29. March 2021 | 14:48 CET
Varta, Triumph Gold, Newmont - Rise is only a matter of time!
Gold has fallen out of the focus of investors in recent months. Too tempting were the stock market returns after the steep rise, especially as the technology stocks such as Tesla, Amazon and Co. multiplied within a year. At the same time, people forget that the precious yellow metal is still in a long-term uptrend. Overflowing national debt and low interest rates are signs that the old highs are only a matter of time. Position yourself.
time to read: 4 minutes by Stefan Feulner
"[...] We knew the world was rapidly electrifying and urbanising and needing significant amounts of copper to do so. [...]" Nick Mather, CEO, SolGold PLC
Protect your capital
Historic highs in national debt, ever new economic stimulus programs worth trillions, and justified fears of rapidly rising inflation are the arguments for investments in tangible assets, primarily in precious metals such as gold and silver. Historically, these have always been considered safe capital and inflation protection. According to his statements last week, Fed Chairman Jerome Powell has inflation under control and intends to continue the loose monetary policy and the zero interest rate policy until at least 2023. The Fed expects inflation to average 2.4% in 2021.
Thus, the lively money printing continues in the United States of America and in parallel in the eurozone. After the USD 1.9 trillion bailout package launched by the new US President Joe Biden passed the Senate, the US economy is still in the midst of a recession. A new, even higher USD 3 trillion program is now in the pipeline. This time, the freshly printed Fiat money is to go to infrastructure projects, climate change, and the education system's modernization.
Geopolitical crises as a risk
In addition to protecting against inflation, gold has always had the reputation of being a safe haven. When tensions between countries were on the rise, investors fled to the safe haven. After the ousting of controversial President Donald Trump and bringing in the "new peacemaker" Joe Biden, gold corrected, with the hope that tensions would normalize, especially between the two world powers, the US and China. However, after a few months in office of the former vice president of Barrack Obama, one finds that the economic war has instead hardened with mutual sanctions, blacklists and threats.
Obama and Deputy Biden, by the way, were record-holders of all US presidents with over 2700 days of war in various countries. At the very least, one should pay close attention to the news of the past week. Europe imposed sanctions on China at the beginning of the week for the first time in more than 3 decades. These are directed against Chinese officials who are held responsible for the persecution of the Uyghurs. Now the government in Beijing is warning foreign companies to tarnish China's name.
Anticyclical entry opportunity
Despite the warning signs, gold prices continued to correct. According to industry reports, gold ETF holdings fell to the lowest level since May of last year. Central bank gold purchases fell 60% year-on-year in 2020. The result was a low of USD 1,676 per troy ounce in March. Since then, the price has stabilized somewhat and is above the support zone of USD 1,700 at currently USD 1,731.49. Although we assume that the precious metal will fall below the March low once again in the short term, investors should establish initial positions for the reasons mentioned above. In addition to an investment in physical gold, gold mining stocks are a good entry point. Due to the correction since August, these have lost a lot of value compared to the gold price and currently offer favorable entry opportunities again.
Currently, mine operators benefit from the fact that they are fundamentally better positioned than they have been for a long time due to the past year's high gold price. The two industry giants Barrick Gold and Newmont, for example, were able to achieve record results despite the Corona Crisis and the production stop at several mines due to the lockdowns and are sitting on historically high cash reserves. Due to the significant correction, the shares from the second gold series now also offer exciting entry opportunities again.
Heavyweights on board
Newmont, the world's largest gold producer, is also a major shareholder in the promising gold mining explorer Triumph Gold and currently owns 12.8% of the Company. In addition, Zijin Mining Fund owns just under 9.8%. Since mid-February, another heavyweight, Teck Resources, has also been on board and joined the illustrious group of shareholders. Triumph Gold has transferred 1.25 million common shares to Teck Resources in exchange for expanding its Freegold Mountain project to include Teck Resources' Big Creek gold-copper property in the Canadian Yukon. In addition, Triumph Gold is securing a 1.5% net smelter return royalty to the Canadian resource giant from potential future production from the acquired 258 contiguous quartz mines.
With approximately CAD 5 million in cash, Triumph Gold is able to fund its entire drill program for the current year. The Canadians' focus is on exploring properties in the Yukon Territory. Earlier this month, a full-time team was assembled to focus on advancing the Freegold Mountain project within the prolific Dawson Range copper-gold belt. Triumph shares have a current capitalization of CAD 23.3 million at a price of CAD 0.16. Last week saw a significant slide in the share price as the support zone at CAD 0.17 was ruptured. The value fell to a low of CAD 0.13 but stabilized again at CAD 0.16 through countercyclical buying. In the long term, attractive entry opportunities are offered at this level.
The Varta share price is also going back and forth. After the Company announced its entry into the battery business for electric cars, the share price initially rose sharply but then corrected again by half. Now Varta also wants to tackle the electric two-wheeler market with KTM. Varta and KTM wish to create a battery platform for the electric two-wheeler sector jointly. From a chart perspective, overcoming the resistance at around EUR 136 would brighten the chart picture.