The coronavirus outbreak is a big deal. But it is not a reason to rush into gold. No, there are plenty of other reasons why gold is going much, much higher, notes Brien Lundin, editor of Gold Newsletter.
There are irreversible economic trends that will demand a very significant depreciation of the U.S. dollar (as well as other major fiat currencies) and a corresponding, but much greater, increase in the relative values of gold and silver.
Simple math shows us that the cost of servicing this massive U.S. federal debt debt are unsustainable at any interest rate that exceeds the rate that the underlying currency is depreciating. In other words, the interest rate on the debt can’t be higher than the rate of inflation.
I think this is one of the reasons, if not the primary one, why the Fed is so intent on igniting inflation in the U.S. economy. Think about it: Why is the institution founded to prevent inflation (currency depreciation) now so desperate to foster it?
What’s different today than when it was founded? The answer is simple and obvious: The federal debt has grown to an unmanageable level, thanks to this long epidemic of monetary easing.
If the growing irrelevancy of the dollar as a fiat currency reaches its endpoint, what will be the new monetary regime to take its place? My bet is that it would include gold, if not as an official gold standard, then some sort of anchor to give the dollar some credibility.
Given the amount gold held in U.S. reserves, at virtually any meaningful backing ratio the new official price for gold would be a considerable multiple of today’s levels, and likely well over $10,000 an ounce.
All this is part of the long-term rationale for owning gold. There are also some short-term reasons, even if a global pandemic isn’t one of them.
I can’t think of a better candidate to become our next big exploration winner than Amex Exploration (Vancouver: AMX). Its Perron project sits within an area with a long history of gold production and ready access to infrastructure.
Amex has already outlined initial high-grade targets at Perron, including the Eastern Gold Zone (“EGZ”) and the Gratien Gold Zone (“GGZ”).
Both targets have proven to be marbled with high-grade gold and look likely to contribute to a resource that could be between 1 million and 1.5 million ounces, by the time Amex releases the initial resource estimate for the project at the end of 2020/beginning of 2021.
Better still, Perron boasts a district-scale fault system. Between the Perron and Normetal faults, the property encompasses more than 15 kilometers of prospective strike, of which the initial four targets, including EGZ and GGZ, span just three kilometers of the Perron fault.
Thanks to a couple of recent financings, Amex is fully cashed up, with C$14 million in its treasury to conduct the 60,000 meters of drilling has planned for Perron in 2020. That’s on top of the 40,000 meters the company completed on the project in 2019. Assays are still pending from 12,500 meters of that effort.
So, there’ll be plenty of news flowing from Amex this year, as it just added a third drill to step out to the east and west of the zones defined by the EGZ and GGZ, as well as the Grey Cat Zone and Central Polymetallic Zone. And two drills will continue to explore and define the EGZ, GGZ and Grey Cat Zone.
Success with the regional drilling program at Perron could open up a whole new chapter in Amex’s story. We’ve already enjoyed some tantalizing gains with Amex — its shares are already up more than 75% since my initial buy recommendation in September.
Given the current state of the gold market, I think this company’s ceiling remains quite high. Thus, even after the gains of recent months, Amex Exploration remains very much a buy.
