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Glad the miners are set to shine as is gold, as a lot of other matters seem dismal!

In Oz we have the splitting of our over-governed democratically elected stratum of governments. We have other splits appearing, in the form of Clive Palmer (an eminent individual) challenging the democratically elected Western Australian Government, in the "bureacratically elected" High Court about the closure of the Western Australian border. The federal government is mean time considering an expansion of paid pandemic leave to prevent the further spread of coronavirus (not sure how this works), as the PM expressed growing concern at the national economic impact of the crisis from Victoria (25% of the GDP of Australia in lockdown?). These concerns about what the PM called the "Victorian wave''or second wave, and there are whispers about a third wave?!...were compounded on Wednesday when Queensland Premier Annastacia Palaszczuk closed her (state of Queensland) borders to everyone from greater Sydney (not sure where the borders are here, let alone those who are to enforce the borders) from Saturday onwards, and Victoria is off of course as should be the case, as they have been naughty!?.
In the meantime if you want to travel by air from Brisbane to Adelaide, by Quantas you find out that social distancing on the Quantas flights wont happen as one would think and the eminent medical fraternity sternly advise, but you do have to wear a face mask, which they dont tell you about until near take-off, just after they tell you to buckle up?.
If you wonder why or how you can be forced to SOCIAL DISTANCE IN THE AIRPORT FOR 30 MINS WAIT, AND YOU CANT HELP YOURSELF IN THE QANTAS LOUNGE TO FOOD BUT NEED THE HELP OF A PERSON WITH GLOVES, BUT YOU CAN SIT PACKED LIKE SARDINES FOR A 2.5 HOUR FLIGHT, AND ITS ALL FAIR AND CONSISTENT...WELLLLLL.

IT does suggets that this arrangement and the management thereof, is going to go on for a long while yet, and money will be printed out of fresh air for months...

THE FACTS SEEM TO BE THAT WE HAVE, BROADLY SPEAKING 25,000,000 PEOPLE OF WHOM 150 HAVE DIED FROM THE VIRUS, PROBABLY 500 HAVE DIED FROM DISEASES RELATED TO THE ALCOHOL PANDEMIC (ON GOING), ABOUT 100 DIE ON THE ROAD PANDEMIC (ONGOING) PER MONTH,...and so on...and the future 30 years for the next generation will be spent paying off debts...

I was hoping to leave the world a better place, but perhaps this will happen next time round?

best

the gnome.

I have commented previously on the Capital Drilling business model, ..drill for equity. Now they are expanding their business and range of offerings, to include a range of minig services, some for equity no doubt, with the latest tie up being with Allied Gold Corp (be careful there have been other PUBLIC Allied Gold XXXX companies....?)
You can find a reasonably clear description of the construction fo Allied Gold Corp at the below, and not the equity of $3m that Cap drilling has tipped in
https://im-mining.com/tag/allied-gold/

So Allied was formed from the consortium mentioned in the below release, which had acquired the single asset of Bonriko Gold Mine from Newcrest
https://www.afr.com/companies/mining/newcrest-mining-sells-bonikro-mine-for-81m-20171213-h03lxg
Allied Gold CORP, has now acquired Sadiola from IAMGOLD for about $100m, https://www.miningmetalnews.com/20191230/1389/australian-miner-buys-mali-gold-mine-105m
I am assuming Allied Gold CORP is a private company, backed by the Bonriko backing team, which are basically private equity guys. One can guess that they now having got 2 tired gold operations, will try to monetarise this by an IPO, onto the unsuspecting public for x00% more than they paid and away we go again. Capital will probably be in this action as well.

As I said before one would not be surprised to see Capital Drilling see this as an opportunity to expand their services and their operations and at the same time make some money on the equity side. Nothing wrong with making a bit of mullah$$.
Good luck to the public who overpays for some tired operations with limited upside - but please note I have not done any detailed analysis of the upside, except to make the obivous note that they have been around for a long while, and I would need to understand how Allied have got the worlds best exploration team (a claim made by many, delivered by very very few, hence the general lack of any NEW significant gold discoveries in the last decade or 2!!!).

