There’s something very unique going on that we haven’t discussed before, and it’s important. It’s also intensifying, asserts resources sector experts Mary Anne and Pamela Aden, co-editors of The Aden Forecast.
We’re sure you’ve heard about the supply shortages, and perhaps you’ve already experienced some. We know we have. But when you take the whole big picture of what’s happening and what it means, it’s unprecedented and it’s going to affect us all, as well as the markets.
As you probably know, there are over 100 ships backed up at the Port of Los Angeles/Long Beach. This port receives most of the exports out of Asia and this log jam is getting worse. Why?
It’s basically one of the Covid repercussions and the bottom line is, it’s going to slow the economy and help fuel inflation. Here’s what’s happening:
When the pandemic arrived on the scene last year, many countries went into lockdown. As a result, many Asian factories shut down and production ground to a halt.
This resulted in many shortages, like chips, car parts, imported food products, clothes, toys and more. But since demand was relatively low during the covid months last year, it wasn’t such a big thing. Now, however, this has changed. Demand for goods picked up strongly this year, but supply couldn’t keep up.
The reason was due to factory shutdowns, especially in Viet Nam, which provides the U.S. with 40% of their imports. Plus, busy ports in China partially shut down too, all because of covid. This led to a backlog of products and congestion at the ports as containers stacked up, which is still the case.
The vast majority of these products are sent by ships, 90% to be exact, and that’s currently the problem. There just aren’t enough ships to transport all the containers and goods everyone is waiting for.
So as you’d expect, the cost of shipping is skyrocketing. Nevertheless, companies need the goods and they’re paying whatever it costs to get their goods to the consumers. So ships are lining up at Los Angeles and other U.S. harbors. This is happening internationally too.
These delays and unprecedented traffic are also adding to other additional import costs, like more trucking costs, for warehouses and so on. These costs are all going to be passed on to the consumer, leading to higher priced goods.
Plus, shipping experts say it’s complicated and not only going to continue, but it’s going to get worse. This in turn will result in fewer products, as well as higher prices, likely in the months and year ahead.
Inflation is already surging at the highest rate in 30 years. That’s primarily thanks to the Fed’s money creation, which is the cause of inflation. Basically, two much money equals higher prices.
And in recent years, much more money has been created than ever before, and even more is coming down the pipeline due to infrastructure spending and other items that’re also included in the bill. This means inflation is not going away. It’s going to be with us for a good while and it’ll likely head higher. And the ongoing import situation will only add fuel to the fire.
This is going to be good for gold. As you know, it’s been stubbornly biding its time, and for a while it seemed like nothing was going to push it higher. But it finally reacted to the inflation numbers and it’s now embarking on a renewed rise. This is the rise we’ve been waiting for, and it’ll take silver, and the gold and silver shares up along with it.
Our careers started during the inflationary seventies and that was the common environment during that decade. This is where we learned how easy rising inflation can turn into unwanted high inflation.
It’s a global problem today and it’s much more serious than the seventies. In fact, today’s fiscal program makes the Financial Crisis in 2008 seem tame in comparison. It’s no wonder we see commodities overall rising sharply this year.
Gold is sure to explode in the years ahead. Gold shares are jumping up from their lows. They’ve been the most bombed out this year but it’s now their time to shine. Silver also looks great and it’s poised for a solid upside.
Our gold mines, Kirkland (KL) and Agnico Eagle (AEM) both had top production in several of their mines, and they are a match made in heaven.
They recently announced a merger which means two of our favorite gold mines will have combined results in becoming Canada’s highest quality senior gold producer with the most favorable risk profile.
We own both of these mines, and the way it’ll merge is the shareholders of Kirkland Lake will receive shares of Agnico Eagle, and it’ll become the new Agnico Eagle, pending shareholder’s approval. It’s expected to happen in December, or in the first quarter of 2022. Keep your positions in both of these mines.
Gold shares are all bouncing up from their lows with some stronger than others. Keep your positions and buy new ones if you don’t have all your positions set. Our mining recommendations include Barrick Gold (GOLD), Hecla Mining (HL), Newmont Mining (NEM), Pan American Silver (PAAS), Royal Gold (RGLD) and Yamana Gold (AUY).
