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by Daniel Reid

"We have gold because we cannot trust governments." ― Herbert Hoover

Pullback In Gold Could Be 'Last Chance' For Investors To Get On Board 

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Since hitting a 2020 low in March, gold has been on a tear...


From the low of $1469.4 on March 19, spot gold rallied almost 40% to a 2020 high of $2,056 on August 6 - see London Metal Exchange (LME) chart below.

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It’s pulled back somewhat from that high and is currently trading on the $1,900 handle.


Regardless, most market observers believe it’s only a matter of time before it breaks through any resistance around the 2,000 level to advance the rally.


Therefore, pullbacks will be opportunities for new investors to take positions in gold and for existing investors to consolidate positions.


Now, while you can make a straight gold play by buying physical gold or exchange-traded funds (ETFs), buying the stock of a gold mining company often gives you a better risk/reward than either physical gold or an ETF. 


North American junior miner Emgold Mining Corporation is just such a company. It has a unique business model that is giving it plenty of growth momentum in two of the most prolific gold mining regions in the world. 


But first, what is fueling the gold price rally?


The two primary drivers are the fear of Coronavirus and quantitative easing/weak dollar.


Covid-19 refuses to go away and continues to disrupt economic activities worldwide, thereby creating fear and driving investors and central banks into gold as a safe haven.


Meanwhile, dollar debasement by the Fed as it prints trillions of dollars to buoy the economy puts upward pressure on gold.


Because gold is priced in dollars, a weak dollar increases the price of gold and vice versa - see 10-year correlation chart of U.S. dollar and gold prices below.

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We’re now in an incredibly loose monetary policy era that could last for as long as Covid-19 is around, and nobody knows how long this will be.


Another driver of the gold price that is not much talked about is the limited supply of gold, initially from refiners but now from miners.


Coronavirus lockdown measures imposed in March shut operations at the world’s top gold refiners in Switzerland, thereby disrupting global bullion supply chains for weeks.


This sent panic through gold trading desks in New York because there wasn’t enough bullion in vaults around the world to meet demands of traders who used futures contracts; these paper contracts must be backed with physical gold.


The rush by traders to buy gold amid the bullion scarcity was likely what jump-started the gold rally.


As lockdown measures have eased and refiners have started operations, bullion scarcity has subsequently waned a bit.


However, supply-side issues have not totally diminished because tightness in supply is now coming from the gold miners. 


Because of these aforementioned factors, the gold bull run is not ending soon.


Again, this doesn’t mean there won’t be occasional pullbacks to consolidate technical bases of support.


Legendary anti-gold investor Warren Buffett seized on such a pullback to get into gold for the first time ever…. (As far as we know).


Buffett famously hates holding physical gold, which doesn’t pay dividends like the Oracle of Omaha likes his investments to do. 


So, perhaps to get exposure to the gold rally and still get the dividend income he craves, Berkshire Hathaway invested in Canadian blue-chip gold miner Barrick Gold.


Whatever the rationale, this surprising move by Berkshire is a bullish signal on gold to other investors.



If, like Warren Buffett, you’re also not keen on physical gold, and you’re instead looking for a gold company with a solid business model, considerable upside, and yet still undervalued compared to peers, then you might want to take a look at Vancouver-based junior gold exploration company Emgold Mining Corporation (OTC PINK: EGMCF).



EMGOLD MINING: UNLOCKING AND MONETIZING HIDDEN VALUE IN ASSETS






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EmGold:   Current Chart on OTCMKTS: EMGCF​​​​​​​.   On Canadian Exchange EMR.V


Emgold is not your typical small-cap gold company.


They don’t mine or produce any gold.


Yet they’re doing big business in the big gold mining jurisdictions of Nevada and Quebec.


Nevada is the leading gold-producing state in the U.S. while Quebec is Canada’s second biggest gold-producing Province after Ontario.


The key factors that make Emgold a compelling investment are: a unique business model, high growth prospects, and a solid management team.


UNORTHODOX BUSINESS MODEL


There’s a well-worn mining adage that says, “the best place to find a new mine is in the shadow of an old mine.”


Emgold’s business model, which really is their unique selling proposition (USP), is built on this adage.


They find abandoned mine properties in proximity to producing mines in highly-productive mining regions.  They then apply modern drilling technologies to unlock new value in these properties.  When all is said and done they’ll either sell these assets or outsource their development to other companies in exchange for royalties.


So, Emgold, in a nutshell, could be thought of as a real estate venture capital firm and gold exploration company combined.


In a corporate update provided in August 2019, David Watkinson, President and CEO of Emgold said, “Using a baseball analogy, we try to create multiple opportunities for our shareholders for singles, doubles, triples, and potentially homeruns by acquiring and advancing a diverse asset base made up of quality exploration properties.”


HIGH GROWTH PROSPECTS


Since exiting California in 2013, Emgold has focused attention on Nevada and Quebec, which are two historic gold mining hotspots.


In most of these historic gold regions, there are many mines abandoned... Not because they were not high quality assets, but because prevailing low gold prices at the time of their original development caused them to shut down operation. 


BUT, now that gold prices are at levels not seen since 2011, there are plenty of opportunities for Emgold to aggressively grow its portfolio of assets for sustained future growth. 


On the company’s plans for 2020, CEO Watkinson said, “We are now moving to the next phase of growth where we want to advance those (acquired) assets and increase their value. This will include generating divestiture opportunities as a way to both advance assets and generate capital. We look forward to a transformative year in 2020.” 


SOLID MANAGEMENT TEAM


The company has assembled a highly experienced management team with deep industry knowledge and a wide variety of skills.


CONCLUSION


Gold has embarked on a new bull run driven in part by both the Coronavirus pandemic and the Fed’s debasement of the dollar.

Consequently, gold equities are poised to advance in lockstep with rising gold prices.

If you’re looking for a good risk/reward play on the rising gold prices, then you may want to look further at Emgold Mining.

  

EMGOLD Recap: 


EmGold is a Canadian-based gold exploration company with a unique business model that could have a lot of potential. 


It’s a small-cap company focused on the acquisition, enhancement, and divestiture of previously abandoned mine properties in the gold mining hotspots of Nevada and Quebec.


The company’s small-cap size and aggressive growth plans makes it an attractive acquisition target as well as a formidable company on its own.



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