05. August 2021 | 13:41 CET
Commerzbank, Troilus Gold, Allianz - The bubble bursts!
Rising consumer prices are belatedly arriving in Germany. At 3.8%, these were higher in July than at any time since the fall of 2018. And inflation is also likely to pick up further due to rising commodity prices. Instead of raising interest rates and reducing bond runs, the European Central Bank sticks to its ultra-loose monetary policy. The high rates of price increases are said to be temporary and due to special factors. What to do as a saver when expropriation threatens? Take precautions against the worst-case scenario.
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ISIN: COMMERZBANK AG | DE000CBK1001 , TROILUS GOLD CORP. NEW | CA8968871068 , ALLIANZ SE NA O.N. | DE0008404005
"[...] We quickly learned that the tailings are high-grade, often as high as 20 grams of gold per tonne; because they are produced by artisanal miners, local miners who use outdated technology for gold production. [...]" Ryan Jackson, CEO, Newlox Gold Ventures Corp.
No end in sight
The key interest rate remains at a historic 0.0%, and there is no thought of a throttling of the bond program after the last meetings of the central banks. Even the EUR 1.85 trillion Pandemic Emergency Purchase Program launched by the European Central Bank at the beginning of the pandemic is expected to continue until at least March of next year, and securities purchases are even to be increased this fall. The bubble is thus inflating further and further. Highly indebted countries such as Italy or Spain are supported by the fact that they can finance their rescue programs and reduce their debts with the proceeds. An abrupt increase in interest rates would put both states and companies in existential difficulties. That leaves the monetary authorities little room for maneuver. Growth and jobs take precedence over price stability.
Gold is attractive
The fears of savers are entirely justified. Especially in times of inflation fears, it is worth adding gold to any portfolio, as the precious metal is considered a safe haven against the loss of value of money. Although the gold price is currently hovering around the USD 1,800 mark, the signs for a long-term rise in the gold price are better than ever. Experts predict prices beyond the USD 3,000 mark per ounce and point to the bubble building up due to the lively money printing by the central banks, which does not solve the problems but only pushes them back. Therefore, they say, it is likely that the precious metal will go up in the long term with a time lag.
An attractive investment opportunity currently exists at the Troilus Gold Project, a mine that produced 2 million ounces of gold and about 70,000t of copper between 1996 and 2010. Due to a weakening gold price, the mine was subsequently shut down. For nearly four years, Troilus Gold has drilled nearly 250,000m on the 1,420km² concession area in the Canadian province of Quebec, expanding resources to 8.1 Moz of gold.
Currently, the drilling rate is 10,000m per month, which ensures a continuous news flow. A further resource estimate is also due to be released in the coming weeks. Work is also underway on a further feasibility study which will be critical to the permitting process. A definitive feasibility study is then expected in mid-2022. By the end of 2023, according to the ambitious management's plan, the mine should be in production. The mining costs are USD 850 per ounce, giving an internal rate of return of an attractive 33%.
The attractiveness of the project was also recently demonstrated in the capital market. In a bought deal transaction, the Company was able to secure CAD 45 million. In addition, the Québec government and the Fonds de Solidarité pension fund co-invested CAD 11.15 million on equal terms. This potential is also shared by analysts at Cormark Securities. They named Troilus Gold a "Top Pick" and see the Company as one of the most attractive acquisition targets for larger gold producers given its size and location. The experts set the price target at CAD 4.50, which would be equivalent to a fivefold increase in the current share price.
You can read an in-depth interview with Troilus Gold CEO Justin Reid here.
Trend reversal at Allianz
The flagship of the German share index DAX has suffered its first scratches. After record profits in recent years, a scandal in the USA is now causing a possible change in trend. At the very least, the Allianz Group's Board of Management sees a considerable risk that the matters associated with the fund could significantly impact the insurance group's future financial results. The fund in question is Structured Alpha. Here, the DAX-listed Company is alleged to have deviated from its own investment rules laid down in the fund's articles of association. Investors are suing, and now the US Securities and Exchange Commission and the US Department of Justice (DoJ) are investigating. The Munich-based Company rejects the accusations.
From a chart-technical perspective, the picture has also clouded considerably. After the price slide of around 10% to EUR 189.90, a countermovement towards the price gap at EUR 205.30 would have been desirable in the eyes of the bulls. However, increasing selling pressure pushed the value again in the direction of last week's lows. As a result, significantly lower quotations are to be expected initially in the area around EUR 160. New investments should be avoided at the moment.
High burdens at Commerzbank
The shares of Commerzbank should also not be added to the portfolio at the moment. The financial institution slipped significantly deeper into the red again in the second quarter. The ongoing group restructuring and restructuring expenses of EUR 511 million led to the high charges. Overall, the loss was EUR 527 million. The Frankfurt-based company plans to continue restructuring until 2024. That includes the elimination of 7,500 full-time positions and the closure of around 340 locations. The share price reacted with a fat drop of almost 6% to EUR 5.13. The next major support is at EUR 4.
Rising inflation figures and loose monetary policy make gold attractive in the long term. Troilus Gold has a high-grade deposit that should go into production by 2023 at the latest and is therefore promising in the long term. In contrast, we see little potential in Allianz and Commerzbank.