Gold Mining Valuations Ridiculous AgainMyrmikan_Research_2022_07_13.pdf
Excerpts:
When the world losses confidence in the Western banking system, perhaps as soon as this winter when Europe will face economic and political collapse because of the conflict with Russia, the Fed will be forced to print more and faster, and there will be runs on central banks. There are no liquid assets on these balance sheets that can be sold to support the currency. Gold will trade at a price that balances central bank balance sheets. In order for gold to back the Fed’s liabilities by a modest one third, it would currently require a price above $11,000/oz. Since markets always overshoot, $17,000, or half-backing, is a more reasonable target (the peak price in 1980 resulted in an absurd 133% backing, which today would translate to $45,000/oz). This assumes no growth in the Fed’s balance sheet. The same forces that will drive gold to those prices will also drive interest rates to a level that disallows continued deficit spending. Like third-world countries and the Soviet $0 $50 $100 1952 1972 1992 2012 Debt Securities and Loans: All Sectors GDP NOTE: This material is for discussion purposes only. This is not an offer to buy or sell or subscribe or invest in securities. The information contained herein has been prepared for informational purposes using sources considered reliable and accurate, however, it is subject to change and we cannot guarantee the accurateness of the information. Myrmikan Research July 13, 2022 Page 6 The information transmitted is intended only for the person or entity to which it is addressed and may contain confidential and/or privileged material. Any review, retransmission, dissemination or other use of, or taking of any action in reliance upon, this information by persons or entities other than the intended recipient is prohibited. If you received this in error, please contact the sender and delete the material from your computer. The material contained herein is for discussion purposes only and is not an offer to buy or sell securities. It has been prepared using sources considered reliable and accurate, however, it is subject to change and the accurateness of the material cannot be guaranteed. Union before it, the United States (and other Western powers) will be forced suddenly to balance its budget, with catastrophic effects for those dependent upon the state: the poor and the government parasites both. The economy will have to adjust radically as overcapacity liquidates, which will drive gold higher in real terms as well as nominal and cause gold mining margins to explode. Gold mining companies, such as the ones described above, ought to be the primary beneficiaries. The $100 trillion of debt (and growing) demanding $8 trillion of cash (and shrinking) has launched the dollar higher through a short squeeze. The assets most sensitive to currency have fared the worst. We are reminded that the NASDAQ bubble bust when the last short covered. We suspect the dollar bubble may do the same thing