Generally speaking I think West Africa and the Nubian shield are still the best places to expore technicaly. The big thing is managing the other risks...so hence my previous comment in another post about CEY sticking to jurisdictions they know

best to all
the gold gnome...

A plan “B” in case the global advance of the Chinese currency has to be accelerated should be taken into account.

The large amounts of Treasury paper in Chinese possession could be a weapon against the US dollar, but then it would not serve Beijing’s interest to have its dollar bonds lose substantial value due to rapid US dollar depreciation. This writer does not know what strategy the PBoC has worked out, but assuredly there are alternative plans.

The Digital Yuan
The most significant development that might undermine the US dollar’s current dominant position as a global reserve currency is the new national Chinese digital currency that employs blockchain. There have been several articles about the Chinese digital currency. Forbes (China Will Use Its Digital Currency To Compete With The USD) and the Guardian (China starts major trial of state-run digital currency) have both published detailed articles about the new Chinese digital currency as well as Bloomberg. They all consider that the new digital currency could cause disruption to US dollar supremacy.

So far it does not seem that the new digital currency is linked in some way to physical gold, but that remains to be seen. In any case the digital payment system is already well-established in China, and it will not take long for smart phone users to start using the national digital currency.

It is when China begins demanding payment in yuan for its exports that there will be a significant depreciation of the US dollar as demand for the dollar will lessen due to the demand for yuan for payment. Exactly how the PBoC plans to inaugurate obligatory payment in yuan for Chinese exports is not known at this time.

Tectonic Shifts
Investors should keep a close eye on developments of the new Chinese digital currency as it will quickly start competing with Bitcoin and other Cryptocurrencies as the digital yuan becomes widely used internationally. This writer has already noted in earlier articles that the greatest threat to the global dominance of the US dollar will come from China. In fact the Asian markets are growing swiftly and overtaking the US and European nations. It is to be expected that there will be a tectonic shift in economic activity in the next few years. This has been clearly pointed out in a Zero Hedge article (Continental Shift: The World's Biggest Economies Over Time) .

Instead of preparing for tougher global competition, US corporations have gone deeper into debt to finance share buyback programs. The Administration via the Treasury and the Fed counters the corporate bond debacle with yet more liquidity and outright purchase of corporate bonds. One can ask how such a policy is going to help the US dollar resist the Chinese currency onslaught.

and on it goes....

gold looks mighty good bet to me, and CEY is in the rights pace

good luck all, hang on..

the gnome

I wonder who the bucing brono is?
U.S. Dollar Depreciation Ahead
Summary
US Government spending is out of control.

US federal debt, federal budget deficit and trade deficit are not sustainable.

Signs of depreciation.

The Chinese are going digital.

The gold price is breaking out.

Loss of Control....
The wretched condition of US government finances has already has been noted in earlier articles of this writer and is widely discussed in the literature. The federal debt of $25.6 trillion, the annual budget deficit of $3.4 trillion and the $600 billion trade deficit show that the Administration has lost control of spending. More spending to relieve economic distress caused by the Coronavirus lockdowns is likely soon and is almost certain before the November 2020 elections. This is not sustainable. $30 trillion of federal debt by 2022 is going to undermine faith in the US dollar as a safe haven currency. The federal government lost its AAA rating in 2011.
United States loses prized AAA credit rating from S&P

Signs of Depreciation
One of the most obvious signs of US dollar depreciation would be a drop in the US dollar index, which measures the value of the US dollar in relation to a basket of currencies among which the euro has the most weight. Investopedia provides basic information about the index:

Currency Basket Definition

“The U.S. dollar index started in 1973, and today is a basket of six currencies - the Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss Franc. The euro is, by far, the largest component of the index, making up almost 58 percent (officially 57.6%) of the basket. The weights of the rest of the currencies in the index are - JPY (13.6%), GBP (11.9%), CAD (9.1%), SEK (4.2%), CHF (3.6%). During the 21st century the index has reached a high of 121 during the tech boom and a low of 71 just prior to the Great Recession.”

