global financial crisis so much QE and impetus came on the market and from 2000 to 2008 were the golden years of globalization.
The resource-rich emerging economies borrowed heavily to build these infrastructure projects, as well as mining operations and oil programs in US dollars.
It takes many years to build these projects and produce goods in USD. China has incurred a lot of debt to build a manufacturing center in the world and sell it to the United States.
Because of the global financial crisis (all QE, all debt), we saw negative interest rates worldwide, and this is actually deflationary.
While commodity prices are falling in the emerging markets, their currencies are depreciating against the US dollar and gold in these emerging markets.
And even in the euro and the yen, the Canadian dollar and the Australian dollar, they are all devalued against the US dollar and gold.
The dangers of not having a SWAP line
For example, can you imagine Mexico receiving hundreds of billions of SWAP dollars from the United States? then turn around and confiscate an American-backed gold mine (owned by the pension funds) in their country?
Or Sweden? Or Canada?
That will not happen. That would be catastrophic for those countries that are all strong allies of the United States.
Well, a lot of mining managers won't like it, but they have to hear the truth.
If you buy a gold stock with a mining project in a non-SWAP country (I call these nations "SWAP" line nations), you can see that your entire investment is confiscated by a desperate government and goes to zero.
This next chart now shows that emerging market superpowers have been aggressively buying gold over the past three years. This continues.
The top 10 gold producers in the world together produced about 75 million ounces of gold last year.
Almost two-thirds of these were negative swap line nations, which means that they have no swap lines with the United States.
Do you think these mines were developed by governments? A very small percentage of them actually did.
Most of these two-thirds or more than 48 million ounces of gold were found, developed, approved, built and operated by North American gold mining companies.
A large percentage of this production will be a victim of these negative swap line nations in the war on gold.
This risk is very real. Expect higher royalties, higher taxes, and a gradual government takeover of mine.
You will see threats or total nationalization of these foreign-owned gold mines in these negative SWAP countries.
In addition, they will add controls for these companies that will be more difficult to get their US dollars out of and they will tax them on the conversion.
They will also sell the gold in their local currency to the governments of these negative SWAP countries.
You will not get the gold price shown on the international market in the negative SWAP countries.
This will be very difficult to understand for many people and for many mining managers they do not want this to happen.
It doesn't matter what you want. The reality is that the geopolitics of the world are changing so quickly and the virus may be accelerating further blocking.
A boundary is drawn between positive SWAP line nations and negative SWAP line nations.
What kind of gold companies are at risk?
Here is a graphic of the ten largest gold producing companies in the world and their exposure to -SWAP (negative SWAP Line Nations) in red:
Now I have nothing against one of these companies. I know everyone who runs them and they have some great gold mines, along with some very smart people ...
However, you should think twice before buying a company with a lot of red - those whose projects are in the countries of the SWAP line with "SWAP".
I do not recommend you buy Agnico, the one with the full green bar. However, as you can see, the entire project portfolio of this company consists of ALL countries of the + SWAP line (Positive SWAP).
We are in a whole new world ... with a whole new era of market risk never seen before.
If you want to make a lot of money on the gold bull market, you need to understand the difference between + SWAP and SWAP nation risks to your portfolio and know the right gold stocks to buy.
I have prepared a special presentation to show you how I want to position my portfolio
I did some exciting, stupid and dangerous things and traveled to some crazy places to find the next big score.
But after really becoming one of the few in the industry who can say that I've been there, I've learned an important lesson that I want to share.
Yes, it's true, some big scores are waiting for those who are first in an exotic or war-torn place with a massive Tier 1 mining deposit.
It's a sexy story that sells newsletters and people love to read about it (Indiana Jones Speculation, as I like to call it). But these success stories are so rare.
The reality is that an equally high score (and in many cases, even higher scores) can be achieved if you are patient with larger sales in politically stable jurisdictions such as the United States.
