AuAg Funds : Gold and silver are ending 2022 with a powerful finish and are looking strong for 2023.
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Eric Strand, CEO at AuAg Funds and founder of the AuAg ESG Gold Mining UCITS ETF
We anticipate a new all-time high for gold during 2023 and the start of a new secular bull market when the price goes over 2 100 USD per troy ounce. Central banks as a group have continued, since the great financial crisis, to add more and more gold to their reserves, with a new record set for q3 2022.
It is our opinion that central banks will pivot on their rate hikes and become dovish during 2023, which will ignite an explosive move for gold for years to come. We, therefore, believe gold will end 2023 at least 20 per cent higher, and we also see miners outperforming gold with a factor of two
Gold miners faced depressed valuations in the wake of the invention of gold ETCs. However, we believe this period of historical suffering has now run its cause, and the long-lasting selling period is over, resulting in no further selling pressure.
Gold miners are today historically cheap relative to gold, something that will revert and overshoot in the coming secular gold bull market. Gold miners have lowered their debt substantially in the last ten years, as other sectors instead have taken on a lot more debt
Since 2021, companies in the commodity sector have become true cash flow monsters, and the sub-sector with the highest margins has been the producers of precious metals. The gold price has also risen approximately 50% in the last four years.
Gold miners have become much more shareowner friendly and are nowadays very careful with new expensive projects. Gold miners have a very strong dividend trend, now at 2-5% levels. We have also seen record share buybacks by gold miners in the last two years. But crucially, this is not being done with added debt on high valuations as in most sectors.
Gold miners have a very low correlation with the broad stock market and are becoming more interesting for larger investors looking for possible/alternative return drivers, and that may result in strong capital flows, which will then take equity prices higher.
Gold miners are also historically cheap vs S&P500, which offers a great entry point. Smaller large caps, as well as larger midcaps, are expected to outperform the mega-caps within the sector. Institutional money will especially drive the share prices of ESG-friendly companies and ETFs with the best sustainability credentials
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