In an environment where the price of gold is high and rising, I make the case for a heavier weighting in favor of gold mining stocks.
Gold royalty and stream companies have been trading at significantly higher multiples than gold miners for nearly a decade, which some say is partly justified. After all, royalty and stream companies do not bear the costs of developing and operating mines.
Their business model is to purchase the right to current and future production from a mine for an upfront payment at a fixed price per ounce of metal delivered. Because these companies do not operate mines, their overhead costs are low, and because their royalty and stream agreements have been entered into at a fixed price, their profit margins and cash flow are assured even if the price of the gold is relatively low or falling, as it has been for most of the past decade.
Normally, royalty or stream agreements also benefit from the upside potential due to increases in either the life or production of a mine, which are not capped.
In August, after hovering around the same level for the past few years, the price of gold broke above $2,000 an ounce for the first time. In a high and rising gold price environment, gold miners’ profit margins and cash flow are seeing significant increases and investors should reflect this in their portfolios by placing a heavier weight on stocks. of gold miners versus stocks of gold royalty and stream companies.
But we are no longer in a low and depressed gold expense environment, are we? In a rising price environment for gold, such as the one we are in now, the calculus changes, although my argument for how to consider the valuations of both types of companies is unconvincing. While the profit margins and cash flow of royalty and stream companies continue to grow as the price of gold rises, the leverage to the price of gold declines given their costs. weaker fixed operating costs.
Conversely, margins and cash flow for producing companies are growing at a much faster rate relative to their higher inherent operating costs, laying the groundwork for explosive valuation growth. In Yamana’s case, each $100 per ounce increase in the price of gold represents a $100 million increase in annual EBITDA and a $70 million increase in cash flow from operating activities before net changes in working capital items.
…
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[content] => Array ( [encoded] =>In an environment where the price of gold is high and rising, I make the case for a heavier weighting in favor of gold mining stocks.
Gold royalty and stream companies have been trading at significantly higher multiples than gold miners for nearly a decade, which some say is partly justified. After all, royalty and stream companies do not bear the costs of developing and operating mines.
Their business model is to purchase the right to current and future production from a mine for an upfront payment at a fixed price per ounce of metal delivered. Because these companies do not operate mines, their overhead costs are low, and because their royalty and stream agreements have been entered into at a fixed price, their profit margins and cash flow are assured even if the price of the gold is relatively low or falling, as it has been for most of the past decade.
Normally, royalty or stream agreements also benefit from the upside potential due to increases in either the life or production of a mine, which are not capped.
In August, after hovering around the same level for the past few years, the price of gold broke above $2,000 an ounce for the first time. In a high and rising gold price environment, gold miners’ profit margins and cash flow are seeing significant increases and investors should reflect this in their portfolios by placing a heavier weight on stocks. of gold miners versus stocks of gold royalty and stream companies.
But we are no longer in a low and depressed gold expense environment, are we? In a rising price environment for gold, such as the one we are in now, the calculus changes, although my argument for how to consider the valuations of both types of companies is unconvincing. While the profit margins and cash flow of royalty and stream companies continue to grow as the price of gold rises, the leverage to the price of gold declines given their costs. weaker fixed operating costs.
Conversely, margins and cash flow for producing companies are growing at a much faster rate relative to their higher inherent operating costs, laying the groundwork for explosive valuation growth. In Yamana’s case, each $100 per ounce increase in the price of gold represents a $100 million increase in annual EBITDA and a $70 million increase in cash flow from operating activities before net changes in working capital items.
The post Gold Mining Stocks Versus Royalty And Gold Stream Companies appeared first on .
) [summary] =>In an environment where the price of gold is high and rising, I make the case for a heavier weighting in favor of gold mining stocks.
Gold royalty and stream companies have been trading at significantly higher multiples than gold miners for nearly a decade, which some say is partly justified. After all, royalty and stream companies do not bear the costs of developing and operating mines.
Their business model is to purchase the right to current and future production from a mine for an upfront payment at a fixed price per ounce of metal delivered. Because these companies do not operate mines, their overhead costs are low, and because their royalty and stream agreements have been entered into at a fixed price, their profit margins and cash flow are assured even if the price of the gold is relatively low or falling, as it has been for most of the past decade.
Normally, royalty or stream agreements also benefit from the upside potential due to increases in either the life or production of a mine, which are not capped.
In August, after hovering around the same level for the past few years, the price of gold broke above $2,000 an ounce for the first time. In a high and rising gold price environment, gold miners’ profit margins and cash flow are seeing significant increases and investors should reflect this in their portfolios by placing a heavier weight on stocks. of gold miners versus stocks of gold royalty and stream companies.
But we are no longer in a low and depressed gold expense environment, are we? In a rising price environment for gold, such as the one we are in now, the calculus changes, although my argument for how to consider the valuations of both types of companies is unconvincing. While the profit margins and cash flow of royalty and stream companies continue to grow as the price of gold rises, the leverage to the price of gold declines given their costs. weaker fixed operating costs.
Conversely, margins and cash flow for producing companies are growing at a much faster rate relative to their higher inherent operating costs, laying the groundwork for explosive valuation growth. In Yamana’s case, each $100 per ounce increase in the price of gold represents a $100 million increase in annual EBITDA and a $70 million increase in cash flow from operating activities before net changes in working capital items.
…
The post Gold Mining Stocks Versus Royalty And Gold Stream Companies appeared first on .
[atom_content] =>In an environment where the price of gold is high and rising, I make the case for a heavier weighting in favor of gold mining stocks.
Gold royalty and stream companies have been trading at significantly higher multiples than gold miners for nearly a decade, which some say is partly justified. After all, royalty and stream companies do not bear the costs of developing and operating mines.
Their business model is to purchase the right to current and future production from a mine for an upfront payment at a fixed price per ounce of metal delivered. Because these companies do not operate mines, their overhead costs are low, and because their royalty and stream agreements have been entered into at a fixed price, their profit margins and cash flow are assured even if the price of the gold is relatively low or falling, as it has been for most of the past decade.
Normally, royalty or stream agreements also benefit from the upside potential due to increases in either the life or production of a mine, which are not capped.
In August, after hovering around the same level for the past few years, the price of gold broke above $2,000 an ounce for the first time. In a high and rising gold price environment, gold miners’ profit margins and cash flow are seeing significant increases and investors should reflect this in their portfolios by placing a heavier weight on stocks. of gold miners versus stocks of gold royalty and stream companies.
But we are no longer in a low and depressed gold expense environment, are we? In a rising price environment for gold, such as the one we are in now, the calculus changes, although my argument for how to consider the valuations of both types of companies is unconvincing. While the profit margins and cash flow of royalty and stream companies continue to grow as the price of gold rises, the leverage to the price of gold declines given their costs. weaker fixed operating costs.
Conversely, margins and cash flow for producing companies are growing at a much faster rate relative to their higher inherent operating costs, laying the groundwork for explosive valuation growth. In Yamana’s case, each $100 per ounce increase in the price of gold represents a $100 million increase in annual EBITDA and a $70 million increase in cash flow from operating activities before net changes in working capital items.
The post Gold Mining Stocks Versus Royalty And Gold Stream Companies appeared first on .
