Expected inflation turnaround likely driving gold and mining shares

In my June 20th interview with Jim Goddard from HoweStreet.com, I reviewed two buy signals we have put out this month in the resource area, specifically on the gold group in our June 3rd market report and, more recently, on the Basic Materials sector last Friday. I also point out that a strong Canadian dollar was good for junior miners who raise money in Canada for gold exploration offshore because their loonies will go further in local currencies.

With more inflation on the horizon, junior mining stocks are looking good

Later in the broadcast, we get into a short discussion of the Trans Mountain pipeline expansion where I suggest we are getting close to a buy signal in the Energy sector and will be providing an update in next Monday's market commentary.

Jim asked me what I thought was driving gold higher. I suggested it was likely due to a bet that inflation has hit its lows for the foreseeable future. I pointed to Mario Draghi's Monday speech which included him musing about a European Union common fiscal stabilization instrument. That would allow the EU to spend on infrastructure projects and other stimulative measures in case of a slowdown, whereas right now the eurozone depends on national governments to implement fiscal measures. However, due to EU budget rules, there is a limit to what can be done in each country. I suggest that if another crisis approaches, the EU would probably unveil a new common fiscal spending regime which would likely be inflationary. It would also open the door to modern monetary theory in the EU that would essentially have the ECB monetarize government debt.

We close off the segment discussing the Facebook (Mostly Sunny; FB) cryptocurrency strategy. I am giving it a thumbs down due to the market power of the large companies that have signed up for the initiative. Ultimately, consumers will have to decide if they want to give Facebook and other corporate giants even more data.