Dominos will continue to fall, plus look at what just collapsed to lowest level in 32 years.

Dominos Will Continue To Fall
October 12 (King World News) – Otavio Costa:  There is a reason why central banks are trapped. When liquidity in the bond market becomes dysfunctional, every policy maker in the planet will be forced to step in. BOJ was first. BOE was second. Yellen is changing her tune. Next in line: the Fed & the ECB.

Highest In 16 Years
Liza Abramowicz:  U.S. 30-year mortgage rates keep climbing, now to 6.81%, the highest in 16 years:

Mind-Boggling
Marc-André Fongern:  Absolutely mind-boggling. Central banks can hardly hike rates any more without pension funds, the housing market, or hedge funds blowing up. It’s frightening how f*cked we are…

ALERT:
Billionaire and mining legend Ross Beaty, Chairman of Pan American Silver, just spoke about what he expects to see in the gold and silver markets and also shared one of his top stock picks in the mining sector CLICK HERE OR ON THE IMAGE BELOW TO HEAR BEATY’S INTERVIEW.

UK Pension Troubles Continue
Peter Boockvar:  UK pension funds don’t have 3 days to delever. They have 3 additional days as hopefully this process started in the days leading up to September 28th when the Bank of England initially stepped in to buy gilts which in hindsight was done to buy time for these pension funds to do so. So, assuming the BoE will stick to the Friday deadline, next week we’ll see where gilt yields settle out. Today the 2 yr yield is actually falling by 20 bps but is up by 10 bps for the 10 yr and by 18 bps for the 30 yr as of this writing and which are the longer term gilts pension funds own, particularly the 30 yr. The pound is higher by almost 1% vs the dollar as just maybe this situation has been enough to notably take down the leverage risks with these pensions. When all the dust settles, UK assets, including the pound remain cheap. 

With respect to the market and political freak out over the Liz Truss budget, the tax cuts were all of 40b pounds annually in the context of a 3 Trillion pound plus economy. There was little math done by anyone criticizing it, especially when compared to the government spending numbers that have taken place elsewhere.

The UK economy did contract in August by .3% from July and the estimate was for no change with manufacturing production and services softer than expected. 

But just as in the game of whack a mole, something else pops up and Italian bond yields are jumping again with the 10 yr yield at the highest since 2013.

Italian  Yields Continue To Soar

Its spread to the German 10 yr bund yield is wider by 5 bps to 243, though down from the 251 seen last week and 253 on September 27th. 

And the yen is falling to a fresh 24 yr low and is now just below the weakest in 32 years.

Yen Collapses To Weakest Level In 32 Years vs US Dollar

As the BoJ has essentially killed off the JGB market, the 10 yr JGB DID NOT TRADE for the 4th straight day in part because the BoJ owns almost all of them. As the 40 yr continues to trade, and what I have emphasized multiple times what we should be watching, its yield jumped another 6 bps to 1.72% and that is the highest since June 2015.

Yesterday’s September Survey of Consumer Expectations from the NY Fed saw a 3 tenths drop in one yr inflation expectations to 5.4% which is the lowest since September 2021. The 3 yr outlook though rose one tenth m/o/m to 2.9%. Home price gain expectations not surprisingly continue to fall and fell to 2% growth, the lowest since June 2020. This offset rising expectations for the prices of gas, food, education and rents.

The labor market component was mixed as “the mean probability that the US unemployment rate will be higher one yr from now decreased by .9 percentage point to 39.1%” but the “mean perceived probability of losing one’s job in the next 12 months increased by .5 percentage point to 11.6%.” The expected growth in household income was unchanged. Of note, and a big deal for the consumer dependent US economy, “Median household spending growth expectations fell sharply to 6% from 7.8% in August, its steepest one month decline since the series’ inception in June 2013, and its lowest reading since January of this year. The decline was broad based across demographic groups.” The bold is mine. 

With the average 30 yr mortgage rate up again (Bankrate has it now above 7%), purchase applications fell 2.1% w/o/w after last week’s 13% drop and it is now lower by 39% y/o/y. Refi’s declined by 1.8% after the sharp drop in the prior two weeks and is lower by 86% y/o/y. No need to add anything here that we don’t already know. Again, the only question is what prices do from here. 

Also of importance…

Positioned for Upside Potential
Zacapa Resources’ South Bullfrog gold project is located in the center of eight to nine multi-million-ounce gold deposits in Nevada’s Beatty District and is adjacent to Augusta Gold’s Bullfrog Mine that was previously owned by Barrick Gold and produced over 2 million ounces of gold.

“The Beatty District is really being transformed. Over the last 5 years the district has gone from having a couple of non-core oxide gold deposits kicking about to having upwards of 10 million ounces of new gold discoveries with 3 new mines expected to come online within the next 2 years,” says Zacapa’s CEO and Director, Adam Melnik.

Massive Growth Story
South Bullfrog offers an unparalleled property position that cannot be reproduced as the company is exploring for gold at a time when you’ve got the super major AngloGold Ashanti building new mines and actively acquiring other companies and projects in the district. A gold discovery at South Bullfrog would undeniably lead to a re-rating of Zacapa’s shares.

Near Term Catalysts
In the near term, the company will be focusing its attention on drilling its most prospective targets at South Bullfrog. CEO Adam Melnik indicates that any positive results that come in from South Bullfrog that demonstrate grades similar to other projects in the Beatty District would serve to cement the project as a highly prospective gold resource. The company plans to create the most value in the near term through a discovery at South Bullfrog where there is a very clear path to crystallizing value, through a partnership or sale to one of the other majors and mid tiers operating in the district.

The company recently announced an unbrokered private placement in the amount of CA$3,000,000 primarily funded by the company’s directors and other long-term common shareholders.

Beatty District Highlights:

  • AngloGold is actively consolidating the Beatty District (AngloGold market cap US$5B, annual capex US$1.1B)
    • AngloGold acquired Corvus Gold in November 2021 for (US) $370M; included gold projects North Bullfrog (2.1Moz gold) and Motherlode (1.6Moz gold) – values the transaction at $100/oz of gold versus Corvus’ cost of discovery of <$20/oz of gold
    • AngloGold announced the discovery of Silicon gold deposit in February 2022 with a maiden resource of 3.4Moz gold and growing with six drill rigs currently on the project – many geologists believe Silicon could ultimately host 5-10Moz of gold
    • AngloGold acquired Crown & Sterling project from Coeur Mining this week for up to (US) $200M; includes the C-Horst, Secret Pass, and Daisy deposits around Anglo’s Merlin deposit that could total over 3.5Moz gold, valuing the transaction at ~$60/oz of gold, importantly including ~1Moz gold that have yet to be discovered – many geologists believe that Merlin will ultimately be larger than Silicon
    • AngloGold is investing billions of dollars constructing a large oxide gold processing facility at North Bullfrog (5 km from Zacapa’s South Bullfrog project) and likely a gold processing plant at Silicon (11 km from Zacapa’s South Bullfrog project) that could be used to process material from other deposits – AngloGold: “the combined assets will help the Beatty District become a large, long life, low-cost operation that develops into Tier-1 company-making mines”

Zacapa Resources, symbol ZACA in Canada and ZACAF in the US.

Billionaire Pierre Lassonde Calls Major Bottom In The Gold Market
***To listen to billionaire Pierre Lassonde discuss the major bottom in the gold market as well as where he believes the price of gold is headed CLICK HERE OR ON THE IMAGE BELOW.

***To listen to Alasdair Macleod discuss the unfolding banking crisis and how it will impact major markets including gold and silver CLICK HERE OR ON THE IMAGE BELOW.

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