Resource World Magazine

F E B R U A R Y / M A R C H 2 0 1 9 www.resourceworld.com 19 Speculations by Leonard Melman F or the first time in several years, real pleasure may be obtained by hard money advocates from reviewing the price charts for gold and silver. After mak- ing a relative low in mid-August near US $1,165/oz, gold rallied steadily and stands broke through the US $1,300 mark as of mid to late January. Silver has made a simi- lar move from a relative low at US $14.00/ oz to a present quote around $15.85. Most interestingly, these positive moves have taken place against a news background which might be considered as unfavourable. Inflation readings are down which in the US now stand below 2% and the US Dollar Index remains close to multi-year highs. Despite this seeming anomaly, I would suggest a truly plausible answer for this quandary which is a substantial recent increase in the important 'fear component' of precious metals pricing. As I recall, during the great gold and silver bull markets of 1976-80, it was fear which was an important factor in driving quotes to then-historic highs including fear of escalating price inflation; fear of astonishingly high interest and mortgage lending rates; fear of the consequences of massively high levels of debt and budget - ary deficits and fear created by Russia's late 1979 invasion of Afghanistan. These fears were palpable in that era, leading many to seek the monetary safe haven of gold and silver. Since that time, there have been many fears through the years, but those have sel - dom been followed by actual crises – and I believe the metals investment community became skeptical – leading to lackluster per- formance over the years since 2011. However, a substantial argument can now be made that a collection of present deep concerns may be the 'real thing' and could indeed lead to sub- stantial price gains for the precious metals in the future. What follows is a list of some of these present-day items. • Fear of political turmoil, particularly those concerns emanating from America These involve calls for impeachment of America's President, calls for new and perhaps intensive Congressional investi - gations into his possible collusion with Russia regarding the 2016 election and fear generated by the deep divisiveness within America's political world. • Fear of a potential real estate collapse, most particularly here in Canada Previously ultra-hot markets in Vancouver and Toronto are facing sharply declining real estate activity as well as price weakness and, in addition, the Calgary real estate market could be fac - ing collapse as problems within Alberta's energy markets continue to proliferate. • Fear of the consequences of trade wars between America and China and, to a lesser extent, those related to disagree - ments between the US and Canada • Fear of looming economic slowdowns in America, Europe and even China The Organization for Economic Cooperation and Development (OECD) just issued a forecast which The Wall Street Journal entitled, OECD Sees Further Slowdown in Global Economy This Year which includes comments such as, "The US indicator fell for the third straight month" and, "The leading indicator for the Eurozone was below 100 (neutral) for a fourth straight month." Fear that the long-expected financial trauma caused by the aging of the mam - moth Baby Boom generation may indeed be near at hand The slew of babies born between 1949 and 1965 now enters an era of declining consumer participation, increasing pen - sion entitlements and substantial, perhaps dramatic, increases in total medical expen- ditures – all of which, when combined, are capable of throwing government finances into turmoil. And now, most recently, we have new fears regarding the almost total domination of computerization in industry, govern - ment and our personal lives – and the apparent vulnerability of those systems to hacking or mass equipment failures. It is also well worth noting that a for- mer concern is now returning, perhaps in a more ominous nature than any previ- ous form, and that is deep concern over American and international debt. In early January, the WSJ published an article by Aaron Kuriloff which led off with this statement: "The world has never had as much debt as it has right now – nearly US $250 trillion. That figure is three times what it was two decades ago. And the world's debt loads are about to get a big test: Global central banks, which once kept borrowing easy, are changing course." There are also uncertainties within the world of mining itself. The new chief of Barrick Gold – which just bought out Randgold Resources for US $5.4 billion – just told the world that, "This is just the start of a big shakeup." There are also uncertainties on the national and inter - national mining regulatory front with additional regulations appearing likely from both environmental and international human rights sources. All in all, these fears and concerns indeed appear to be combining to drive many investors to turn to safe haven gold and silver holdings. n This material is taken from sources believed to be reliable and is provided for information only. Any investment decision should be made only after prior consultation with investment professionals. Leonard Melman is a financial and political writer who focuses on issues relating to the resource sector. Mr. Melman lives in Nanoose Bay, British Columbia, Canada and can be reached at lmelman@ shaw.ca The fear component in gold and silver

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