Gold Miners Disappoint Again, Palladium Zooms 15%

Well, as the countdown to Election Day ticks closer, the gold market continues to reflect a vote of no confidence in fiat currency.

Gold prices have been moving up in terms of all major national currencies, including of course the U.S. dollar.  That’s despite a significant move up in the dollar in recent weeks on foreign exchange markets.

The monetary metal made another record high on Tuesday. It currently comes in at $2,753 per ounce and is registering a weekly gain of 1.2%.

Turning to the white metals, silver is up 0.3% for the week to bring spot prices to $33.83 an ounce. Platinum is advancing 1.8%% to trade at $1,036. And finally, palladium is rallying an impressive 14% this week to command $1,232 per ounce.

The palladium market got a lift from reports that the Biden administration wants to stiffen international sanctions against Russia – by targeting specifically its ability to export palladium. Russia produces nearly 40% of all palladium that makes its way to the global market for the strategic metal, which is used heavily in the automotive industry.

China is a major consumer, and it’s unlikely it will partake in any U.S.-led boycott of Russian palladium. But if supplies are cut off to Western buyers, that could lead to a scramble for scarce available stockpiles and potential price spikes not just in palladium but also in platinum, which can be substituted in many industrial applications.

Attempts by the U.S. to ban Russian palladium will only accelerate Russian efforts to forge ahead with alternative trading mechanisms specifically for the so-called BRICS countries. Russia’s Finance Minister said the country is currently pursuing a BRICS precious metals exchange.

A BRICS super-currency has also been proposed – one that would be backed at least in part by gold.  The central banks of Russia and China have been big buyers of gold in recent years. Russia has also begun adding silver stockpiles to its monetary reserves.

Of course, the Kremlin will be closely watching political developments in the United States. The American media has long tried to portray Donald Trump as an apologist for Vladimir Putin. 

But the Trump administration actually began ramping up sanctions on Putin’s government before it went on to invade Ukraine on Joe Biden’s watch. Trump has also talked about imposing large new tariffs on Russia’s trading partner, China. He went further recently and threatened to hit any country that shifts away from using the U.S. dollar in international trade with a 100% tariff.   

Currency wars are heating up, and they will continue to do so regardless of who wins in November.

In other news, shares of top-tier gold producer Newmont Mining got slammed on Thursday. Newmont stock plunged as much as 15% on the day after a disappointing earnings report. Even though the company reported big revenue increases on the heels of gold prices making record high after record high, its operating costs are also pushing relentlessly higher.

Unlike gold itself, a gold mining enterprise doesn’t necessarily benefit from the effects of inflation. And like most other publicly traded gold mining companies, Newmont has lagged behind the performance of spot gold prices.

It’s not just a recent phenomenon. The underperformance of the mining sector has been going on for decades.

In retrospect, Newmont and other miners would have generated more shareholder value by scaling back capital expenditures, lowering production volumes, and using freed-up cash to add physical precious metals to their balance sheet.

Holding gold and silver as real money reserves should be an obviously attractive idea to the CEOs of companies that literally dig it out of the ground. But unfortunately, few mining executives seem to believe in the monetary utility of their own products.

One exception is Canada-based SilverCrest Metals. Its management team has moved to put around 20% of treasury assets in gold and silver bullion.

That decision has paid off for shareholders. SilverCrest shares hit a record high this week. Meanwhile, Newmont, Barrick, and most other notable stocks in the sector remain well below their former highs as they underperform the metals year after year, decade after decade.

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