Thursday , 18 August 2022

Significant Upside Lies Ahead For Gold & Mining Equities – Here’s Why

The price of gold has been treading water for 10 years while the investment fundamentals have improved dramatically. That is why, in our opinion, significant upside lies ahead for gold and related equities.

This version of the original article by John Hathaway (sprottmoney.com) has been edited [ ] and abridged (…) to provide you with a faster and easier read. Also note that this complete paragraph must be included in any re-posting to avoid copyright infringement.

Gold has been driven by:

  • problematic inflation,
  • prospects of a recession,
  • excessive public and private debt,
  • widening credit spreads,
  • the onset of a bear market in equities and bonds,
  • a growing loss of confidence in the Federal Reserve and now
  • Putin’s war introduces yet an additional reason to stoke investment demand for the yellow metal

#$$4$ 

and the gold price, despite its strong rise over the past two years, still fails to adequately reflect these risks. In nominal terms, the March 31, 2022, gold price of $1,937 exceeds the previous monthly average high of $1,825 set in August 2011, but still lags the inflation-adjusted equivalent of $2,328 based on the August 2011 high…

fig 1

Source: Bloomberg as of 3/31/2022. Gold Spot Price measured by GOLDS COMDTY. Inflation-Adjusted Gold Price calculated by taking the spot price of Gold on 8/31/2011 ($1,826) and adjusting it by the month-over-month consumer price index (CPI CHNG INDEX). Included for illustrative purposes only. You cannot invest directly in an index. Past performance is no guarantee of future results.

…It is our opinion that the investment fundamentals have improved dramatically for gold. That is why, in our opinion, significant upside lies ahead for gold bullion and gold mining equities.

fig 5

Source: Bloomberg as of 3/31/2022 (reflects past 35 years). Gold is measured by the GOLDS Comdty Spot Price and gold equities by the Philadelphia (PHLX) Stock Exchange Gold and Silver Sector Index (XAU). The Philadelphia (PHLX) Stock Exchange Gold and Silver Index (XAU) is used versus the Philadelphia (PHLX) Stock Exchange Gold and Silver Sector Total Return Index (XXAU) for its longer historical track record. Included for illustrative purposes only. You cannot invest directly in an index. Past performance is no guarantee of future results.

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