02. April 2020 | 06:15 CET
Barrick Gold, Desert Gold, First Majestic - Stocks offer advantage
The world is currently in an extremely tense situation. An invisible pandemic is spreading fear, worry and taking lives. The economy around the globe has come to a standstill and supply chains have been cut. Almost all industries are affected. Central banks and governments are using various means to support the financial system and maintain basic confidence. The money press is running at full speed and the monetary supply is being drastically increased. Investors who want to hedge their investments are fleeing into gold or trying to do so.
time to read: 2 minutes by Mario Hose
"[...] We knew the world was rapidly electrifying and urbanising and needing significant amounts of copper to do so. [...]" Nick Mather, CEO, SolGold PLC
Investors get in
Physical gold is considered a crisis-proof currency. In turbulent times, the demand for the precious metal grows, and this also applies to silver. In market phases, when stock exchanges crash, there is usually also involuntary redistribution. It can be observed that speculators who have bought on credit have to get out. Investors then have the opportunity to enter at a favorable price. In recent weeks, since the Corona Crisis has kept the world on tenterhooks, it has been seen that the volatility of gold and silver companies has also increased. The price of physical gold and silver also increased the fluctuations.
Covid-19 causes supply shortages
Considering that the uncertainty of market participants increases with the money supply, more and more investors want to invest or expand their gold holdings. However, the Corona Virus not only causes falling stock market prices, but also has an impact on the procurement and supply of gold and silver. Numerous mines of well-known companies are currently closed for security reasons.
The safety of the employees is the main concern in connection with the spread of Covid-19. The producers of coins and bars as well as their dealers have also closed down or are currently experiencing a new logistical challenge, as many airlines have meanwhile restricted or completely stopped operations. For this reason, there are increasingly supply bottlenecks.
Small Cap in Mali with potential
As an alternative to physical gold and silver investments, shares in companies that participate in the creation of value are a good choice. The certification of corporate interests in shares of companies with physical gold stocks or reserves is currently a real substitute for bars or coins with supply bottlenecks. The stock exchanges are open and participation is possible at the push of a button. Barrick Gold is one of the most renowned names in the industry. The company is active around the globe and has a market value of CAD 46 billion.
As a newcomer, Desert Gold Ventures is active in Mali and explores for gold there. The company has already made several discoveries in the 400 sqkm area. As an explorer, the company is pursuing the goal of acquiring further data in order to be taken over by a producer. The West of Africa is becoming more and more important and with a market value of CAD 8 million, Desert Gold is still a small cap with upside potential - as is well known, everybody has started small.
Precious metals secure values
Among the renowned silver producers is First Majestic Silver. The company currently has a market capitalization of over CAD 1.8 billion. As soon as the stock markets have bottomed out and volatility is dwindling, demand for gold and silver stocks is likely to rise, as paper money will become less and less valuable due to the many rescue packages. The precious metal boom in connection with the financial crisis in 2008 lasted until 2011 and the price of the troy ounce of gold rose by around 150% to over USD 1,900.00.
