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June 24th, 2024 | 07:00 CEST

Bank quake?! Is Deutsche Bank affected? Desert Gold and Barrick Gold as safe havens!

  • Mining
  • Gold
  • Banking
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Europe could be facing a new banking quake. The reason for this lies in French government bonds. Since the French President called for new elections, one has been able to read a lot about a possible shift to the right, but the real problems have hardly been reported so far. France's national debt ratio is 110% of gross domestic product, making it the highest in Europe. French bonds are worth less because risk premiums have risen by almost 60%. As a result, interest rates are rising, and accordingly, the value of government bonds is falling. As a result, all banks that hold these government bonds are suffering book losses. Deutsche Bank could also be affected by this. Additionally, we are looking at gold companies that are considered safe havens.

time to read: 4 minutes | Author: Armin Schulz

Table of contents:

    Deutsche Bank - How many French government bonds are on the balance sheet?

    Deutsche Bank may be facing turbulence in view of the political unrest in France and the associated risk premiums for French government bonds. It is currently impossible to tell how many of these bonds are on the Frankfurt-based bank's balance sheet, but it can be assumed that French bonds have also been purchased as part of the portfolio diversification. This could result in book losses. Both French and German bank shares recorded price falls. This could be due to the prevailing uncertainties but also to the ECB's latest interest rate cut. The latter is likely to have an impact on Deutsche Bank's profits.

    In the first quarter of 2024, the Company reported a pre-tax profit of EUR 2.0 billion, a 10% increase. Revenues rose by 1%, mainly due to growth in net commission income. Costs were reduced and the capital position therefore remains strong. Risk provisions in the lending business fell. The implementation of the "Global House Bank" strategy is showing positive results. The bank intends to prioritize sustainable financing in the future. Despite normalizing interest rates, it is optimistic that it will achieve its targets for 2025. To this end, it is implementing massive cost-cutting measures, particularly by reducing expenditure on external consultants in the Private Clients division, to increase its profitability.

    Additionally, the Company acquired a large part of NordLB's aircraft financing portfolio, amounting to EUR 1.67 billion. The transaction still has to be approved by the antitrust authorities. An agreement was reached in the legal disputes in Spain by accepting a small fine. The Postbank case, however, is still unresolved. It will be interesting to see how the collective bargaining round with the trade unions concludes, as they had demanded between 12.5% and 16.0% more pay. There are currently many uncertainties surrounding Deutsche Bank, which explains the pressure on the share, which is currently trading at EUR 14.52.

    Desert Gold - Optimistic outlook for investors

    Investors looking for high leverage for their gold investment should take a look at gold explorers. Desert Gold owns the SMSZ (Senegal Mali Shear Zone) gold project in Mali, a significant exploration area of 440 sq km in West Africa, where 1.1 million ounces of gold have already been confirmed. The Canadian company is pursuing ambitious plans to expand these resources through further drilling activities. At the same time, a gold production economic assessment (PEA) is underway. The proven gold reserves are currently valued at less than USD 10 per share, which offers significant upside potential for investors. This solid base and the upcoming results from ongoing activities could significantly boost the share price in the near future.

    Thanks to a successful private placement in May, which raised CAD 941,920, Desert Gold can now advance its drilling program again. The 3,750 m Phase 2 drilling program has been underway since May 14. A total of 47 drill holes are to be drilled in 5 different gold zones, including Mogoyafara South and Barani East. The results are expected to expand the resource and demonstrate the economic feasibility of gold production. Accordingly, the Company has published further important updates in the second half of the year, which could bring additional momentum to the share.

    The current market conditions for gold are promising. Despite a slight price correction following the record high of USD 2,450 per ounce, the precious metal remains in demand, not least due to geopolitical uncertainties and persistent inflation. The Company could benefit disproportionately in a sustained bull trend. The Company's exploration area is also conveniently located in the vicinity of established mine operators such as Allied Gold, Endeavour Mining, and Barrick Gold. This proximity to major producers increases the likelihood that Desert Gold will become the focus of potential acquirers if the gold price continues to develop positively. The share is currently available for CAD 0.06.

    Barrick Gold - Optimistic about the future

    Barrick Gold, the world's second-largest gold producer, has made remarkable progress in recent years. Without having to make any significant acquisitions, the Company was able to increase its gold reserves from 71.4 million ounces in 2019 to an impressive 77 million ounces at the end of 2023, corresponding to an increase of around 8%. This continued and sustained increase in reserves underscores Barrick's ability to discover and develop new sources internally.

    In addition to gold, Barrick Gold is increasingly focusing on the production of copper, a commodity that is gaining in importance as part of the global energy transition. The Company is heavily involved in several significant gold and copper projects. This strategic focus should further strengthen Barrick's position as a leading producer. The demand for copper as a key component for renewable energy and electric vehicles also allows the Company to tap into new markets and benefit from growing demand.

    The Company is optimistic about the second half of 2024, particularly with regard to production prospects at the Nevada mines. The Company expects a significant increase in gold production in this region following the completion of extensive maintenance work. These developments will help Barrick Gold to further expand its position as the world's second-largest gold producer and meet investor expectations. However, the share has performed poorly recently. It fell from around USD 19 to USD 16 and is currently trading at USD 16.55.

    In summary, Deutsche Bank may be facing challenging times due to the political unrest in France, the interest rate cut and the collective bargaining. The high increase in risk premiums for French government bonds could lead to book losses. Watch how smaller banks react to the problems with government bonds. Gold companies could serve as a safe haven. Desert Gold shows great potential with its SMSZ project in Mali, which is to be expanded by further drilling activities, while Barrick Gold is steadily increasing its gold and copper reserves** and is optimistic about the second half of 2024.

    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.

    For this reason, there is a concrete conflict of interest.

    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

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    Der Autor

    Armin Schulz

    Born in Mönchengladbach, he studied business administration in the Netherlands. In the course of his studies he came into contact with the stock exchange for the first time. He has more than 25 years of experience in stock market business.

    About the author

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