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February 18th, 2022 | 10:33 CET

Shell, Ximen Mining, Newmont: Will gold follow the oil price rally?

  • Gold
Photo credits: ximenminingcorp.com

Now that the oil price has long since cracked the USD 90 mark, gold is also picking up significantly. The precious metal lingered only briefly on the much-cited interest rate worries. The theoretical reasoning behind this is that if the interest rate rises, non-interest-bearing gold loses its attractiveness. This assumption has always been a bit far-fetched given the negative real yields that are expected to continue, but the gold price is now proving it: The interest rate turnaround is not relevant for gold. Instead, the general uncertainty on the market and the property as a reserve currency count. But how far can the gold rally go?

time to read: 3 minutes | Author: Nico Popp
ISIN: Shell PLC | GB00BP6MXD84 , XIMEN MINING | CA98420B2003 , NEWMONT CORP. DL 1_60 | US6516391066

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

     

    Shell: What is going on?

    While gold has only been slowly picking up speed for a few weeks, the oil price has been rising for many months. The "black gold" also immediately made up for setbacks. The reasons lie in the scarce supply and the again rising demand. Companies such as Shell have missed out on investing in new deposits in recent years. On the one hand, this is understandable - after all, oil is not exactly in line with the spirit of the times, which rightly prioritizes climate protection.

    Since oil multinationals such as BP and Shell want to secure their business in the long term, they prefer to invest in sustainable projects - after all, it is also a matter of sharpening one's own ESG profile. Fig leaves in the form of individual smaller projects from wind and water power are no longer enough. The so-called best-in-class approach to assessing ESG activities means that companies from one sector are constantly competing, and sustainable projects are being expanded more and more. In the process, companies have lost sight of the need for energy in the here and now. That probably also explains why Shell's share price is still lower today than it was three, five or ten years ago. The big multinationals are in the midst of a realignment and benefit only in the short term from high oil prices.

    Ximen Mining is on the radar of the big players

    Rising oil prices are due to the actual market situation today and in the future, whereas there is a lot of psychology in the prices of gold. For example, there are doubts about the rumored withdrawal of the Russians from the Ukraine border. The consideration that the Fed is fighting a losing battle with its measures against inflation also plays a role. Market participants suspect that the central bank will not be able to raise interest rates so sharply without driving the economy into a new imbalance. Gold, in turn, could benefit from this. The Canadian Company Ximen Mining operates three precious metal projects in British Columbia and focuses on gold and silver.

    Most recently, Ximen Mining received a kind of accolade in the mining scene with the entry of New Gold. The producer initially injected CAD 2.5 million into the Company. According to Ximen Mining CEO Chris Anderson, this is an initial position from which no strategic collaboration has yet followed. However, it is positive to see a company with a market capitalization of more than CAD 1 billion have a small company like Ximen on its radar, Anderson said in a video interview.

    Ximen Mining expects to make operational progress in 2022 and is looking to make progress primarily at Brett Epithermal Gold. This property has been the focus of major companies in the past. However, Ximen Mining also wants to advance work on the other projects and thus ensure a continuous news flow. The share was already trading around three times higher in 2020 but suffered from the underlying conditions in recent months. With the developments around the gold price, the lean period could end soon. Since smaller stocks, such as Ximen Mining, can offer greater leverage on gold, speculative investors, in particular, should make a note of the stock for closer analysis.

    Newmont: Things are looking up here

    The Newmont share shows that something is going on in the gold market. The world's largest gold producer has already gained around 6% in the past month. This can be interpreted as a clear sign that the fantasy around the precious metal is returning. Gold producers profit directly from rising quotations, while project developers, such as Ximen Mining, are among the laggards at the beginning of a gold price rally. That is because the gold deposits at project developers lie dormant in the ground and production usually still takes several months to years.


    To get a foot in the door on the gold price, stocks such as Newmont or even Barrick may well be suitable. However, investors should keep in mind that extracting commodities carries risks, including accidents, geological misplanning, and unavoidable natural disasters. The market is usually somewhat more "merciful" with regard to operational details in the case of junior companies that are not yet in production. Here, drilling results and imagination count. Those who appreciate such framework conditions in their portfolio can take a closer look at the Ximen share. On the other hand, Shell is currently rather uninteresting - there are better alternatives for investing in oil and gas.


    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

    Nico Popp

    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.

    About the author



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