) [1] => Array ( [title] => Gold Is Good; Gold Stocks Are Better [link] => https://goldirainvestment.info/gold-is-good-gold-stocks-are-better/ [dc] => Array ( [creator] => Albert Appell ) [pubdate] => Sat, 19 Nov 2022 11:51:49 +0000 [category] => Gold Stocks [guid] => https://goldirainvestment.info/?p=62 [description] =>In my inaugural blog post, I attempted to explain why the price of gold was not only viable at the current level but likely to rise. Since then, and I must admit that three weeks is a very short horizon, the spot price of gold has increased by 4%, from $1,731 per ounce to almost $1,800 per ounce and reaching a high intraday trade of $1,799.60 last Tuesday. Gold futures, meanwhile, rose above $1,800 an ounce on Tuesday, closing at the highest level since September 2011, with gold for August standing at $1,809.90 l ‘ounce. In short, it is a very good time to invest in gold as an asset. It’s an even better time to invest in gold stocks.
I say this for several reasons. First, the purchase of physical gold in the form of gold coins, gold bars, or any other form of gold, or any instrument representing a unit of gold, is immutable, although the value of the unit will depend entirely on the price of gold alone. If the price goes up, we collect the difference – end of the story.
In contrast, stock in a gold mine brings the value of the gold currently in the ground or being produced, plus the value of any increase in the resources in place or production. This is a powerful catalyst in an environment where the price of gold is rising. This multiplier effect arising from the higher price of gold and higher resources in place or production, or both, can create significant upsides in value, in that the higher price of gold is multiplied not only by the initial level of resources or production but also by the increase in resources and production. This boost effect can be really interesting!
Just look at our Jacobina mine to see how this can materialize. On February 14, 2019, we forecast annual production of 145,000 ounces of gold from this mine. At the time, gold was trading at $1,312 an ounce. We subsequently increased our forecast to 152,000 ounces, which Jacobina exceeded by producing 159,000 ounces for the year. By then the price of gold had risen to $1,517 an ounce, so the value of the mine was not only boosted by the 16% rise in the price of gold, but also by the 10% increase in production. This multiplier effect has only accelerated since then, with the price of gold continuing to climb and Jacobina raising its 2020 production forecast to a range between 162,000 and 168,000 ounces.
Another benefit of gold stocks is yield. Physical gold does not pay a dividend or any form of cash yield, but many gold companies do. We certainly do! In a favorable gold price environment, when cash flow and cash balances are on the rise, gold companies are more likely to increase their dividends. This has been the case for us, as we have increased our dividend three times in the past 12 months alone, for a cumulative increase of over 210%.
Investing in gold stocks is certainly riskier than investing in physical gold. Gold miners are exposed to operational risks whereas the only risk of investing in physical gold is price. The dividend yield should be considered in part as an offset to the risks associated with this type of investment. Therefore, the question to ask is: are we getting enough reward, in an environment where the price of gold is rising, when we invest in gold stocks? I think my opinion on this is pretty clear, and there is still time to take advantage of the first phase of the cycle. So far, investors remain underweight in gold stocks.
And while I recognize that I may have a slight bias, if investors choose to allocate capital to gold stocks, they should consider a company like Yamana, with its portfolio of high-quality assets in jurisdictions favorable to mining, its track record of dividends, and overall returns, its solid balance sheet, its organic growth prospects, and its growing cash flow.…
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[content] => Array ( [encoded] =>In my inaugural blog post, I attempted to explain why the price of gold was not only viable at the current level but likely to rise. Since then, and I must admit that three weeks is a very short horizon, the spot price of gold has increased by 4%, from $1,731 per ounce to almost $1,800 per ounce and reaching a high intraday trade of $1,799.60 last Tuesday. Gold futures, meanwhile, rose above $1,800 an ounce on Tuesday, closing at the highest level since September 2011, with gold for August standing at $1,809.90 l ‘ounce. In short, it is a very good time to invest in gold as an asset. It’s an even better time to invest in gold stocks.
I say this for several reasons. First, the purchase of physical gold in the form of gold coins, gold bars, or any other form of gold, or any instrument representing a unit of gold, is immutable, although the value of the unit will depend entirely on the price of gold alone. If the price goes up, we collect the difference – end of the story.
In contrast, stock in a gold mine brings the value of the gold currently in the ground or being produced, plus the value of any increase in the resources in place or production. This is a powerful catalyst in an environment where the price of gold is rising. This multiplier effect arising from the higher price of gold and higher resources in place or production, or both, can create significant upsides in value, in that the higher price of gold is multiplied not only by the initial level of resources or production but also by the increase in resources and production. This boost effect can be really interesting!
Just look at our Jacobina mine to see how this can materialize. On February 14, 2019, we forecast annual production of 145,000 ounces of gold from this mine. At the time, gold was trading at $1,312 an ounce. We subsequently increased our forecast to 152,000 ounces, which Jacobina exceeded by producing 159,000 ounces for the year. By then the price of gold had risen to $1,517 an ounce, so the value of the mine was not only boosted by the 16% rise in the price of gold, but also by the 10% increase in production. This multiplier effect has only accelerated since then, with the price of gold continuing to climb and Jacobina raising its 2020 production forecast to a range between 162,000 and 168,000 ounces.
Another benefit of gold stocks is yield. Physical gold does not pay a dividend or any form of cash yield, but many gold companies do. We certainly do! In a favorable gold price environment, when cash flow and cash balances are on the rise, gold companies are more likely to increase their dividends. This has been the case for us, as we have increased our dividend three times in the past 12 months alone, for a cumulative increase of over 210%.
Investing in gold stocks is certainly riskier than investing in physical gold. Gold miners are exposed to operational risks whereas the only risk of investing in physical gold is price. The dividend yield should be considered in part as an offset to the risks associated with this type of investment. Therefore, the question to ask is: are we getting enough reward, in an environment where the price of gold is rising, when we invest in gold stocks? I think my opinion on this is pretty clear, and there is still time to take advantage of the first phase of the cycle. So far, investors remain underweight in gold stocks.
And while I recognize that I may have a slight bias, if investors choose to allocate capital to gold stocks, they should consider a company like Yamana, with its portfolio of high-quality assets in jurisdictions favorable to mining, its track record of dividends, and overall returns, its solid balance sheet, its organic growth prospects, and its growing cash flow.…
The post Gold Is Good; Gold Stocks Are Better appeared first on .
) [summary] =>In my inaugural blog post, I attempted to explain why the price of gold was not only viable at the current level but likely to rise. Since then, and I must admit that three weeks is a very short horizon, the spot price of gold has increased by 4%, from $1,731 per ounce to almost $1,800 per ounce and reaching a high intraday trade of $1,799.60 last Tuesday. Gold futures, meanwhile, rose above $1,800 an ounce on Tuesday, closing at the highest level since September 2011, with gold for August standing at $1,809.90 l ‘ounce. In short, it is a very good time to invest in gold as an asset. It’s an even better time to invest in gold stocks.
I say this for several reasons. First, the purchase of physical gold in the form of gold coins, gold bars, or any other form of gold, or any instrument representing a unit of gold, is immutable, although the value of the unit will depend entirely on the price of gold alone. If the price goes up, we collect the difference – end of the story.
