While Federal Reserve Chairman Ben Bernanke is likely a bit relieved to be out of the financial spotlight for a change this week due to the immediacy of the U.S. debt ceiling deadline, the impact of U.S. fiscal policies in the weeks ahead could very well increase the likelihood of a third round of quantitative easing, QE3.
That is, at least according to BNP Paribas strategist Julia Coronado, who in a note to clients this morning wrote the following:
The markets seem to be complacent that American politicians will ultimately do the right thing and raise the debt ceiling. The current state of play features competing plans in the Senate sponsored by Republican Jon Boehner and Democrat Harry Reid, respectively. Both the Boehner and Reid plans have roughly $1trn in specified cuts with the remainder to be decided by Congressional panels. They focus on different areas but the key difference is that the Boehner plan raises the ceiling by $1trn so that we will be back at this slog in January or February. Reid wants to raise the ceiling by $2.7trn which would get us beyond the elections. Given that S&P has clearly said they want specific and credible reductions in the deficit, neither plan is likely to satisfy them either in size or credibility and thus a downgrade still seems likely.
With the focus on the US debt ceiling, the USD is likely to stay under selling pressure with the safe haven currencies like CHF (Swiss Franc) and JPY (Japanese Yen) likely to be the key out performers in G10 space. In our view, even if a credible deal is struck that eliminates the debt default risk and gets the support of the ratings agencies, any support for the dollar could prove transitory. Markets may soon after conclude that the implied fiscal headwinds in 2012 either raises the risk of the Fed enacting QE3 or at a minimum imply a public commitment to a longer period of near-zero rates and no Fed balance sheet shrinkage. Under the alternative scenario of no debt default but a ratings downgrade, dollar implications are also ambiguous.
West Kirkland-Newmont Joint Venture Reports Results
West Kirkland Mining (WKM.TSXV) reported assay results from the Company's first core drilling on its TUG property, which is currently under option from Newmont Mining (NEM). The first hole of the drill program returned 15.48 meters (50.8 feet) grading 3.08 grams per tonne gold (0.09 oz/t) and 94.75 grams/tonne silver (2.77 oz/t).
Approximately 400 shallow RC type holes have been completed at the TUG property and a near surface historic resource has been calculated. West Kirkland current drill program is designed to provide confirmation of the previous gold values in order to produce an updated compliant resource calculation as well as to explore for the roots and controls on the higher grades with the recent Long Canyon model in mind. Additional targets have been identified that have the potential to expand the deposit along strike and down dip.
Full West Kirkland Mining Press Release.
*First hole returned 15.48 meters (50.8 ft) grading 3.08 grams per tonne gold (0.09 oz/t) and 94.75 grams/tonne silver (2.77 oz/t).
*2011 drill program will include a minimum of five holes for 1,500 meters (5,000 feet) in the TUG deposit - Long Canyon Trend.
*Drilling of up to 1,500 meters (5,000 feet) at the Bullion Mountain property, North of the Pipeline Mine Nevada (10 g/t surface assays-shallow and deep high grade target).