#1/ The Week in Commodities/ Wesdome Gold Mines Ltd. (TSX: WDO)(OTC: WDOFF)
Weekly Recap, and Translating the Fed's Newspeak
Gerardo Del Real Photo By Gerardo Del Real
Written Monday, August 29, 2016
Fed chairwoman Janet Yellen sent markets lower, then higher, then lower after her latest comments regarding the direction of interest rates and views on the economy.
Her comments were best described by a CNBC pundit as “the most dovish-hawkish comments from Janet Yellen yet.” I can’t make this stuff up.
Here’s one quote:
"In light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months."
I will attempt to translate. There’s at least one rate hike coming, and possibly two. The markets, including the metals space, will not like it but it will be temporary. Why? Because if markets react in a negative fashion, the Fed chairwoman has a plan. Here it is in her own words:
“On the monetary policy side, future policymakers might choose to consider some additional tools that have been employed by other central banks, though adding them to our toolkit would require a very careful weighing of costs and benefits and, in some cases, could require legislation. For example, future policymakers may wish to explore the possibility of purchasing a broader range of assets.”
I’ve repeatedly outlined the policy actions of the European Central Bank (ECB) and the Bank of Japan (BOJ) because I feel they’re critical to understanding where we’re headed with policy here in the U.S.
Additional tools that may require legislation would include negative interest rates. Purchasing a broader set of assets means more QE. The market understood that and this is why gold responded higher initially.
It took about an hour, but after reading through the statement the market, including the metals space, understood the additional stimulus would come after a nasty sell-off, causing the markets and gold to retreat.
Understanding that it won’t happen before some considerable volatility in the markets is important but we now have our road map.
One, maybe two hikes in the coming months. A market that calls the Fed’s bluff and forces the introduction of “additional tools that have been employed by other central banks.”
What happens in September is important. Not just what happens here, but in Europe and Japan. I wrote about why in early August in the article "Gold's Most Important Month."
I’ve detailed several times that central bank influence is waning and in the way of what’s necessary; robust, sustainable economic growth on a global scale.
The interference by central banks around the world has delayed what will be a painful but necessary outcome; coordinated structural reforms.
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The Week in Commodities
Gold saw a weekly decline of approximately 1.5% while silver dropped approximately 4% for the week. Copper also saw a decline of approximately 4.4% for the week with platinum and palladium dropping approximately 4.2% and 3.2% respectively.
September is right around the corner. Expect volatility and possibly the next great buying opportunity.
The Week in Juniors
Wesdome Gold Mines Ltd. (TSX: WDO)(OTC: WDOFF)
Let’s start it off right with an exciting new high-grade discovery at an old mine.
On August 24, 2016 Wesdome Gold Mines announced underground drill results from the exploration program at its 100% owned Kiena Mine Complex located near Val d’Or, Quebec and it was a fantastic set of numbers.
Numbers that included:
94.35 g/t Au over 17.40 meters uncut (18.03 g/t cut) in hole U-6124
223.12 g/t gold over 14.25 m uncut (18.59 g/t cut) in hole U-6125
38.81 g/t gold over 5.00 m uncut (15.71 g/t cut) in hole U-6125
43 g/t gold over 8.2 m uncut (3.82 g/t cut) in hole U-6130
The company’s wholly-owned, contiguous Val d’Or properties cover approximately 7,000 hectares and encompass four former producers and eight shafts.
The Kiena Mine Complex is a fully permitted, integrated mining and milling infrastructure, which includes a 900-meter production shaft and 2,000 tonne per day capacity mill. From 1981 – 2013 the mine produced 1.75 million ounces of gold from 12.5 million tonnes at a grade of 4.5 g/t.
In 2013, operations were suspended due to a combination of declining gold prices and lack of development. The infrastructure has been preserved on care and maintenance status.