In contrast, stock in a gold mine brings the value of the gold currently in the ground or being produced, plus the value of any increase in the resources in place or production. This is a powerful catalyst in an environment where the price of gold is rising. This multiplier effect arising from the higher price of gold and higher resources in place or production, or both, can create significant upsides in value, in that the higher price of gold is multiplied not only by the initial level of resources or production but also by the increase in resources and production. This boost effect can be really interesting!
Just look at our Jacobina mine to see how this can materialize. On February 14, 2019, we forecast annual production of 145,000 ounces of gold from this mine. At the time, gold was trading at $1,312 an ounce. We subsequently increased our forecast to 152,000 ounces, which Jacobina exceeded by producing 159,000 ounces for the year. By then the price of gold had risen to $1,517 an ounce, so the value of the mine was not only boosted by the 16% rise in the price of gold, but also by the 10% increase in production. This multiplier effect has only accelerated since then, with the price of gold continuing to climb and Jacobina raising its 2020 production forecast to a range between 162,000 and 168,000 ounces.
Another benefit of gold stocks is yield. Physical gold does not pay a dividend or any form of cash yield, but many gold companies do. We certainly do! In a favorable gold price environment, when cash flow and cash balances are on the rise, gold companies are more likely to increase their dividends. This has been the case for us, as we have increased our dividend three times in the past 12 months alone, for a cumulative increase of over 210%.
Investing in gold stocks is certainly riskier than investing in physical gold. Gold miners are exposed to operational risks whereas the only risk of investing in physical gold is price. The dividend yield should be considered in part as an offset to the risks associated with this type of investment. Therefore, the question to ask is: are we getting enough reward, in an environment where the price of gold is rising, when we invest in gold stocks? I think my opinion on this is pretty clear, and there is still time to take advantage of the first phase of the cycle. So far, investors remain underweight in gold stocks.
And while I recognize that I may have a slight bias, if investors choose to allocate capital to gold stocks, they should consider a company like Yamana, with its portfolio of high-quality assets in jurisdictions favorable to mining, its track record of dividends, and overall returns, its solid balance sheet, its organic growth prospects, and its growing cash flow.…
The post Gold Is Good; Gold Stocks Are Better appeared first on .
[atom_content] =>In my inaugural blog post, I attempted to explain why the price of gold was not only viable at the current level but likely to rise. Since then, and I must admit that three weeks is a very short horizon, the spot price of gold has increased by 4%, from $1,731 per ounce to almost $1,800 per ounce and reaching a high intraday trade of $1,799.60 last Tuesday. Gold futures, meanwhile, rose above $1,800 an ounce on Tuesday, closing at the highest level since September 2011, with gold for August standing at $1,809.90 l ‘ounce. In short, it is a very good time to invest in gold as an asset. It’s an even better time to invest in gold stocks.
I say this for several reasons. First, the purchase of physical gold in the form of gold coins, gold bars, or any other form of gold, or any instrument representing a unit of gold, is immutable, although the value of the unit will depend entirely on the price of gold alone. If the price goes up, we collect the difference – end of the story.
In contrast, stock in a gold mine brings the value of the gold currently in the ground or being produced, plus the value of any increase in the resources in place or production. This is a powerful catalyst in an environment where the price of gold is rising. This multiplier effect arising from the higher price of gold and higher resources in place or production, or both, can create significant upsides in value, in that the higher price of gold is multiplied not only by the initial level of resources or production but also by the increase in resources and production. This boost effect can be really interesting!
Just look at our Jacobina mine to see how this can materialize. On February 14, 2019, we forecast annual production of 145,000 ounces of gold from this mine. At the time, gold was trading at $1,312 an ounce. We subsequently increased our forecast to 152,000 ounces, which Jacobina exceeded by producing 159,000 ounces for the year. By then the price of gold had risen to $1,517 an ounce, so the value of the mine was not only boosted by the 16% rise in the price of gold, but also by the 10% increase in production. This multiplier effect has only accelerated since then, with the price of gold continuing to climb and Jacobina raising its 2020 production forecast to a range between 162,000 and 168,000 ounces.
Another benefit of gold stocks is yield. Physical gold does not pay a dividend or any form of cash yield, but many gold companies do. We certainly do! In a favorable gold price environment, when cash flow and cash balances are on the rise, gold companies are more likely to increase their dividends. This has been the case for us, as we have increased our dividend three times in the past 12 months alone, for a cumulative increase of over 210%.
Investing in gold stocks is certainly riskier than investing in physical gold. Gold miners are exposed to operational risks whereas the only risk of investing in physical gold is price. The dividend yield should be considered in part as an offset to the risks associated with this type of investment. Therefore, the question to ask is: are we getting enough reward, in an environment where the price of gold is rising, when we invest in gold stocks? I think my opinion on this is pretty clear, and there is still time to take advantage of the first phase of the cycle. So far, investors remain underweight in gold stocks.
And while I recognize that I may have a slight bias, if investors choose to allocate capital to gold stocks, they should consider a company like Yamana, with its portfolio of high-quality assets in jurisdictions favorable to mining, its track record of dividends, and overall returns, its solid balance sheet, its organic growth prospects, and its growing cash flow.…
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) [2] => Array ( [title] => Higher Cash Flows In The Current Gold Price Environment Creates An Explosive Increase In Value. [link] => https://goldirainvestment.info/higher-cash-flows-in-the-current-gold-price-environment-creates-an-explosive-increase-in-value/ [dc] => Array ( [creator] => Albert Appell ) [pubdate] => Sat, 19 Nov 2022 11:49:12 +0000 [category] => Gold Price [guid] => https://goldirainvestment.info/?p=58 [description] =>Also, for many producing companies (in fact, most producing companies in my opinion) that are trading at low multiples and whose valuations do not yet reflect the true price of gold, multiples and valuations will improve as market participants strive to catch up with the price of gold.
There is another factor that works against royalty and stream companies in a high gold price environment that also needs to be considered. It must be assumed that the high multiples at which these securities are traded also reflect the growth prospects of the investment opportunities.
Will there be as many opportunities in a high and rising gold price environment, or will royalty and stream companies face a relative dearth of investment opportunities, which will imply that premium valuations should no longer apply? It must be assumed that at least part of the bonus was based on growth prospects, on the universe of available candidates needing to strike deals with royalty and stream companies in what was a low gold price environment.
We should expect that gold miners, or indeed any gold-producing mining company, in need of financing will have more options available to them in a higher gold price environment. They could, for example, issue equity and trust that there will be demand for their shares. They could also issue debt securities with an equally high degree of confidence that they will generate enough cash to repay the loan without compromising their credit rating. Or they could rely on increased cash flow to finance their projects internally, taking advantage of better profit margins.
On the other hand, in a context where the price of gold is low, it is more difficult to have access to financing. Investors are avoiding equity financing and companies are not interested in issuing debt and risking over-indebtedness. In such circumstances, royalty and stream companies are often a good option and perhaps the only viable option, allowing them to pick the best investment opportunities and negotiate deals on more favorable terms.