China
Of course the exchange rate with the renminbi is also important:

The USD has strengthened against the CNY and is currently trading at about 7 yuan for one dollar. In 2018 a dollar bought only 6.4 yuan. It should be clear that the PBoC does not want the renminbi to appreciate very much against the US dollar since that would mean that Chinese exports to the US and to other countries would become more expensive. One can therefore assume that Beijing would follow a policy of gradual US dollar weakening so as not to endanger its competitive edge thanks to lower prices for its goods.

However, given that the US has been provoking China with an aggressive Hong Kong policy and rights of navigation fleet movements in the South China Sea in addition to support for Taiwan and sanctions against Chinese personalities, the possibility that the PBoC has a plan “B”...

Indeed, given the impossibility of selling forward a “future” Italian lira that no longer existed, countries like Italy, Spain and even France broadly became no-go zones for long-term capital, thereby widening differences in productivity. As Ionesco once said “caress a circle and it becomes vicious”. The question today is whether Europe’s plan to deliver the fiscal backbone it lacks changes the above equation. If nothing else, this change should mean that the euro stops being the red-haired step child of foreign exchange markets, and again becomes a credible alternative to the US dollar for global foreign exchange reserve managers and asset allocators. This isn’t to say that the euro is set to come roaring back—Europe has many other issues to fix—but at the very least, the euro is no longer on one long downhill ride.

3) Asia is not monetizing the Covid crisis like the US is doing. A divergence in policy responses to the Covid-19 hit between the “East” (centered on China) and the “West” (US and Europe) reminds of responses to the 1970s oil price shock. Back then, the US, UK and France monetized the surge in the oil price that followed the 1973 Arab oil embargo. For their part, Germany, Switzerland and Japan chose to take the price hike on the chin, despite facing short-term economic pain. The result was a decade-long depreciation of the US dollar, pound sterling and French franc against the yen, deutschmark and Swiss franc. Today, we are seeing the same divergence, with China leading the “anti-monetization” pack, while the US leads the way in money creation (see table below and Toward A Renminbi-Gold Standard). Incidentally, this different monetary approach may partly explain the recent divergence between Chinese bond yields creeping higher and US yields flatlining at low levels. Such a divergence in long term interest rates argues for further US dollar weakness.
4) US uncertainties. Another explanation for the dollar’s apparent breakdown is recent news out of the US having been fairly dismal. Between riots, an inability to tackle the Covid-19 pandemic, the impression of divided government (the White House against governors and Congress; governors against mayors), daily headlines have not been pretty. In addition, there is growing political uncertainty linked to the electoral calendar (will foreigners stay overweight US assets if the Democratic Party sweeps the upcoming elections and unleashes a program of higher corporate income taxes, higher capital gain taxes, and perhaps even the introduction of wealth taxes?). And given record-high unemployment, it is hard to see who will be the marginal buyer of US dollars. Sure, the US remains the world’s global tech leader, but it increasingly looks as if the tech world could break apart into different zones (US, China, India, Europe) each with its rules, regulations and national champions. If this duly unfolds, big US tech companies now priced to keep dominating the world as they did in the past de

The US Dollar Starts To Break Down
The US dollar, as shown by the DXY, is back to the panicked lows of March. Back then, prices of all assets were dislocated, partly because traders were told to stay at home and not make markets. At the time, prices for bonds, equities, commodities and currencies reflected a lack of liquidity rather than fundamentals. Fast forward to today and financial asset prices can hardly be said to be dislocated due to insufficient liquidity. On the contrary, almost all of the world’s major central banks—the Federal Reserve chief among them— have acted to ensure that markets are well provisioned with liquid funds. Thus, the fact that the US dollar is back to its crisis lows and seems to be breaking down out of the past few years’ trading range is important information. The US dollar’s price today is “real” and underscores an important shift in the global investment environment: we are entering into a weak US dollar world. And just as success has many fathers, there are a few possible reasons for this:
1) The slow death of the US dollar-shortage theory. In the years before the 2008 global financial crisis, the US current account deficit was between 4% and 6% of GDP. That is a big number. Each year, the US consumer was, in effect, consuming between 4% and 6% more than he produced. And the end result was a constant export of US dollar cash to the rest of the world. Meanwhile, against such generous outflows, the rest of the world gladly borrowed in a progressively weakening dollar. The 2008 crisis changed this dynamic, as did the shale-energy revolution and from a situation of excess, the world looked like it could be facing a US dollar shortage. The Bank for International Settlements published papers highlighting the volume of foreign-domiciled US dollar debt as a legitimate concern. And the fact that the US basically stood alone among major western economies in having positive interest rates made that stock of past US dollar debt problematic. But that was then. Today, US interest rates are hugging the zero bound and the once-improving US current account deficit is again worsening. Importantly, the pre-Covid-19 crisis estimates by the International Monetary Fund are likely to be far too conservative. And with US M2 growing at 24.5% a year, and the Fed having granted swap lines to 14 foreign central banks, it is becoming very hard to argue that the world faces a dollar shortage.
2) Europe could be climbing out of its black hole. After the 2008-09 crisis laid bare the euro’s “original sin”—creating a common currency without the backbone of a fiscal union—Europe effectively suffered a lost decade. This design flaw made the broader eurozone uninvestible, as the single biggest risk (euro breakup) could not be hedged. more to come...sigh

