March 23rd, 2021 | 13:30 CET
Xiaomi, Osino Resources, Barrick Gold - Here come new highs!
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"[...] We knew the world was rapidly electrifying and urbanising and needing significant amounts of copper to do so. [...]" Nick Mather, CEO, SolGold PLC
Party mood prevails
Since the price of gold reached its high of USD 2,069 per troy ounce at the beginning of August last year, a correction set in that temporarily pushed the value below the USD 1,700 mark. Currently, the price is trading just above it again. Since the fall, hopes of an end to the pandemic and a rapid global economic recovery have been dominated by vaccine manufacturers' positive developments. Gold as a "safe haven" does not count at the moment. An investment in Bitcoin & Co is currently considered more lucrative and also more timely. According to industry reports, gold ETF holdings are at their lowest level since May last year. In addition, central bank gold purchases in 2020 were down 60% year-over-year.
Another low below the mark and, at best, a short-term sell-off would present itself as a more than interesting entry opportunity, in our opinion. The reasons for the long-term optimistic scenario are easily explained. On the one hand, the central banks are flooding the markets with more and more fresh money. Government debt has already exploded to historic highs. The new US President Joe Biden came to the rescue last week with the approval of the new USD 1.9 trillion stimulus package through the Senate. The goal of the program is to boost consumption. While this will drive the economy, it will also increase inflation. The Fed expects inflation to average 2.4% in 2021, officially. The current price increase is likely to be many times higher. Nevertheless, the Fed is sticking to its loose monetary policy and wants to continue pumping money into the markets. The same scenario applies to the ECB's policy. Interest rates remain low, and inflation is rising dramatically - a more than clear warning signal for gold and gold mining stocks.
Fundamentally strong as never before
Gold mining stocks are fundamentally stronger than they have been for a long time. Due to the high gold price, not only the largest gold producers Barrick Gold and Newmont Mining, achieved record results. Barrick Gold CEO Mark Bristow, among others, is optimistic and expects a further increase in the price of the shiny precious metal. Besides the big players on the gold market, smaller producers and mining explorers corrected disproportionately. Should there be an increase in the precious yellow metal, they should outperform both the gold price and the more prominent players. Fundamentally, Canadian junior explorer Osino Resources continues to perform according to plan. Osino holds 17 exclusive drilling licenses in Namibia, one of the world's leading mining nations for diamonds, uranium, zinc, and gold.
In Historic Territories
All of these licenses are located near and along strike of the producing Navachab and Otjikoto gold mines. The Canadians' flagship project is Twin Hills Central, which lies southwest of the high-grade Otjikoto Mine and has been defined to date as 1.3 km in length. The gold grade per tonne at the Otjikoto mine is currently still twice that of Osino Resources' Twin Hills project, but the area Osino is exploring is twice as large. Earlier this year, results were released suggesting that the area is similar in grade to that of the neighboring area. Individual drill intercepts over 50m and 81m returned above-average results of 1.75 g/t and 1.74 g/t gold, respectively. According to analysts at Echelon, the price targets for Osino Resources are between CAD 2.30 and CAD 2.45. This would offer a price opportunity of almost 100%; the share price is currently at CAD 1.20.
The share of the Chinese technology group Xiaomi also had to correct. On the one hand, the Company, which has risen to become the third-largest smartphone manufacturer, was hit by the current market correction. On the other hand, the sanctions imposed by the US government, which had placed Xiaomi on a blacklist, had a negative impact. According to the court, a judge suspended the punitive measures because the reasons were inadequate justification by the US Department of Defense. As a result, US investors are once again allowed to invest in the Chinese Company.
For a long time, one rumor circulating but has been denied by Xiaomi is the Company's entry into the lucrative electric car market. Now the Chinese media Company 36Kr reports, citing company circles, that preparations are already underway for the production of the Company's own electric cars. The project could be launched as early as April and is expected to have a similar brand positioning to Guangzhou-based Xpeng, which targets younger Chinese buyers in the mid to high-end market segment. After the drop back to the significant support line at EUR 14, this offers an attractive long-term entry opportunity.
Conflict of interest
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