S&P’s downgrade of the United States’ credit rating to AA+ from AAA will have a much more negative impact on the value of the U.S. dollar than that of U.S. government bonds, according to Jeffrey Gundlach.
The founder of DoubleLine Capital and one of the world’s most respected bond investors, Gundlach discussed the implications of the U.S. downgrade in an interview with CNBC on Monday.
Gundlach argued that the downgrade is actually more of a referendum on the dollar rather than U.S. Treasuries, due to the fact that America’s ability to pay its debt obligations remains a virtual certainty because the dollar remains the world’s reserve currency and the government can continue to print money to fund its obligations.
Therefore, holders of Treasuries should not be concerned that they may not receive interest payments on government bonds. However, the value of those payments is what has essentially declined, given the fact that with more dollars in circulation due to the printing presses, the value of each dollar by definition declines.
While Gundlach did not specifically discuss gold, the implications of a weaker dollar and higher bond prices (lower yields) are unequivocally bullish for the price of the yellow metal. This is the case because in such a scenario, gold is denominated in dollars and the opportunity cost of holding an asset such as gold that does not pay interest has fallen.
Platinum Group Metals Secures $260 Million Loan
An Updated Feasibility Study published for the WBJV Project 1 Platinum Mine in October 2009 planned for a steady state production rate of 275,000 4E ounces (platinum, palladium, rhodium and gold) per year at a capital cost of $443 million. Of the required capital cost, a fully funded Phase 1 $100 million surface establishment and underground decline development program is already in progress. Full Platinum Group Metals News Release.
- The $260 million senior loan includes a term of nine years, an additional working capital facility up to $25 million, and a standby subordinate loan facility for cost overruns, if any.
- The proposal includes a hedging strategy that maximizes the hedging of byproducts such as palladium, gold and nickel - thereby minimizing the ounces of platinum hedged over the loan life.
- The lending group of banks has a global presence, direct platinum industry experience and includes two of South Africa's major banks. Each bank has a defined role in order to assist with efficiency and a timely closing, currently expected by November 30, 2011.