Will the same high multiples given to royalty and stream companies remain when these companies no longer have the opportunity to make the best choices, when they have to take more risks and when they are forced to diversify beyond royalties? and gold flows? This is an untested hypothesis, although I suspect it has some validity.
That doesn’t mean you shouldn’t consider an investment in royalty and stream companies in the current gold price environment. We should. Yamana did just that when we recently sold our royalty portfolio in a transaction that sponsored the creation of a new royalty and stream company, in which we took a 13% stake. As such, we certainly support the model.
Royalty companies offer a diversity of mining assets and consistent returns regardless of the gold price environment. However, when it comes to percentage weightings in one’s portfolio, one needs to recalibrate in an environment where the price of gold is rising, to maximize the impact of the explosive growth in gold mining margins and cash flow. We have already started to see this effect in our share price performance and I believe we will continue to see it for a long time to come.…
The post Higher Cash Flows In The Current Gold Price Environment Creates An Explosive Increase In Value. appeared first on .
[content] => Array ( [encoded] =>Also, for many producing companies (in fact, most producing companies in my opinion) that are trading at low multiples and whose valuations do not yet reflect the true price of gold, multiples and valuations will improve as market participants strive to catch up with the price of gold.
There is another factor that works against royalty and stream companies in a high gold price environment that also needs to be considered. It must be assumed that the high multiples at which these securities are traded also reflect the growth prospects of the investment opportunities.
Will there be as many opportunities in a high and rising gold price environment, or will royalty and stream companies face a relative dearth of investment opportunities, which will imply that premium valuations should no longer apply? It must be assumed that at least part of the bonus was based on growth prospects, on the universe of available candidates needing to strike deals with royalty and stream companies in what was a low gold price environment.
We should expect that gold miners, or indeed any gold-producing mining company, in need of financing will have more options available to them in a higher gold price environment. They could, for example, issue equity and trust that there will be demand for their shares. They could also issue debt securities with an equally high degree of confidence that they will generate enough cash to repay the loan without compromising their credit rating. Or they could rely on increased cash flow to finance their projects internally, taking advantage of better profit margins.
On the other hand, in a context where the price of gold is low, it is more difficult to have access to financing. Investors are avoiding equity financing and companies are not interested in issuing debt and risking over-indebtedness. In such circumstances, royalty and stream companies are often a good option and perhaps the only viable option, allowing them to pick the best investment opportunities and negotiate deals on more favorable terms.
Will the same high multiples given to royalty and stream companies remain when these companies no longer have the opportunity to make the best choices, when they have to take more risks and when they are forced to diversify beyond royalties? and gold flows? This is an untested hypothesis, although I suspect it has some validity.
That doesn’t mean you shouldn’t consider an investment in royalty and stream companies in the current gold price environment. We should. Yamana did just that when we recently sold our royalty portfolio in a transaction that sponsored the creation of a new royalty and stream company, in which we took a 13% stake. As such, we certainly support the model.
Royalty companies offer a diversity of mining assets and consistent returns regardless of the gold price environment. However, when it comes to percentage weightings in one’s portfolio, one needs to recalibrate in an environment where the price of gold is rising, to maximize the impact of the explosive growth in gold mining margins and cash flow. We have already started to see this effect in our share price performance and I believe we will continue to see it for a long time to come.…
The post Higher Cash Flows In The Current Gold Price Environment Creates An Explosive Increase In Value. appeared first on .
) [summary] =>Also, for many producing companies (in fact, most producing companies in my opinion) that are trading at low multiples and whose valuations do not yet reflect the true price of gold, multiples and valuations will improve as market participants strive to catch up with the price of gold.
There is another factor that works against royalty and stream companies in a high gold price environment that also needs to be considered. It must be assumed that the high multiples at which these securities are traded also reflect the growth prospects of the investment opportunities.
Will there be as many opportunities in a high and rising gold price environment, or will royalty and stream companies face a relative dearth of investment opportunities, which will imply that premium valuations should no longer apply? It must be assumed that at least part of the bonus was based on growth prospects, on the universe of available candidates needing to strike deals with royalty and stream companies in what was a low gold price environment.
We should expect that gold miners, or indeed any gold-producing mining company, in need of financing will have more options available to them in a higher gold price environment. They could, for example, issue equity and trust that there will be demand for their shares. They could also issue debt securities with an equally high degree of confidence that they will generate enough cash to repay the loan without compromising their credit rating. Or they could rely on increased cash flow to finance their projects internally, taking advantage of better profit margins.
On the other hand, in a context where the price of gold is low, it is more difficult to have access to financing. Investors are avoiding equity financing and companies are not interested in issuing debt and risking over-indebtedness. In such circumstances, royalty and stream companies are often a good option and perhaps the only viable option, allowing them to pick the best investment opportunities and negotiate deals on more favorable terms.
Will the same high multiples given to royalty and stream companies remain when these companies no longer have the opportunity to make the best choices, when they have to take more risks and when they are forced to diversify beyond royalties? and gold flows? This is an untested hypothesis, although I suspect it has some validity.
That doesn’t mean you shouldn’t consider an investment in royalty and stream companies in the current gold price environment. We should. Yamana did just that when we recently sold our royalty portfolio in a transaction that sponsored the creation of a new royalty and stream company, in which we took a 13% stake. As such, we certainly support the model.
Royalty companies offer a diversity of mining assets and consistent returns regardless of the gold price environment. However, when it comes to percentage weightings in one’s portfolio, one needs to recalibrate in an environment where the price of gold is rising, to maximize the impact of the explosive growth in gold mining margins and cash flow. We have already started to see this effect in our share price performance and I believe we will continue to see it for a long time to come.…
The post Higher Cash Flows In The Current Gold Price Environment Creates An Explosive Increase In Value. appeared first on .
[atom_content] =>Also, for many producing companies (in fact, most producing companies in my opinion) that are trading at low multiples and whose valuations do not yet reflect the true price of gold, multiples and valuations will improve as market participants strive to catch up with the price of gold.
There is another factor that works against royalty and stream companies in a high gold price environment that also needs to be considered. It must be assumed that the high multiples at which these securities are traded also reflect the growth prospects of the investment opportunities.
Will there be as many opportunities in a high and rising gold price environment, or will royalty and stream companies face a relative dearth of investment opportunities, which will imply that premium valuations should no longer apply? It must be assumed that at least part of the bonus was based on growth prospects, on the universe of available candidates needing to strike deals with royalty and stream companies in what was a low gold price environment.
We should expect that gold miners, or indeed any gold-producing mining company, in need of financing will have more options available to them in a higher gold price environment. They could, for example, issue equity and trust that there will be demand for their shares. They could also issue debt securities with an equally high degree of confidence that they will generate enough cash to repay the loan without compromising their credit rating. Or they could rely on increased cash flow to finance their projects internally, taking advantage of better profit margins.
On the other hand, in a context where the price of gold is low, it is more difficult to have access to financing. Investors are avoiding equity financing and companies are not interested in issuing debt and risking over-indebtedness. In such circumstances, royalty and stream companies are often a good option and perhaps the only viable option, allowing them to pick the best investment opportunities and negotiate deals on more favorable terms.
