With the US Dollar Index trading lower and gold surging, today a legend in the business sent King World News a powerful piece stating the gold price is set to spike nearly $1,000.
Gold And A New Arms Race – Technology
By John Ing, Maison Placements
May 24 (King World News) – We believe this trade clash with Beijing is not even over steel and aluminum but the dominance of core information technology into the 21st Century. China has its own “Made in China 2025” strategy which aims to establish a world leading role in technology with giants like Alibaba and Tencent whose market values are already over half a trillion. China has the world’s fastest supercomputer and is building its own Hadron supercollider. While the US has taken a laissez- faire approach, heading in a different direction in technology, China is funding centers in India and Japan. China has supercomputers faster than the U.S., chips that are Chinese made and fifth generation wireless networks (5G) will be first in China, not America.
Semiconductor chips has replaced oil as the lifeblood of the global economy. We believe the arms race over the future and technological dominance will shake American hegemony to its very foundations. In an attempt to stall China’s technological advancement and catch up, America introduced tariffs. Tariffs won’t work. S&P Global warned that American companies would be the biggest losers in a trade war with China…
NEW KEITH NEUMEYER INTERVIEW:
Keith Neumeyer just spoke with KWN about $8,000 & $10,000 price targets for gold and much more, to listen immediately CLICK HERE OR ON THE IMAGE BELOW.
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The Thucydides Trap
America’s economic power goes well beyond market access. At the end of World War II, the United States accounted for roughly 50 percent of global output. Today, the International Monetary Fund (IMF) estimates that share at 15.1 percent. Nonetheless, America’s financial hegemony remains dominant, which is a major factor in maintaining America’s standing in the world and another subtle weapon in the new Cold War.
China’s rise over the past half century has given Trump cause for concern calling China, “a strategic competitor.” China’s challenging the primacy of the US raises the question by Professor Graham Allison of Harvard as to whether China and the United States can escape the Thucydide’s Trap. Professor Allison and his colleagues studied the conflicts between a rising power and an established ruling power over a 500 year period showed that when one power threatens to displace the other, that in 12 of 16 cases, they ended badly in bloodshed.
In ancient Greece in the fifth century, Athens the rising power, had challenged the ruling power Sparta, and went to war against one another on the fear of the rise of the other. And almost a century ago, Germany, the rising power and Britain the ruling power started World War I following the ancient example of Sparta and Athens. The war to end all wars ended four years later with Europe in ruins, the German Kaiser gone and England similarly losing a good part of its economic strength. Then two decades later, the Second World War ended with the defeat of rising axis powers Germany and Japan by the allies, led by America, the ruling power. Today Professor Allison’s, “Destined For War: Can America and China escape Thucydides,” raises the point that American fears are not about steel and aluminum but that the roots for China’s rising strength are due to the technological revolution. China has already overtaken the US here. Amid the deepening economic rivalry between China and the US, the parallels with previous periods are hard to avoid. Noteworthy is that in those instances where there was no war, there was instead a painful adjustment of attitudes and actions.
Dominoes of Destabilization
As the Fed’s quantitative tightening intensifies, the financial system will contract further raising alarms over the $164 trillion of debt held by the US, Japan and China. Inflation long feared to be dormant has picked up as the sanctions have affected everything from aluminum to oil. And, ominously the benchmark 10 year Treasury yield continues to breach levels not seen in seven years, indicating rising inflation expectations and stormy times ahead.
A decade after the global financial crisis, the world led by the United States has loaded up on debt again. In 2009, when President Obama took office, the national debt was $7 trillion. The non-partisan Congressional Budget Office estimates that debt at $17 trillion and will top $20 trillion in a couple of years. America has run deficits for years, flooding the world with cheap dollars. It is America’s Achilles heel.
Mr. Trump’s stimulus package of tax cuts will boost the fiscal deficit and deepen the trade deficit, as Americans spend more, undermining Trump’s efforts to eliminate the trade balance. Ironically, America’s large debt load will make it more dependent upon China, the very country that he is bashing. America’s finances are in shambles. In truth, China’s economy is more financially complementary than competing directly with the US economy. Only four nations have a higher debt to GDP ratio than the United States; Greece, Italy, Portugal and Japan. Trump’s tax cut will cost $5.5 trillion in lost revenues and add over $1 trillion to the deficit over the next decade, deepening the hole in America’s debt to GDP currently over 100 percent.
Why should China finance America’s consumption at a time when they are being blamed for America’s self-induced problems. In the meantime, Congress is so fixated on elections, that they are too distracted to pass the necessary bills or legislation to encourage Americans to save more. And of course there is the increasing risk of escalation. Is the tariff war really the beginning of the Thucydides Trap of yesteryear, sending the world back to the dark ages of beggar-thy-neighbor protectionism?
