Update from the Allan Barry Reports
Brought to you by Advance Gold (AAX.V)
I’m always on the lookout for good reporting on the mining sector, I try my hardest to provide a bunch of it at the Allan Barry Reports. It is much needed because mining is undercovered and needs more top quality coverage to tell the stories about metals and the companies exploring, developing and mining it.
Yesterday, a friend shared a link to a video. I clicked on it, I didn’t know the gentleman, I knew nothing about his company.
He hooked me into watching it with the title: “The Fall Of The US Dollar: Is The Return To A Gold Standard Inevitable?” This is a topic that has rambled around in my noggin for many years as a professional in the mining sector, and a commentator on exploration to mining, as well as the action in metals.
I’m usually not a big fan of highly produced powerpoint presentations. They tend to be way too slick and it starts me off suspicious. I’m in the camp of making things as simple as possible.
This video was a highly produced slick presentation, presented by an excellent public speaker. Yet, I literally think anybody that does public speaking, even if the topic isn’t your thing, it is a must watch.
Okay, so, in addition to being impressed with this fellas presentation and public speaking skills, I was debating his points and conclusions, while he was discussing them.
I agree and disagree with some of his conclusions. An example would be he makes a very strong argument about the potential struggles ahead for the US dollar (USD), do I think it is fundamentally overvalued? Yes. Does that mean I think it is doomed to be replaced as the world reserve currency any time soon? Definitely no.
The second part of the question, is it inevitable the world will return to a gold standard? Basically what I think will happen is economics will lead us back toward a form of the gold standard. He makes the case for some sort of apocalyptic event, I don't agree it needs to happen in a shocking way.
In the video, Grant Williams, makes a point about what happened at Yellowstone Park when they reintroduced wolves in the mid 1990s. It transformed the park, and it happened over time.
That is how I see a return to a more sound monetary framework, with hard currencies backed by something other than a pile of debt and promissory notes from politicians.
A transition could take several years, but, will probably be the way politicians and central bankers are forced to return to some monetary sanity. Piles of debt and fiat currency while currencies worldwide are constantly seeing their purchasing power eroded. This does not exactly sound like a rosy sounding future.
I’ve always believed that basic economics has a way of fixing serious problems. I also see that we are probably in the early innings of the process making a return to basic economic sanity. Such as currencies backed with something like gold and silver.
A return to a version of the gold standard is highly probable. I think it will take time. We are starting to see the start of it with central bankers all over the world increasing their physical gold holdings. To the highest levels in many decades. Economics are forcing them to start backing up their currencies with gold.
I don't think they should stop at gold, I think they will also back it with silver, copper, oil, zinc, battery metals and many other commodities. The things that are mined are the building blocks of everything in our lives, now and long into the future.
Yet, for too long, the much needed exploration costs to look for new mines to replace the old ones has been a no go. As is often the case with trends, like the effects of not enough exploration and development of new mines. They tend to overdo it on the extremes.
Mr. Market has a way of getting overly greedy at the tops, and overly fearful at the bottoms. But, just like night turns into day and day into night, economics tell you that one of two things need to happen.
Either prices for gold and other commodities, that are fundamentally undervalued based on long term supply and demand trends, need to go up. Or they will go down and only delay the inevitable. Which is if you have resources that are under tight supply and strong demand, the prices will go higher.
Several central bankers are starting with gold, as a means to harden their currencies. Again, I see that as basics of economics forcing their hands, and others will join the party.
You don’t need to convince the Chinese and Indians, the two most populous countries in the world, of the wisdom in being skeptical of politicians, central bankers and the fiat currencies they trade with.
As China and India grow, they consume increasing amounts of gold, silver and all commodities. If China ever decided to liquidate some of their USD and US debt, into gold, silver and national reserves of metals. In a meaningful way. China alone could move the market big time.
Plus, there is buying coming from several central bankers, Chinese, Indians consumers are big buyers, and they aren’t alone. It is a fabric of their cultures.
We are currently seeing gold trading at near record highs in several major currencies. We are even seeing days when the USD and gold both go up. This is all very bullish for gold.
I still believe we are in the early days of central bankers, and consumers worldwide increasing their buying. When they shift in a big way, the supply chain will be overwhelmed and it will drive up the price of gold. Silver will join in and then other key commodity metals and battery metals will kick their heels up as well.
The leverage problems with debt will force economics to fix things. The Federal Reserve knows it, they can see the $22 trillion in national debt, they know that is larger than annual economic growth.
Although they would like to have more ammunition with interest rates, in case this long in the tooth economic expansion slows down. They know they can’t “normalize” interest rates any more.
This has to be the new normal because any more interest rate hikes and the economy will hit the wall. Consumers are stretched, they haven’t had a real pay raise above the level of inflation in decades.
Even though, cryptocurrencies and blockchain technology had a big pumpage and then big dumpage. There was some value to be gleaned from this event.
It has caused a lot of younger folks to look at the harsh reality of the writing on the wall. Huge debt, stretched to the max, and no raises. They are yearning for an alternative, which is confirmed by the mania around crypto and blockchain.
It is almost like they are forced to search out a better way, or at least one that doesn’t sound too crazy. At least not more crazy than cryptocurrency and blockchain mania.
The system is seriously broken, we need more discipline in currencies, deficits and debt. Mr. Market and his friend basic economics have allowed these things to get out of hand.
I do like the point Grant Williams makes, about the supply and how much the prices of the metals need to go up. For the bankers of the world and consumers, to store some of their wealth in gold and backup currencies with gold.
So, to answer the questions Grant poses. Do I think the USD will fall into the abyss of extinct currencies? No. But, I do think it is significantly overvalued and now that the Fed is done tightening, USD is headed for rougher roads that will take some of the shine out of King Dollar.
His second question, about the inevitability of returning to a form of a gold standard. I not only think it is inevitable, I also think it has started.
The way I would play it, is look for explorers and developers of new mines. If they have success with drilling, and the truth machine says they have a mine. The bigger companies will feed on them and pay handsome premiums. The higher, gold, silver and other metals go, the higher the premiums.
Looking for quality drill results, and reasonable valuations, with good potential to valuation setups is the way to go. I will do a weekly update report, likely by tomorrow to talk about the ones I see fit the bill.
You have to watch this video, it is an interesting topic and Grant Williams, someone I didn’t know of until watching this video yesterday, is a fantastic public speaker and presenter.
All the best,
Allan Barry Laboucan
Allan Barry Reports
Advance Gold (AAX.V)
P.S. my reports are for information purposes only, before making any investment decisions it is important to do your homework and speak with your financial advisers.