I predicted the 2020 recession/ depression - or at least looked at the wrong signals and still came out relatively unharmed.
Disclaimer: Originally posted on Feb 21, 2020, readers can safely assume the author has relevant positions in any asset class discussed.
At the start of February, I was looking to move the majority of my trading capital into another asset class. After the crypto swings for the past two years, I was ready for something with more stability. I had my apprehensions in the market after getting burnt multiple times by 0-DTE’s courtesy of /r/wallstreetbets and was contemplating going all cash. Then India - more specifically the Uttar Pradesh Government stepped in and solved my issues.
DTE - Day’s to Expiration
NEWS: UP 'finds' 3000 tonnes of gold reserves, markets have not reacted yet (or have already been priced in). Lets do a bit of research in some of the glaring inconsistencies + states financials + socioeconomic factors to save the interested parties from the hassle thread- 1/12
inconsistencies: > "approx. 2,943.26 tonnes" - gross quantity of gold isn't possible this soon, and nothing online from a reputable source (World Gold Council) to affirm support -India finds gold and first mine is largest - no study/ verification + what grades + what depth?? 2/12
- at the VERY least JORC / NI43-101 compliant report (or the equivalent in India) not from @timesofindia or @ndtv - area is being leased, any layman will overestimate and underdeliver back to the numbers: - 5x current India’s reserve - gold ore: still needs to be refined 3/12
technicalities: - India has only 3 working gold mines Hutti + Uti in Karnataka and Hirabuddini mines in Jharkhand "from 1902 to 1919, nearly 7,400 kg of gold were obtained from very rich ore, at an average yield of 19 g/metric tonne." source:shodhganga.inflibnet.ac.in/bitstream/1060… (pg 30) 4/12
success rates for gold mines: > Hutti: "The industry closed down in 1920 due to technical difficulties + lack of funds." > Kolar: "... which was eventually closed in 28 Feb 2001 due to inflation of gold rates" The Yogi govt does NOT have the infra for this kind of project 5/12
where: sonbhadra, district in Uttar Pradesh, literally translates to 'blessed w/ gold' - If I was a prospector would probably already go to the place literally named gold - literally one of the poorest districts especially in the Yogi government - incentive? 6/12
incentives: - economic: been trying to promote this place as a tourist hub since ’17 with no apparent success - with the upcoming elections, any news of prosperity of lack thereof will spur FDI or at the very least a gold rush to capture the land 7/12
financial stuff: - the mine will be worth $224b @ current gold prices (Feb ’20). - GDP of Uttar Pradesh is US$220 billion. - current yield is abysmal from Indian mines for any proper interest 8/12
IMF + World Bank facts: - Indian gold imports were 51.8t in December 2019 – 19% lower y-o-y - The domestic gold price increased by 3.2% in December, ending the year 23.8% higher than the end of 2018 source:gold.org/goldhub/gold-f… 9/12
gold.orgGold demand tailed off in second half of December with start of inauspicious period and higher gold priceWedding and stable domestic gold price at ~Rs 37800/10gm helped demand in first half of December but demand tailed off after 15th December after the beginning of inauspicious period and rising gold price which jumped by 3.7% from mid-December till end of the month. Post by Mukesh Kumar
acc to the World Bank, "the country is also seeking ways to ensure its future growth is more sustainable and inclusive, adjusting its policies regarding social protections and infrastructure development." 10/12
thoughts: - its one thing to find a promising formation BUT to mine, develop + get product from it is an entirely diff ball game. This is a 20y project min and will NOT affect gold prices. - If anything this mine will be used to bring black market gold into circulation. 11/12
Mark Twain has described a mine as "a hole in the ground owned by a liar." Always hopeful, but wary. 12/12