China Resets The World’s Reserve Currency
China is weaning itself off the dollar and has many more tools in its arsenal. In pledging to open up its markets and loosen restrictions on autos, manufacturing and banking, China has given America a taste of its own medicine. Importantly, China has $3.1 trillion of financial reserves, making it the richest nation in the world but also holds some $1.2 trillion of US debt. China has held back on their largest American import: government debt.
In fact, once the biggest buyer, China has started dumping US government debt. China saves more than the US and could easily undermine the dollar by dumping massive dollar assets, causing America to boost rates because the Fed could not arrange currency swaps with other countries in time. China has been buying yuan too while selling dollars. China isn’t alone. Russia , Taiwan, Saudi Arabia and Norway have reduced their dollar exposure. America has become the world’s biggest debtor to the world’s latest creditor. Who needs who?
Of longer term concern is the day when China clears global payments in yuan. It goes without saying that China’s has benefited from a cheap currency allowing cheap goods to be exported to the United States. However, since the addition of the yuan to the IMF’s Special Drawing Right (SDR) basket, the Chinese currency has moved up against the dollar. China has begun to reset the world’s dependency on the US dollar reserve system.
It is the US dollar that is the world’s reserve currency which is the source of America’s strength and that “exorbitant privilege” allows America to pay its bills in the currency that it prints. America’s central role in the global financial system is a powerful weapon but that role diminishes with every new sanction. The dollar’s strength lies in the trust placed by global markets in US financial governance and today that is a dwindling asset. China and Russia are setting up alternatives to the dollar.
Consequently, China has sought to internationalize its currency, pricing oil for example by creating a petroyuan and pricing iron ore in yuan. Already, the majority of the world’s physical gold is traded on the Shanghai Gold Exchange. China is the world’s largest consumer and producer of gold.
The world’s largest importer of crude and commodities is sending a subtle message – the end of dollar hegemony and a yuan based oil, iron ore and gold. After all, America halted dollars for gold in 1971, when Nixon closed the gold window. China has also purchased gold becoming the sixth largest gold holder in the world and there’s talk of having the yuan backed by a basket of currencies, including gold which would lessen China’s dependency on the US dominated financial infrastructure. Other central bankers have added to their stockpiles of gold. In the meantime, China’s $1 trillion Belt and Road initiative is a source of much needed capital and infrastructure for itself and will extend its influence from Beijing to central Asia to Europe and Africa.
America, The Bubble
Moreover, after years of easy money, Trump’s trillion dollar spending plans risks America becoming the next global crisis as its debt spirals out of control. And, since Trump’s much feared trade deficits are a product of American’s consuming much more then they produce, they are forced to increasingly borrow from foreigners to sustain their standard of living and profligacy.
We believe markets are vulnerable to a serious correction on four fronts: runaway deficits, property bubbles, mounting inflation and geo-political tensions. With America’s outsized international funding requirements and a debt to GDP ratio of 100 percent made worse by a long spell of strong growth and easy money, the greenback is in for a long-term downward spiral. America itself is a bubble. For too long Wall Street has viewed America’s problems as long term, but eventually the long term becomes the short term.
To be sure, the Trump administration and Congress have been successful in kicking the can down the road. Although the debt ceiling was raised only a few months ago, Trump’s tax package has accelerated the day of reckoning. Debt on debt is not good. Two-thirds of the world’s assets are denominated in a fiat currency issued by a country whose leaders are taking policy actions, which will inevitably lead to its debasement. The US has a serious problem with its deficits and the dollar. Furthermore, increased use of financial sanctions have forced countries to move away from the dollar and the American-led SWIFT system. High bond yields, geopolitical uncertainties on top of an aging bull market has left stock valuations at historic highs and, the dollar vulnerable to a massive correction. A perilous adjustment lies ahead. Argentina has joined Venezuela in the currency crisis club. Is America to be next?
Within this backdrop, gold is going to be a good thing to have when stores of value are highly priced. Gold is an alternative to currency debasement, and Mr. Trump. If gold was overbought seven years ago, it looks unloved today. We continue to believe gold which recently tested $1,365 an ounce five times will successfully break through with a target of $1,700 and $2,200 an ounce within 18 months.
This Gold Article Was Just Released In Northern Miner!
Maple Gold VP: ‘We’re still finding new gold zones’
Fred Speidel, Maple Gold Mines’ vice-president of exploration, holds a map at the Douay gold project in Quebec’s Abitibi greenstone belt. Credit: Maple Gold Mines.Maple Gold Mines (TSXV: MGM; US-OTC: MGMLF) has just completed the winter 2018 drill program at its Douay project in the Abitibi greenstone belt of northwestern Quebec. The company drilled a total of 22,606 metres — 21,122 metres of diamond drilling in 52 holes and 1,484 metres of RC drilling in 57 short top-of-bedrock holes. The program started in mid-January and ramped up with more drill rigs as it received additional permits.
