December 5th, 2022 | 10:36 CET
Where gold shines brightest: Barrick Gold, Desert Gold, Uniper
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"[...] Our projects are at the initial, high reward exploration stage. [...]" Humphrey Hale, CEO, Managing Geologist, Carnavale Resources Ltd.
Is 2020 repeating itself?
Traditionally, when the dollar brings interest rates back, it depresses the price of gold. But this market correlation becomes obsolete as soon as the focus turns to distortions in the financial system. Even after the great inflation of the 1970s, gold started its triumphal march with a delay. Even during the great financial crisis, the gold market was initially as if it had dried up, only to virtually boom from 2011 onwards. Although gold's current all-time high dates from August 2020, it is only marginally higher than the 2011 mark. 2020 was mainly characterised by the multi-billion dollar aid programs for the economy in the wake of the pandemic. At that time, the price of gold anticipated the inflation we see today - at least in part.
Stocks like those of Barrick Gold and Desert Gold also experienced 2020 highs. However, the more the pandemic was contained, and economic development stagnated, the more disillusionment set in around gold. But despite stagnating inflation rates, the time of inflation is not over. On the contrary, interventionist governments and central banks could make mistakes in the coming weeks and months that would encourage a new wave of inflation.
Barrick Gold is already trending friendly - a sign?
Although the US labor market is robust and wages are rising, the Biden administration plans to invest billions in future technologies. These measures are prompting imitators - after all, Europe, Japan and China do not want to be left out in the cold compared with the USA. In addition, calls for government support are traditionally louder in the EU than in the US. Instead of handing out checks to those in need, the German government, for example, has been acting on the "watering can" principle. High-wage settlements are also already on the horizon in Germany. The mixture of a subsidy race around future technology and aid for employees in the form of generous wage settlements could once again fuel inflation. Barrick Gold's share price, like the gold price, has already made substantial gains in recent weeks.
Desert Gold offers leverage on the gold price
While gold producers, like Barrick Gold, generally run largely in lockstep with the gold price, companies like Desert Gold offer disproportionate potential. Desert Gold operates one of the world's most promising prospective mining projects. With deposits in the ground trading at a discount to the market, great leverage is created from the moment the gold market picks up steam. In 2020, Desert Gold's stock price surged from CAD 0.09 to CAD 0.33 between March and July. Since then, the Company has continued to explore its SMSZ project, reporting a resource estimate of about 1 million ounces of gold. Experts believe the potential is far greater due to many promising drill holes.
If governments worldwide launch new spending programs and the interest rate turnaround stalls in the coming months, the markets could price in runaway inflation. Even today, renowned economists, such as the former ECB chief economist Otmar Issing, assume that the monetary guardians may have failed. Moreover, problems that continue to exist, such as at the energy utility Uniper, could soon leave the ECB with no choice: Highly indebted companies and states are dependent on a moderate interest rate level. The situation, therefore, remains highly complex - an escalation cannot be ruled out.
While investors should steer clear of stocks like Uniper, which has degenerated into a kind of "litigation gamble" following the lawsuit against Gazprom, gold stocks are more suitable than ever as an admixture. On the one hand, stocks like Barrick Gold are solid and offer cash flows. On the other hand, other stocks, such as Desert Gold, tend to represent significant leverage. The Company will be presenting live at the International Investment Forum on December 7. It should be particularly exciting to see what potential the Company's leaders still see in their flagship SMSZ project. If gold takes off and finally switches to crisis mode, any investor who knows the potential of Desert Gold should be at an advantage.
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.
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