Europe’s Deal (by gavekal, a very good research group)

Most of the attention paid to the European Union’s recovery fund deal, secured in the early hours of Tuesday morning, focused on how much of the agreed €750bn would be distributed as grants and how much as loans. That’s understandable. Haggling over this balance was one of the main reasons the talks dragged on into their fifth day. But as far as investors are concerned, the relative size of grants and loans is among the least significant aspects of the agreement.

Far more important is the long-term precedent it establishes, paving the way for an eventual central EU finance ministry, able to issue debt, raise taxes and spend the proceeds in its own right. But although this element of the deal is momentous, and may well be looked back upon as a milestone in the development of a federal EU, it was never realistically in doubt. Member governments had already agreed the principle of the matter before they assembled last Friday (see From Temporary To Permanent).

As a result, the most important practical consequence of the deal will be how it affects the trajectories of Europe’s economies over the next two to three years, and what it means for the EU’s asset markets and currency. Here the impact is likely to prove tangible in the near term, appreciably reducing the asymmetry of Europe’s recovery from Covid-19 shutdowns, and reinforcing the risk-on shift in European financial markets.

First, the details. Tuesday’s deal authorizes the European Commission to issue up to €750bn in long-term bonds to fund Covid recovery programs, distributing €390bn to member governments in the form of grants, and €360bn as loans. The weight of grants was lower than the €500bn proposed in the original French and German-backed plan, reduced in deference to the moral hazard fears of the “frugal four” northern governments, led by Dutch prime minister Mark Rutte. But with borrowing costs close to zero, even for 30-year debt, the increase in the weight of loans is arguably more a matter of political symbolism than of practical significance.

The frugals failed to win their desired veto over disbursements to governments proving refractory over reform. Instead, members’ spending and reform plans will ultimately be approved by a qualified majority vote of EU heads of government; a measure which confirms the dominance over EU decision-making of the revitalized Franco-German axis. In return, the frugal northern governments were bought off with the promise of enhanced rebates on their contributions to the EU budget; a cost of doing business in the EU briar patch.

So, over the next few years Brussels will issue a raft of debt, and service this debt via its new power to raise trans-European taxes. The details have yet to be settled, but Tuesday’s statement mentioned the possibility of a tax on plastics, a border tax on carbon, a digital levy, an expanded emissions trading scheme and a financial transaction tax. all

GOLD TO GO HIGHER! No one knows how much gold China owns, but according to gold foundries in Switzerland and Belgium, whatever they offered to the market over the last decade was snapped up by China and shipped to the country. In addition, China is the world’s biggest gold producer, so it will have large undeclared holdings.

As I look at what China has done in the last 15 years to make the renminbi a credible currency—just as the old deutschemark emerged from the 1960s onward—I conclude that it wants to put gold back at the center of the global payments system using Bretton Woods-era type arrangements. Back then, if a country acquired too many US dollars through current account surpluses and was not happy buying treasuries, the Federal Reserve would exchange its dollars for gold. The system began to crumble when the US closed the “gold window” in 1971, before moving in 1973 to freely floating exchange rates.