In April it closed a $3.95 million private placement that was completed at the current market price with no warrants. The financing was almost exclusively Quebec funds and insiders. At the closing, Quebec fund ownership in the company on an undiluted basis increased from 3% to about 10%. Many of the investors were instrumental in the funding and development of the Canadian Malartic mine, now owned by Agnico Eagle Mines (TSX: AEM; NYSE: AEM) and Yamana Gold (TSX: YRI).
The Douay project currently has 479,000 indicated ounces of gold (9.38 million tonnes grading 1.59 grams gold) and 2.75 million inferred ounces of gold (84.15 million tonnes grading 1.02 grams gold). The project is 81 km east of Hecla Mining’s (NYSE: HL) Casa Berardi gold mine and 123 km southeast of Detour Gold’s (TSX: DCG) Detour Lake gold mine.
Most of the gold found at Douay so far is associated with a syenite gold system that forms part of a 7 km long trend of mineralized zones. These zones are found within the central part of the project’s strike length, which stretches 55 km along the Casa Berardi Deformation Zone. Douay’s intrusive-related mineralization style is also present at several other deposits that have been discovered in recent years, including Canadian Malartic, Osisko Mining’s (TSX: OSK) Windfall project, and Alamos Gold’s (NYSE: AGI) Young-Davidson mine.
The Northern Miner recently spoke with Maple Gold’s vice-president of exploration, Fred Speidel.
The Northern Miner: Will you be doing any more drilling before the end of the year?
Fred Speidel: That’s it for the winter program. I wouldn’t say that that’s it for the year. Chances are we will want to add some more metres before the year is out, and we do have the necessary permits in place. For now, core sawing is still ongoing with the majority of assays still pending from the current program, so we have significant results expected between now and July, and we have plenty of new data to process and to evaluate before we design the next drill campaign.
TNM: In April you announced that you had defined a new gold zone.
FS: Yes. We’ve already achieved initial success from the newly defined Nika zones, which form part of the northwest gap area, between the Douay West, Northwest and Porphyry zones. We were targeting that area because there is less drilling there, and there’s a lot of potential to add ounces to the resource base in this area.
We are very happy with the fact that the Nika zones include a completely new mineralized area, and also that existing zones have been extended to the NW as a result of 2018 drilling. Our initial press release for this area highlighted results for the bottom of drill-hole DO-18-218, and we were keeping our fingers crossed waiting for the assays from the top 400 metres of that same drill hole, as the core looked very promising. We ended up getting 50 metres of 1.77 grams per tonne gold from 297 metres downhole so that was very encouraging. Not only did it confirm the continuity of the existing high-grade zone, but it also let us link up previously discontinuous zones applying our updated structural model.
Examining maps at Maple Gold Mines’ Douay gold project in Quebec, from left: David Broughton, director and head of the technical committee; Fred Speidel, vice-president of exploration; and Matthew Hornor, president and CEO. Credit: Maple Gold Mines.TNM: Are you optimistic there are more zones to be found at Douay?
FS: We’re still finding new gold zones and many of these are proving to have more continuity than previously thought. At the Nika Zones, all mineralization is outside of the existing pit-constrained resource, and so will be adding to the resource base for the resource update planned for late 2018. We have also found new mineralized areas in the NW and Porphyry Zones.
We’ve also had some success on the south side of the Porphyry Zone — we had an intercept of 158 metres grading 1.25 grams per tonne gold — and that is one of the best intercepts of all time at the Douay property, so we’re clearly excited about that. This is not a new zone. It’s part of an existing one, but it is higher grade than anticipated, so we’re seeing grade variations laterally. There are also indications of the possibility that grade increases at depth here. This particular high-grade zone is open up-dip and down-dip, and we’ve got additional drilling in this area for which assays are pending.
TNM: Can you see any patterns?
FS: There is a structural pattern that is starting to emerge, with intersections between the East-West faults of the Casa Berardi fault set and the NW-SE faults of the Douay fault set showing particular potential for increased thickness of mineralization. These intersections appear to explain at least part of the pinch and swell morphology of several of the mineralized zones.
We view these results very positively and believe the additional assays between now and July will continue to confirm these as well as other additional zones of interest. We look forward to updating the geological, structural and resource block models between now and the end of the year.
TNM: What other work do you have planned this year?
FS: We’ll also be doing some mapping and sampling programs this summer in the central part of the property as well as limited geophysics. All of this work, combined with ongoing compilation of historic information we have in new areas of interest, will help us define targets for the next drill campaign.
Roughly 30% of our total diamond and RC drilling focused on new discovery targets in greenfields areas along the extensions of structures (Casa Berardi and Douay fault sets) known to control mineralization, as well as between these structures, where we are continuing to define new exploration targets.
The property itself straddles a 55 km section of the Casa Berardi Deformation zone where it is at its widest. The early returns from the initial results from the resource area drilling have been very promising. We are equally excited about the potential for new discoveries that could define brand new zones several kilometres away along the same Casa Berardi break. Assays are still pending for the greenfields drill-holes.
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