Yes, it's not that sexy. Yes, no newsletters are sold.
However, we should only care about getting the largest possible amount of money with the least possible risk. For this reason, I would like to prepare everyone for this potential scenario on the gold market.
Do you know the plan. Get the game book.
Be mentally and financially prepared for what to do if the gold price goes down sharply.
Happiness is prepared when the opportunity arises.
And you can get a head start by watching my exclusive presentation here.
Stocks to watch gold get into turbulent territory:
Kinross Gold Corporation (NYSE: KGC, TSX: K)
Kinross Gold Corporation is relatively new to the scene that was founded in the early 1990s, but it is certainly not lacking in drive or experience. In 2015, the company was ranked the highest of all Canadian miners in Maclean's Magazine's annual assessment of socially responsible companies.
While Kinross posted a significant loss in the fourth quarter of 2018, the company is taking strong steps to improve its profits, including hiring a new CFO, Andrea S. Freeborough.
"Andrea's successful track record at Kinross and throughout her career, including accounting, international finance, M&A and extensive management experience, will be an excellent addition to our management team," said Rollinson. "We have great talent at Kinross and succession planning is a key aspect to keep this talent for the future success of our company."
Agnico Eagle Mines Ltd. (NYSE: AEM, TSX: AEM)
Canadian gold producer Agnico Eagle Mines is a particularly notable company for investors. Why? Between 1991 and 2010, the company paid dividends each year. With offices in Quebec, Mexico and Finland, the company also participates in exploration activities in Europe, Latin America and the United States.
Agnico is a company with a high exposure to gold that enables investors to benefit from long-term price movements.
Although the company joins a long list of gold majors that reported losses in 2018, its cash flow deficit is largely due to growth in production and commissioning of new projects.
Yamana Gold (NYSE: AUY, TSX: YRI)
Yamana recently completed its Cerro Moro project in Argentina and has something important to offer its investors. The company plans to increase its gold production by 20% and its silver production by a whopping 200% by 2019. Investors can expect a significant increase in free cash flow if precious metal prices remain stable.
Yamana recently signed an agreement with Glencore and Goldcorp to develop and operate another Argentine project, Agua Rica. Initial analysis suggests the potential of a mine life in excess of 25 years with an average annual production of approximately 236,000 tons (520 million pounds) of copper equivalent metal, including the contributions of gold, molybdenum and silver for the first 10 years of operation.
The agreement is an important step forward for the Agua Rica region and all miners working on it.
Eldorado Gold Corp. (NYSE: EGO, TSX: ELD)
Eldorado Gold Corp. is a mid-cap miner with assets in Europe and Brazil. In recent years, the cost per ounce has been reduced significantly. Although the stock price is not as high as it used to be, Eldorado is well positioned to make significant progress in the short term.
In 2018, Eldorado produced over 349,000 ounces of gold, well above its previous expectations, and will continue to increase production in 2019. Eldorado is also planning higher cash flow and higher sales growth this year.
George Burns, President and CEO of Eldorado, said: “Due to the team's hard work in 2018, we are well positioned to increase annual gold production to over 500,000 ounces in 2020. We anticipate that this will generate significant free cash flow and offer us the opportunity to think about debt relief later this year. "
First majestic silver (NYSE: AG, TSX: FR)
Although First Majestic recently suffered a major blow as a strong dollar weighed on precious metals, resulting in a poor quarterly report, the stock is still very optimistic. However, in addition to the negative numbers, there were a number of very valuable acquisitions that are likely to reverse for the metal giant in the medium to long term.
While the main focus remains on silver mining, it also holds a number of gold investments. In addition, silver tends to follow gold when broader markets become shaky. And since analysts are triggering the alarm of a global economic slowdown, both metals are likely to regain popularity among investors.
The company has further strengthened its portfolio and completed a share buyback program because it believes it is a share. is currently undervalued and will benefit all shareholders by increasing the value of the share.
By Marin Katusa
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