Having secured control over Hong Kong, I believe that China will fairly soon move to offer a gold-renminbi exchange standard. The key difference with the Bretton Woods-era arrangements will be that gold gets exchanged at a market price, rather than at a fixed price, as the US did after 1944. This implies that over the medium term, the return on gold should match the returns of a 10-year CGB, which is more or less what we have seen since 2008.
A tactical question for China is whether it holds fire on this plan until the effect of western economies monetizing huge deficits plays out. It seems likely that open-ended spending will be funded using Modern Monetary Theory-type policies (see Not Modern, Not About Money, And Not Much Of A Theory). In this regard, there is a case for China moving only once these Western fiscal and monetary policies are seen to have failed. If Beijing acts in the midst of the Covid-19 crisis, the move could spur huge capital flows from the US and Europe towards Asia. The action could likely “create” a financial crisis in the US and Europe and be treated—rightly—as a hostile act.

My bet is that China waits for Western policy responses to visibly fail before activating its renminbi-gold exchange plan; the point is that the strategic moves are in place. The investment conclusion is to BUY CGBs, PHYSICAL GOLD and GOLDMIINING EQUITIES. In Asia bonds and currencies will do well, as will long-duration assets generally. Commodity producers should also thrive.
....and the world will be a better place?

best
the gnome

As the international trading and monetary order of the last 50 years continues to crumble, the endgame must be the US dollar losing its lofty position at the apex of the system. The argument has been that this process began in and around 2005 as the US moved to “weaponize” the dollar, thereby ensuring the renminbi’s emergence as a competitor. China has learnt the lesson that one cannot run an empire on someone else’s dime and its tough action in Hong Kong seems in part aimed at securing national financial security. In the next two years, I expect a fairly rapid acceleration of renminbi internationalization.

Aggressive US action has forced China to build a renminbi-based international payments system, which for legal reasons had to be Hong Kong-based. Whatever the rights and wrongs of the new national security law, China’s need to undertake foreign currency settlements in a place it controls compelled Hong Kong’s “capture”. In time, renminbi settlements will likely be run by the Hong Kong Monetary Authority and “guided” by the People’s Bank of China, which already has swap lines with foreign central banks. Those foreign institutions will be reassured by the use of Hong Kong laws and the HKMA being the custodian of their renminbi reserves. Amusingly, this offshore yuan market could develop as the Eurodollar market did in London in the 1960s.

China’s financial agencies have worked hard to make the 10-year Chinese government bond the payment system’s vital “risk free” asset. They have also facilitated smooth trading in bond maturities from three months out, which is a must-have in a top-tier payment system. This will spur all manner of hedging activity in local derivative markets, with settlement in Hong Kong—again, just as happened in the City of London from the 1970s onwards.

To this end, the institutions and market infrastructure are also being developed, notably the Asian Infrastructure Investment Bank. Also in place are futures markets for oil priced in renminbi and gold. These can be developed to provide deep two-way trading.

The skeptical rejoinder to this view is that the Chinese Communist Party will never open the country’s capital account and so the system will remain half built. Overseas holders of renminbi will not be able to easily buy assets in China, and in any case the country’s weak legal protections will militate against large-scale investing there. This view, however, belies the fact that international payments systems have operated without capital accounts being open. This was due to settlement between countries occurring in gold.

It seems likely that settlement for an excess of renminbi in foreign hands could occur by (i) flows into private-sector Chinese financial assets, (ii) central banks depositing excess savings at the HMKA to buy CGBs, and lastly by (iii) gold being offered freely in exchange for renminbi. No one knows how much gold China owns...

Whilst on GOLD and that interesting man Churchill ...

William Manchester in The Last Lion: Winston Spencer Churchill Visions of Glory 1874-1932 (Sphere Books, 1983)...

"When Britannia ruled the waves and the Pound was regarded with respect and awe in all the world's money markets. They assumed that the restoration of the Pound's parity with the American Dollar would re-establish Britain's pre-war prosperity. None seemed to realize that England had squandered its wealth between Sarajevo and Versailles, or that the country's shrunken export trade could no longer provide the surplus needed to re-establish London's fiscal ascendancy over the rest of the world."