Will the same high multiples given to royalty and stream companies remain when these companies no longer have the opportunity to make the best choices, when they have to take more risks and when they are forced to diversify beyond royalties? and gold flows? This is an untested hypothesis, although I suspect it has some validity.
That doesn’t mean you shouldn’t consider an investment in royalty and stream companies in the current gold price environment. We should. Yamana did just that when we recently sold our royalty portfolio in a transaction that sponsored the creation of a new royalty and stream company, in which we took a 13% stake. As such, we certainly support the model.
Royalty companies offer a diversity of mining assets and consistent returns regardless of the gold price environment. However, when it comes to percentage weightings in one’s portfolio, one needs to recalibrate in an environment where the price of gold is rising, to maximize the impact of the explosive growth in gold mining margins and cash flow. We have already started to see this effect in our share price performance and I believe we will continue to see it for a long time to come.…
The post Higher Cash Flows In The Current Gold Price Environment Creates An Explosive Increase In Value. appeared first on .
) [3] => Array ( [title] => Gold Could Continue To Climb For A Long Time [link] => https://goldirainvestment.info/gold-could-continue-to-climb-for-a-long-time/ [dc] => Array ( [creator] => Albert Appell ) [pubdate] => Sat, 19 Nov 2022 11:46:59 +0000 [category] => Investing In Gold [guid] => https://goldirainvestment.info/?p=53 [description] =>Several notable people in the gold mining industry have told me over the years that anyone who claims they can predict the price of gold is either a fool or a liar. I agree in general, but with all due respect, I must bring certain nuances.
This brings me to the subject of this blog. Gold is trading at $1,731 an ounce, up 29% over the past 12 months, including 14% this year. Can it hold at those levels and is there room to climb further? I believe the answer is yes.
Even before the COVID-19 pandemic hit us, many of the factors positively impacting the price of gold were in place: low-interest rates globally, high debt levels, easing monetary policies, central bank buying, ongoing trade tensions between the United States and China, and mass economic protests in many countries around the world.
Fiscal stimulus measures introduced around the world will be financed by deficits and debt, which means that debt to GDP increases while GDP decreases. This trend will continue for the foreseeable future, which creates a favorable environment for gold.
As the economy struggles to show growth, more and more countries are turning to negative interest rates to stimulate spending and consumption. Total negative-yielding debt around the world has increased substantially. It’s fine for governments to borrow at low-interest rates, but eventually, the debt will have to be repaid, or a default will occur, or something else will happen.
These fiscal stimulus measures and unprecedented government debt have pushed the price of gold to record highs in several currencies and bolstered demand for gold ETFs. Yet the price of gold does not fully reflect what has happened and the global financial strains to come. The price of gold stocks is even less representative of the current situation.
There are three fundamental reasons for believing in a rise in the price of gold in the short term and immediately. First, real interest rates will likely remain low to negative for some time, supporting demand for gold as an investment. Additionally, demand in emerging markets will likely increase as these markets return to some degree of normality. In my opinion, this demand, especially from China, did not dissipate, it was simply suppressed for a while.
Second, if we look beyond the likely immediate deflationary effects of COVID-19, there are factors supporting higher inflation, which is also supporting the price of gold. I believe there will be lasting disruptions in supply which, even with weaker aggregate demand, will cause an imbalance in favor of demand, which will have an inflationary effect. We are also in a period of unprecedented government fiscal and monetary stimulus, which will devalue the purchasing power of currencies and will likely cause inflation.
And, finally, we come to the issue of debt. The policy objective of encouraging higher inflation to support the sustainability of unprecedented debt levels cannot be overlooked. It’s a much better alternative to default. Therefore, there is some political expediency in supporting higher valuations for assets that underlie debt that cannot be repaid.
These factors convincingly demonstrate that investing in gold as a physical asset, a currency whose value cannot be downgraded, is a good idea. However, there are other things to consider. Investing in gold as an asset class can be a great value proposition. Investing in gold stocks, especially in a rising gold price environment, might be a better way to gain exposure to gold. Stay tuned for more on this.…
The post Gold Could Continue To Climb For A Long Time appeared first on .
[content] => Array ( [encoded] =>Several notable people in the gold mining industry have told me over the years that anyone who claims they can predict the price of gold is either a fool or a liar. I agree in general, but with all due respect, I must bring certain nuances.
This brings me to the subject of this blog. Gold is trading at $1,731 an ounce, up 29% over the past 12 months, including 14% this year. Can it hold at those levels and is there room to climb further? I believe the answer is yes.
Even before the COVID-19 pandemic hit us, many of the factors positively impacting the price of gold were in place: low-interest rates globally, high debt levels, easing monetary policies, central bank buying, ongoing trade tensions between the United States and China, and mass economic protests in many countries around the world.
Fiscal stimulus measures introduced around the world will be financed by deficits and debt, which means that debt to GDP increases while GDP decreases. This trend will continue for the foreseeable future, which creates a favorable environment for gold.
As the economy struggles to show growth, more and more countries are turning to negative interest rates to stimulate spending and consumption. Total negative-yielding debt around the world has increased substantially. It’s fine for governments to borrow at low-interest rates, but eventually, the debt will have to be repaid, or a default will occur, or something else will happen.
These fiscal stimulus measures and unprecedented government debt have pushed the price of gold to record highs in several currencies and bolstered demand for gold ETFs. Yet the price of gold does not fully reflect what has happened and the global financial strains to come. The price of gold stocks is even less representative of the current situation.
There are three fundamental reasons for believing in a rise in the price of gold in the short term and immediately. First, real interest rates will likely remain low to negative for some time, supporting demand for gold as an investment. Additionally, demand in emerging markets will likely increase as these markets return to some degree of normality. In my opinion, this demand, especially from China, did not dissipate, it was simply suppressed for a while.
Second, if we look beyond the likely immediate deflationary effects of COVID-19, there are factors supporting higher inflation, which is also supporting the price of gold. I believe there will be lasting disruptions in supply which, even with weaker aggregate demand, will cause an imbalance in favor of demand, which will have an inflationary effect. We are also in a period of unprecedented government fiscal and monetary stimulus, which will devalue the purchasing power of currencies and will likely cause inflation.
And, finally, we come to the issue of debt. The policy objective of encouraging higher inflation to support the sustainability of unprecedented debt levels cannot be overlooked. It’s a much better alternative to default. Therefore, there is some political expediency in supporting higher valuations for assets that underlie debt that cannot be repaid.
These factors convincingly demonstrate that investing in gold as a physical asset, a currency whose value cannot be downgraded, is a good idea. However, there are other things to consider. Investing in gold as an asset class can be a great value proposition. Investing in gold stocks, especially in a rising gold price environment, might be a better way to gain exposure to gold. Stay tuned for more on this.…
The post Gold Could Continue To Climb For A Long Time appeared first on .
) [summary] =>Several notable people in the gold mining industry have told me over the years that anyone who claims they can predict the price of gold is either a fool or a liar. I agree in general, but with all due respect, I must bring certain nuances.
This brings me to the subject of this blog. Gold is trading at $1,731 an ounce, up 29% over the past 12 months, including 14% this year. Can it hold at those levels and is there room to climb further? I believe the answer is yes.
