May 5th, 2023 | 09:20 CEST
Bank comeback in a fortnight? Commerzbank, Barrick Gold, Desert Gold
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"[...] We are convinced that we could already leverage significant potential with a drilling program of around 35,000 meters. However, to finance this, we need a decision. Fortunately, there are already interested parties who can imagine advancing Barsele together with us. [...]" Gary Cope, President and CEO, Barsele Minerals
At home in Southern Germany, the passionate stock exchange expert has been accompanying the capital markets for about twenty years. With a soft spot for smaller companies, he is constantly on the lookout for exciting investment stories.
Commerzbank: Are risks turning into opportunities?
The Commerzbank share is hovering around the EUR 10 mark these days. In the medium term, it would be important if the share could hold this level. It looks as if the share could form a bottom at the current level. Even independent of the banking crisis, which is primarily raging in the US and has not yet affected any major institution, pessimists see black for the banking business. High interest rates have caused the demand for loans to collapse. In addition, the institutions themselves are looking more and more closely at loan applications - the high cost of living and potential expenses for energy-efficient renovations have to be taken into account when granting mortgage loans, for example.
Although the volume of new loans in Germany surprisingly rose by 27% in March compared to the previous month, according to Bundesbank figures, the figures remain clearly negative compared to the same month last year. However, the latest increase could be a positive signal after a long dry spell. Industry experts speculate that banks and savings banks are increasingly accepting lower margins in order to secure their share of the languishing business.
Investment experts positive for precious metals and commodities
On May 17, Commerzbank will publish its quarterly figures. Then it will become clear how the bank is doing in the current situation. Since it wants to pay a dividend again and buy back its shares, positive figures could provide a liberating blow. The Commerzbank share remains speculative - not only because of the smouldering banking crisis. At the same time, more and more market experts see opportunities in precious metals and commodities. "The longer the gold price stays above USD 2,000 per ounce, the more likely we believe a sustained sector-wide breakout to the upside will be," write the experts at Jupiter Asset Management. The professional investors point to lower mining costs in the sector and the continuing demand from central banks for precious metals.
WisdomTree also sees good arguments for commodities as an asset class. The ETP provider sees commodities as low-correlated compared to equities and thus as a suitable portfolio addition: "So although commodities are cyclical - i.e. tend to lose and gain value at broadly the same time as equities - the extent of this performance is significantly lower. This supports our decorrelation hypothesis," writes Pierre Debru, Head of Quantitative Research & Multi Asset Solutions at WisdomTree, in a recent commentary. "It appears that commodities and equities tend to rise during the expansion phase of the economic cycle, but not necessarily at the same time or the same stage of the cycle." The experts based their findings on research from the National Bureau of Economic Research (NBER) Business Cycle Dating Committee in the US. Accordingly, commodities have lost only 0.68% on average in all months since the 1960s, in which equities have lost more than 5%.
Desert Gold: Good starting position
Shares from the precious metals and commodities sector could be in demand now. Barrick Gold is currently trading near medium-term resistance, just above EUR 18 in German trading and could pick up speed. The share of Desert Gold has even more catch-up potential. The Canadian company operates in Mali on the border with Senegal and is developing its 440 sq km SMSZ project there. In the vicinity of the project are producing mines B2Gold and Barrick Gold. All projects produce more than 500,000 ounces of gold annually at a cost of around USD 800 per ounce - currently, the gold price is set to rise further from the current level of USD 2,000.
The research portal researchanalyst.com wrote about Desert Gold at the end of March: "If the first takeover activities make the rounds, junior explorers will very quickly become the focus of investors and will be able to make disproportionately high speculative gains. For the potential portfolio allocation in precious metals, a healthy mix of physical metal, larger to mid-sized producers and selected exploration companies with potential for admixture is recommended." That Desert Gold can be a good choice for experienced investors alongside top dogs such as Barrick Gold is also shown by a look at the past: in 2020, the share price multiplied within a few weeks.
Courage pays off. These days, this is true for bank shareholders and precious metal fans. However, while banks remain risky and are quickly taken to task by the market, there is no such contagion risk with gold companies. Both Barrick Gold and Desert Gold seem attractive at the moment. The latter company is presenting online at the International Investment Forum (IIF) on May 10. Participation is free of charge.
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