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September 16th, 2022 | 10:42 CEST

Barrick Gold, Desert Gold, MicroStrategy - Catch a falling knife!

  • Mining
  • Gold
  • crypto
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The recently published inflation data from the US sent not only the stock markets into the basement. Even the oil price, which has been bullish of late, went down. Precious metals, as well as cryptocurrencies, suffered the most from the inflation shock. With the US Federal Reserve meeting next week and the expectation of a significant interest rate step, new lows for the year could be marked for these two assets in particular, and a further sell-off could occur. However, it seems unlikely that further major interest rate hikes will take place in the medium term, as this would tend to favor a hard landing of the global economy. Thus, with an anti-cyclical entry, the chances of long-term price gains increase.

time to read: 4 minutes | Author: Stefan Feulner

Table of contents:

    Bill Guy, Chairman, Theta Gold Mines Limited
    "[...] Both the geology and the infrastructure around the project make for a very attractive cost structure. We expect to be able to produce at 50% of the current gold price. [...]" Bill Guy, Chairman, Theta Gold Mines Limited

    Full interview


    Barrick Gold - Sell-off sentiment at the major

    Fight inflation at all costs; that is the credo of the various central bank members in the US. Despite recession worries in the financial markets, the Fed is determined to contain inflation with a tight interest rate course. In the US, the midterm elections are coming up in November, in which President Joe Biden's Democrats must defend their narrow majority in the House of Representatives and the Senate at all costs. The main accusation of the Republican opponents against the incumbent president is that they have ignored the high inflation of 8.5% in the country at the last count. Thus, the current administration will likely be willing to maintain its tight monetary policy until the midterm elections. The fact that this has already gotten out of hand and cannot be contained by further interest rate steps without bankrupting the economy should be obvious, not only to economists.

    In the wake of concerns about further interest rate hikes next week, gold is trading near its low for the year at USD 1,680. A drop below this level could trigger further stop-loss orders, leading the price into another important corridor at USD 1,620. Even a short-term dip below the USD 1,600 mark would be possible but should offer a promising long-term, anticyclical entry opportunity.

    The chart picture has clouded again at the second largest gold producer in the world, Barrick Gold. At USD 15.36, the price is only marginally above its upward trend formed since September 2015. A break of the support area currently at USD 14.59 could target the USD 12.70 area as the next price target.

    Desert Gold - Promising results

    Gold exploration companies act like leverage on longer-term trend movements in the base price, both up and down. Desert Gold is a clear example of this. While gold corrected by about 19% since its peak in August 2020, the shares of the Canadian company fell by almost 73%. However, the Company has been able to show considerable progress since then.

    With the SMSZ project in Mali, the Canadians own one of the largest non-producing land areas in West Africa, covering 440 sq km. In close geographic proximity are several producing Tier 1 gold mines, including those of Barrick Gold, Allied Gold, Endeavour Mining, and B2Gold. The SMSZ property hosts Measured and Indicated Mineral Resources totaling nearly 1.1 million ounces. A total of more than 23 gold zones have been discovered in the area to date, which will be progressively developed and analyzed for economic grades. With the release of results on the recovery rate of gold from crushed rock, Desert Gold was able to report strong results.

    In this regard, samples from the Mogoyafara South project area from the freshly drilled drill samples recovered between 86% and 88% of the gold from the rock. These are good results and very important for economic viability if the ore body is later mined. Previous metallurgical tests at the Baranie East project have recovered gold in ratios of 83% to 98.7% depending on the rock strata, between 93.6% to 95.2% at Gourbasse West and 87.6% at Gourbassi East on freshly crushed gold ores.

    The next steps are to commence a 35,000m drill program, which includes 10,000m of potential drilling aimed solely at resource delineation. Overall, Desert Gold intends to follow up and expand known gold zones, with plans to focus on Mogoyafara South and Gourbassi West North initially. Desert Gold believes these are the largest gold systems discovered on the SMSZ property to date.

    Desert Gold's market capitalization is CAD 13.87 million. The Company has been able to perform strongly fundamentally in recent months and should outperform the gold price if it develops positively.

    On September 27, 2022, Desert Gold Ventures CEO Jared Scharf will present current company developments live at the 4th IIF - International Investment Forum. The to the virtual event is free of charge.

    MicroStrategy - The crypto super bulls

    The world's largest cryptocurrency, bitcoin, is also suffering from fears of further serious interest rate hikes. After hitting a low for the year on June 13 at USD 17,605, there was a dynamic countermovement to just above the USD 25,000 mark. Jackson Hole nullified this quite bullish movement. With this week's inflation data, the downward trend intensified, so the cryptocurrency is again struggling with the USD 20,000 mark. A renewed undershooting of the annual low should not be unlikely due to the interest rate sentiment. Even a short-term slide below USD 15,000 cannot be ruled out and could form the possible sell-off of the currently prevailing downward movement.

    Regardless of the downward spiral, the largest Bitcoin holder in the world, MicroStrategy, is extremely bullish on the reserve currency in the long term and wants to increase its holdings by another USD 500 million. The capital is to be obtained by selling treasury shares of the same equivalent value. The Company already owns 129,699 BTC, reflecting an equivalent value of around USD 2.8 billion. At the moment, the market capitalization of the software producer is USD 2.11 billion. MicroStrategy's stock is suitable for those investors who do not want to speculate directly on the cryptocurrency and have leverage compared to the underlying asset in both upward and downward movements.

    Rampant inflation combined with significant interest rate moves weighs on the gold and crypto markets in addition to the stock market, making new lows for the year likely. In the long run, these sell-offs should prove worthwhile. In addition to Barrick Gold, Desert Gold is attracting attention with good drill results. Those who want to acquire Bitcoin as a stock cannot avoid MicroStrategy.

    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

    Stefan Feulner

    The native Franconian has more than 20 years of stock exchange experience and a broadly diversified network.
    He is passionate about analyzing a wide variety of business models and investigating new trends.

    About the author

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