Even before the COVID-19 pandemic hit us, many of the factors positively impacting the price of gold were in place: low-interest rates globally, high debt levels, easing monetary policies, central bank buying, ongoing trade tensions between the United States and China, and mass economic protests in many countries around the world.
Fiscal stimulus measures introduced around the world will be financed by deficits and debt, which means that debt to GDP increases while GDP decreases. This trend will continue for the foreseeable future, which creates a favorable environment for gold.
As the economy struggles to show growth, more and more countries are turning to negative interest rates to stimulate spending and consumption. Total negative-yielding debt around the world has increased substantially. It’s fine for governments to borrow at low-interest rates, but eventually, the debt will have to be repaid, or a default will occur, or something else will happen.
These fiscal stimulus measures and unprecedented government debt have pushed the price of gold to record highs in several currencies and bolstered demand for gold ETFs. Yet the price of gold does not fully reflect what has happened and the global financial strains to come. The price of gold stocks is even less representative of the current situation.
There are three fundamental reasons for believing in a rise in the price of gold in the short term and immediately. First, real interest rates will likely remain low to negative for some time, supporting demand for gold as an investment. Additionally, demand in emerging markets will likely increase as these markets return to some degree of normality. In my opinion, this demand, especially from China, did not dissipate, it was simply suppressed for a while.
Second, if we look beyond the likely immediate deflationary effects of COVID-19, there are factors supporting higher inflation, which is also supporting the price of gold. I believe there will be lasting disruptions in supply which, even with weaker aggregate demand, will cause an imbalance in favor of demand, which will have an inflationary effect. We are also in a period of unprecedented government fiscal and monetary stimulus, which will devalue the purchasing power of currencies and will likely cause inflation.
And, finally, we come to the issue of debt. The policy objective of encouraging higher inflation to support the sustainability of unprecedented debt levels cannot be overlooked. It’s a much better alternative to default. Therefore, there is some political expediency in supporting higher valuations for assets that underlie debt that cannot be repaid.
These factors convincingly demonstrate that investing in gold as a physical asset, a currency whose value cannot be downgraded, is a good idea. However, there are other things to consider. Investing in gold as an asset class can be a great value proposition. Investing in gold stocks, especially in a rising gold price environment, might be a better way to gain exposure to gold. Stay tuned for more on this.…
The post Gold Could Continue To Climb For A Long Time appeared first on .
[atom_content] =>Several notable people in the gold mining industry have told me over the years that anyone who claims they can predict the price of gold is either a fool or a liar. I agree in general, but with all due respect, I must bring certain nuances.
This brings me to the subject of this blog. Gold is trading at $1,731 an ounce, up 29% over the past 12 months, including 14% this year. Can it hold at those levels and is there room to climb further? I believe the answer is yes.
Even before the COVID-19 pandemic hit us, many of the factors positively impacting the price of gold were in place: low-interest rates globally, high debt levels, easing monetary policies, central bank buying, ongoing trade tensions between the United States and China, and mass economic protests in many countries around the world.
Fiscal stimulus measures introduced around the world will be financed by deficits and debt, which means that debt to GDP increases while GDP decreases. This trend will continue for the foreseeable future, which creates a favorable environment for gold.
As the economy struggles to show growth, more and more countries are turning to negative interest rates to stimulate spending and consumption. Total negative-yielding debt around the world has increased substantially. It’s fine for governments to borrow at low-interest rates, but eventually, the debt will have to be repaid, or a default will occur, or something else will happen.
These fiscal stimulus measures and unprecedented government debt have pushed the price of gold to record highs in several currencies and bolstered demand for gold ETFs. Yet the price of gold does not fully reflect what has happened and the global financial strains to come. The price of gold stocks is even less representative of the current situation.
There are three fundamental reasons for believing in a rise in the price of gold in the short term and immediately. First, real interest rates will likely remain low to negative for some time, supporting demand for gold as an investment. Additionally, demand in emerging markets will likely increase as these markets return to some degree of normality. In my opinion, this demand, especially from China, did not dissipate, it was simply suppressed for a while.
Second, if we look beyond the likely immediate deflationary effects of COVID-19, there are factors supporting higher inflation, which is also supporting the price of gold. I believe there will be lasting disruptions in supply which, even with weaker aggregate demand, will cause an imbalance in favor of demand, which will have an inflationary effect. We are also in a period of unprecedented government fiscal and monetary stimulus, which will devalue the purchasing power of currencies and will likely cause inflation.
And, finally, we come to the issue of debt. The policy objective of encouraging higher inflation to support the sustainability of unprecedented debt levels cannot be overlooked. It’s a much better alternative to default. Therefore, there is some political expediency in supporting higher valuations for assets that underlie debt that cannot be repaid.
These factors convincingly demonstrate that investing in gold as a physical asset, a currency whose value cannot be downgraded, is a good idea. However, there are other things to consider. Investing in gold as an asset class can be a great value proposition. Investing in gold stocks, especially in a rising gold price environment, might be a better way to gain exposure to gold. Stay tuned for more on this.…
The post Gold Could Continue To Climb For A Long Time appeared first on .
) [4] => Array ( [title] => Will Gold Ever Stop Falling? [link] => https://goldirainvestment.info/will-gold-ever-stop-falling/ [dc] => Array ( [creator] => Albert Appell ) [pubdate] => Sat, 19 Nov 2022 11:24:49 +0000 [category] => Gold [guid] => https://goldirainvestment.info/?p=28 [description] =>Unfortunately for us, the price of gold continued to fall in October despite persistently persistent inflation.
The yellow metal is suffering from the strength of the king dollar, stimulated by the speech of the Fed and the spectacular rise in key rates in 2022.
Since last March, the Federal Reserve has raised its rates by 275 points, a scenario that we had not expected. We thought that the authorities were going to act much more gradually in tightening their monetary policy. That said, we continue to believe that the Fed will refuse to raise rates above a certain threshold. Would it be 6%, 7%, or 8%? We will soon have the answer.
In the meantime, investors around the world are taking refuge in Uncle Sam’s Treasuries while waiting to see more clearly. On this point, the US dollar is currently a more popular haven than gold bullion.
The popularity of the greenback makes all assets look bad: stocks, bonds, and natural resources.
On Friday, October 14, an ounce of gold was selling for US$1,641, down 9% since the start of the year. In Canadian dollars, the picture is much less hopeless since the loonie continues to depreciate against the currency of our neighbor to the south. An ounce of gold is selling for $2,280 Canadian, down only 1% since the start of the year.
According to Jeffrey Christian of the CPM Group, the weakness in the price of gold will last for a while, with a possibility that the price will go down to US$1630.
Like him, we believe the price of bullion will rise once the value of the US dollar stops rising.
This will be the case if other countries follow the lead of the United States and raise their interest rates as sharply as the Fed. Europe is lagging in this regard. Their economic situation, with the war just around the corner and the energy crisis it triggered, is tempering the enthusiasm of the European Central Bank in this regard.
England, which was the first to raise its rates, entered a zone of turbulence caused by the clash between the expansionary budgetary policy of the new Prime Minister and the monetary policy of the Bank of England. We’ll know more about that next week.
