The news that Warren Buffet took a stake in Barrick Gold stimulated animal spirits in the precious sector on Monday. To be sure, this was a factor in the move on Monday. However the precious metals are starting to price in the next round of money printing by the Fed and the coming avalanche of new Treasury bonds, both of which will be considerable in quantity and serve to further devalue the U.S. dollar. On that note, the US dollar index tumbled below 93 on Monday. In addition, per the TIC report which shows the flow of international capital into and out of U.S. securities, foreign entities led by China dumped $20.6 billion worth of Treasury securities in June.
The message is clear: the Fed will need to be a large buyer of the upcoming Treasury bond issuance and the precious metals sector loves the smell of this.
Chris Marcus (Arcadia Economics) and I discuss last week’s one-day price pullback in the precious metals sector and factors that will drive gold, silver and the mining stocks up to levels that may even surprise jaded goldbugs:
Note: I do not receive any promotion or sponsor payments in any form from the mining stock companies I present in my newsletter. Furthermore, I invest in many of the ideas personally or in my fund.