What we can learn from this is that, just like the despotic Nero or Henry VIII – who debased their currency to enrich their Treasury – Churchill through vainglory (and a puffed-up belief in the importance of the role of our nation in the world) sought to overvalue money, leading to a massive outflow of money as people would move their gold to where it was sold for more purchasing power, as Gresham's law dictates.

So it is argued by some that this moment in the 1920's (realising the UK's net income was not a lot! crica 1920''s, lead to the creaiton of new form of income and utility for the good men of the CITY of LONDON...the creation of the marvellous web of deceit and ROBBING OF THE POOR TO PAY THE RICH... TAX HAVENS ...(to capture the final breath of the empire experience)
... we must credit the British courts with the technique of 'virtual' residencies, allowing companies to incorporate in Britain without paying tax - a development that at least one commentator believes is the foundation of the entire tax haven phenomenon.

Many trace the origins of the practice to a series of rulings in the British law courts. Most significant among those was the 1929 case of Egyptian Delta Land and Investment Co. Ltd. V. Todd. It was demonstrated that although the company was registered in London it did not have any activities in the UK and hence was not subject to British taxation. This case created, argues Picciotto, "a loophole which, in a sense, made Britain a tax haven". Companies could now incorporate in Britain but avoid paying British tax. The ruling of the British courts proved significant because it laid down the rule not only for the United Kingdom but also for the entire British Empire, a point later exploited by jurisdictions such as Bermuda and the Bahamas and perfected in the 1970s by the Cayman Islands.

A good description is at
http://www.historyandpolicy.org/policy-papers/papers/history-of-tax-havens

Go gold, hold them to account ...

best
the Gnome

Yes, Churchill had a lot of innovative thoughts and actions, LOL

And whilst we mention bribery and corruption, cant help but think of some of Churchill's shortcomings..as a man who should have nown better

""In return for a fee of £5,000 two oil companies, Royal Dutch Shell and Burmah Anglo-Persian Oil Company [later BP], asked him to represent them in their application to the government for a merger," Gilbert's official biography stated.
By modern British political standards, the 1923 payment would be considered highly inappropriate. (!!!!)
Churchill, whose "political career was in the doldrums" at the time, according to a history of British Petroleum, agreed to use his parliamentary influence to raise the issue in return for money.
"But I'd be careful about calling it a bribe," Toye says. "He accepted all sorts of gifts, which in today's culture of full disclosure would get you expelled from the Commons. But those rules were not in place at the time."....

His view on the use of poisnous gases was interesting "I am strongly in favour of using poisoned gas against uncivilised tribes," he continued....didnt' name any tribes but the Afghans and Kurds didn't do well.

His response to the famine in NE Bengal in 1943, where he appeared to blame the Indians for the famine, claiming they "breed like rabbits". WheAT from Australia went to storage in the UK rather than feeding the rabbits. ...

and on that forever nuisance Mhatama Ghandi..."It is alarming and nauseating to see Mr Gandhi, a seditious Middle Temple lawyer, now posing as a fakir… striding half-naked up the steps of the Vice-regal Palace," Churchill said of his anti-colonialist adversary in 1931.

...from Churchill's 1899 book The River War, in which he wrote: "How dreadful are the curses which Mohammedanism lays on its votaries! Besides the fanatical frenzy, which is as dangerous in a man as hydrophobia [rabies] in a dog, there is this fearful fatalistic apathy.
"Improvident habits, slovenly systems of agriculture, sluggish methods of commerce and insecurity of property exist wherever the followers of the Prophet rule or live."...would have made a great foreign minister ...

His strategy in the Dardanelles was disasterous for the Ozzie and NZ troops (so he was not racist! and we have never forgot), and it was said he made so many mistakes in WWI, that he could not help but learn an enormous amount!?

https://www.parliament.uk/about/living-heritage/transformingsociety/private-lives/yourcountry/collections/churchillexhibition/churchill-the-orator/gold-standard/
A most unusual man was Churchill.

Best
the gnome.

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