Japan has not yet started raising its key rates. Result: the yen plummets. The Canadian dollar is 17% more expensive against the yen than at the start of the year. It’s time to plan your vacation in the Land of the Rising Sun!
Another plausible scenario, there could also be concerted action by central banks to limit the strength of the greenback. A strong dollar has the disadvantage of importing US inflation to its trading partners. Emerging countries are suffering since their debt is often denominated in US dollars.
Don’t think that too strong a US dollar suits the Yankees either. Yes, it’s convenient for overseas travel, but US exporters lose their competitiveness while US multinationals’ overseas profits melt like snow in the sun when converted to US.
In a more likely scenario, the US dollar will lose its luster the day the Fed announces the end of rate hikes or even a relaxation of its monetary policy. Unfortunately, that day seems a little further away with each new inflation figure.
As for gold stocks, the results for the third quarter are expected in the coming days. No miracles on the horizon. Margins are under pressure with a falling gold price and input cost inflation.
At least Barrick (ABX, in Toronto, $19.72) assures that it will produce the announced quantity of gold in 2022.
Orla (Ola, in Toronto, $4.57) also had good news for its shareholders. In the third quarter, Orla produced 28,876 ounces of gold, more than expected by analysts. The grade surprised on the rise by 0.88 g/t instead of 0.75 g/t and a production rate of 19,200 tonnes of ore per day exceeded expectations. Orla increases its production forecast for 2022 by 10,000 tonnes, to 110,000 tonnes. It now has US90 million in cash.
Of note, the publication of the sulfide envelope resource update to appear in economic details regarding development options at its Camino Rojo deposit in Mexico has been postponed again, this time to the first quarter. 2023. It had been promised for the first half of 2022, then for the end of 2022.
Since February 2021, Orla stock has sold in a price range of $3 to $7. Over the past two years, the stock price has often stayed above $4.40. Scotia has a target price of $7 within a year.
Orla’s main shareholders are Newmont and Pierre Lassonde.
…
The post Will Gold Ever Stop Falling? appeared first on .
[content] => Array ( [encoded] =>Unfortunately for us, the price of gold continued to fall in October despite persistently persistent inflation.
The yellow metal is suffering from the strength of the king dollar, stimulated by the speech of the Fed and the spectacular rise in key rates in 2022.
Since last March, the Federal Reserve has raised its rates by 275 points, a scenario that we had not expected. We thought that the authorities were going to act much more gradually in tightening their monetary policy. That said, we continue to believe that the Fed will refuse to raise rates above a certain threshold. Would it be 6%, 7%, or 8%? We will soon have the answer.
In the meantime, investors around the world are taking refuge in Uncle Sam’s Treasuries while waiting to see more clearly. On this point, the US dollar is currently a more popular haven than gold bullion.
The popularity of the greenback makes all assets look bad: stocks, bonds, and natural resources.
On Friday, October 14, an ounce of gold was selling for US$1,641, down 9% since the start of the year. In Canadian dollars, the picture is much less hopeless since the loonie continues to depreciate against the currency of our neighbor to the south. An ounce of gold is selling for $2,280 Canadian, down only 1% since the start of the year.
According to Jeffrey Christian of the CPM Group, the weakness in the price of gold will last for a while, with a possibility that the price will go down to US$1630.
Like him, we believe the price of bullion will rise once the value of the US dollar stops rising.
This will be the case if other countries follow the lead of the United States and raise their interest rates as sharply as the Fed. Europe is lagging in this regard. Their economic situation, with the war just around the corner and the energy crisis it triggered, is tempering the enthusiasm of the European Central Bank in this regard.
England, which was the first to raise its rates, entered a zone of turbulence caused by the clash between the expansionary budgetary policy of the new Prime Minister and the monetary policy of the Bank of England. We’ll know more about that next week.
Japan has not yet started raising its key rates. Result: the yen plummets. The Canadian dollar is 17% more expensive against the yen than at the start of the year. It’s time to plan your vacation in the Land of the Rising Sun!
Another plausible scenario, there could also be concerted action by central banks to limit the strength of the greenback. A strong dollar has the disadvantage of importing US inflation to its trading partners. Emerging countries are suffering since their debt is often denominated in US dollars.
Don’t think that too strong a US dollar suits the Yankees either. Yes, it’s convenient for overseas travel, but US exporters lose their competitiveness while US multinationals’ overseas profits melt like snow in the sun when converted to US.
In a more likely scenario, the US dollar will lose its luster the day the Fed announces the end of rate hikes or even a relaxation of its monetary policy. Unfortunately, that day seems a little further away with each new inflation figure.
As for gold stocks, the results for the third quarter are expected in the coming days. No miracles on the horizon. Margins are under pressure with a falling gold price and input cost inflation.
At least Barrick (ABX, in Toronto, $19.72) assures that it will produce the announced quantity of gold in 2022.
Orla (Ola, in Toronto, $4.57) also had good news for its shareholders. In the third quarter, Orla produced 28,876 ounces of gold, more than expected by analysts. The grade surprised on the rise by 0.88 g/t instead of 0.75 g/t and a production rate of 19,200 tonnes of ore per day exceeded expectations. Orla increases its production forecast for 2022 by 10,000 tonnes, to 110,000 tonnes. It now has US90 million in cash.
Of note, the publication of the sulfide envelope resource update to appear in economic details regarding development options at its Camino Rojo deposit in Mexico has been postponed again, this time to the first quarter. 2023. It had been promised for the first half of 2022, then for the end of 2022.
Since February 2021, Orla stock has sold in a price range of $3 to $7. Over the past two years, the stock price has often stayed above $4.40. Scotia has a target price of $7 within a year.
Orla’s main shareholders are Newmont and Pierre Lassonde.
…
The post Will Gold Ever Stop Falling? appeared first on .
) [summary] =>Unfortunately for us, the price of gold continued to fall in October despite persistently persistent inflation.
The yellow metal is suffering from the strength of the king dollar, stimulated by the speech of the Fed and the spectacular rise in key rates in 2022.
Since last March, the Federal Reserve has raised its rates by 275 points, a scenario that we had not expected. We thought that the authorities were going to act much more gradually in tightening their monetary policy. That said, we continue to believe that the Fed will refuse to raise rates above a certain threshold. Would it be 6%, 7%, or 8%? We will soon have the answer.
In the meantime, investors around the world are taking refuge in Uncle Sam’s Treasuries while waiting to see more clearly. On this point, the US dollar is currently a more popular haven than gold bullion.
The popularity of the greenback makes all assets look bad: stocks, bonds, and natural resources.
On Friday, October 14, an ounce of gold was selling for US$1,641, down 9% since the start of the year. In Canadian dollars, the picture is much less hopeless since the loonie continues to depreciate against the currency of our neighbor to the south. An ounce of gold is selling for $2,280 Canadian, down only 1% since the start of the year.
According to Jeffrey Christian of the CPM Group, the weakness in the price of gold will last for a while, with a possibility that the price will go down to US$1630.
Like him, we believe the price of bullion will rise once the value of the US dollar stops rising.
This will be the case if other countries follow the lead of the United States and raise their interest rates as sharply as the Fed. Europe is lagging in this regard. Their economic situation, with the war just around the corner and the energy crisis it triggered, is tempering the enthusiasm of the European Central Bank in this regard.
England, which was the first to raise its rates, entered a zone of turbulence caused by the clash between the expansionary budgetary policy of the new Prime Minister and the monetary policy of the Bank of England. We’ll know more about that next week.
Japan has not yet started raising its key rates. Result: the yen plummets. The Canadian dollar is 17% more expensive against the yen than at the start of the year. It’s time to plan your vacation in the Land of the Rising Sun!
Another plausible scenario, there could also be concerted action by central banks to limit the strength of the greenback. A strong dollar has the disadvantage of importing US inflation to its trading partners. Emerging countries are suffering since their debt is often denominated in US dollars.
Don’t think that too strong a US dollar suits the Yankees either. Yes, it’s convenient for overseas travel, but US exporters lose their competitiveness while US multinationals’ overseas profits melt like snow in the sun when converted to US.
In a more likely scenario, the US dollar will lose its luster the day the Fed announces the end of rate hikes or even a relaxation of its monetary policy. Unfortunately, that day seems a little further away with each new inflation figure.
As for gold stocks, the results for the third quarter are expected in the coming days. No miracles on the horizon. Margins are under pressure with a falling gold price and input cost inflation.
At least Barrick (ABX, in Toronto, $19.72) assures that it will produce the announced quantity of gold in 2022.
Orla (Ola, in Toronto, $4.57) also had good news for its shareholders. In the third quarter, Orla produced 28,876 ounces of gold, more than expected by analysts. The grade surprised on the rise by 0.88 g/t instead of 0.75 g/t and a production rate of 19,200 tonnes of ore per day exceeded expectations. Orla increases its production forecast for 2022 by 10,000 tonnes, to 110,000 tonnes. It now has US90 million in cash.
Of note, the publication of the sulfide envelope resource update to appear in economic details regarding development options at its Camino Rojo deposit in Mexico has been postponed again, this time to the first quarter. 2023. It had been promised for the first half of 2022, then for the end of 2022.
Since February 2021, Orla stock has sold in a price range of $3 to $7. Over the past two years, the stock price has often stayed above $4.40. Scotia has a target price of $7 within a year.
Orla’s main shareholders are Newmont and Pierre Lassonde.
…
The post Will Gold Ever Stop Falling? appeared first on .
[atom_content] =>Unfortunately for us, the price of gold continued to fall in October despite persistently persistent inflation.
The yellow metal is suffering from the strength of the king dollar, stimulated by the speech of the Fed and the spectacular rise in key rates in 2022.
Since last March, the Federal Reserve has raised its rates by 275 points, a scenario that we had not expected. We thought that the authorities were going to act much more gradually in tightening their monetary policy. That said, we continue to believe that the Fed will refuse to raise rates above a certain threshold. Would it be 6%, 7%, or 8%? We will soon have the answer.
In the meantime, investors around the world are taking refuge in Uncle Sam’s Treasuries while waiting to see more clearly. On this point, the US dollar is currently a more popular haven than gold bullion.
The popularity of the greenback makes all assets look bad: stocks, bonds, and natural resources.
On Friday, October 14, an ounce of gold was selling for US$1,641, down 9% since the start of the year. In Canadian dollars, the picture is much less hopeless since the loonie continues to depreciate against the currency of our neighbor to the south. An ounce of gold is selling for $2,280 Canadian, down only 1% since the start of the year.
According to Jeffrey Christian of the CPM Group, the weakness in the price of gold will last for a while, with a possibility that the price will go down to US$1630.
Like him, we believe the price of bullion will rise once the value of the US dollar stops rising.
This will be the case if other countries follow the lead of the United States and raise their interest rates as sharply as the Fed. Europe is lagging in this regard. Their economic situation, with the war just around the corner and the energy crisis it triggered, is tempering the enthusiasm of the European Central Bank in this regard.
England, which was the first to raise its rates, entered a zone of turbulence caused by the clash between the expansionary budgetary policy of the new Prime Minister and the monetary policy of the Bank of England. We’ll know more about that next week.
Japan has not yet started raising its key rates. Result: the yen plummets. The Canadian dollar is 17% more expensive against the yen than at the start of the year. It’s time to plan your vacation in the Land of the Rising Sun!
Another plausible scenario, there could also be concerted action by central banks to limit the strength of the greenback. A strong dollar has the disadvantage of importing US inflation to its trading partners. Emerging countries are suffering since their debt is often denominated in US dollars.
Don’t think that too strong a US dollar suits the Yankees either. Yes, it’s convenient for overseas travel, but US exporters lose their competitiveness while US multinationals’ overseas profits melt like snow in the sun when converted to US.
In a more likely scenario, the US dollar will lose its luster the day the Fed announces the end of rate hikes or even a relaxation of its monetary policy. Unfortunately, that day seems a little further away with each new inflation figure.
As for gold stocks, the results for the third quarter are expected in the coming days. No miracles on the horizon. Margins are under pressure with a falling gold price and input cost inflation.
At least Barrick (ABX, in Toronto, $19.72) assures that it will produce the announced quantity of gold in 2022.
Orla (Ola, in Toronto, $4.57) also had good news for its shareholders. In the third quarter, Orla produced 28,876 ounces of gold, more than expected by analysts. The grade surprised on the rise by 0.88 g/t instead of 0.75 g/t and a production rate of 19,200 tonnes of ore per day exceeded expectations. Orla increases its production forecast for 2022 by 10,000 tonnes, to 110,000 tonnes. It now has US90 million in cash.
Of note, the publication of the sulfide envelope resource update to appear in economic details regarding development options at its Camino Rojo deposit in Mexico has been postponed again, this time to the first quarter. 2023. It had been promised for the first half of 2022, then for the end of 2022.
Since February 2021, Orla stock has sold in a price range of $3 to $7. Over the past two years, the stock price has often stayed above $4.40. Scotia has a target price of $7 within a year.
Orla’s main shareholders are Newmont and Pierre Lassonde.
…
The post Will Gold Ever Stop Falling? appeared first on .
) ) [channel] => Array ( [link] => https://goldirainvestment.info/ [lastbuilddate] => Sat, 19 Nov 2022 17:25:43 +0000 [language] => en-US [sy] => Array ( [updateperiod] => hourly [updatefrequency] => 1 ) [generator] => https://wordpress.org/?v=6.1.1 [tagline] => ) [textinput] => Array ( ) [image] => Array ( [url] => https://goldirainvestment.info/wp-content/uploads/2023/02/cropped-Logo-5-flavicon-Black-32x32.png [link] => https://goldirainvestment.info/ [width] => 32 [height] => 32 ) [feed_type] => RSS [feed_version] => 2.0 [stack] => Array ( ) [inchannel] => [initem] => [incontent] => [intextinput] => [inimage] => [current_field] => [current_namespace] => [ERROR] => [_CONTENT_CONSTRUCTS] => Array ( [0] => content [1] => summary [2] => info [3] => title [4] => tagline [5] => copyright ) [last_modified] => Tue, 28 Feb 2023 09:38:02 GMT [etag] => "2072d33bac1a327098d372f4f66e11cc" )