As we wrote in our March 24 industry note, we see extreme monetary and fiscal stimulus leading to dollar deflation. In this environment, similar to the set up in 2008, we expect gold price to trade materially higher and we have raised our gold price forecast to $2,500/oz. With higher prices, gold miners stand to benefit from substantial margin growth, assuming that industry-specific cost inflation remains low. In our opinion, investors should be looking to build positions in gold-related equities that give them exposure to gold. In our experience, investors will gravitate to large-cap producers and select those with the largest annual production of gold. Investors will also look to published gold reserves (and resources) in the ground, and selecting those equities with the largest accumulation. While neither of these section methods is without its flaws, we have reviewed our coverage and aggregated this data. As we indicated in our January 30 gold industry note (“Strategies for Outperforming the Gold Miner ETFs”), we continue to recommend investors build a concentrated portfolio of our favorite names that offer gold leverage, but also minimize exposure to production interruptions and provide exposure to the M&A cycle that historically accompanies a gold bull market.
A link to the full report is posted in the Subscriber's Area.
This is not the time to worry about deficits” are likely to prove fateful words 18 months from now. The measures being adopted by the world’s governments, in tandem with their respective central banks, are sowing the seeds for future inflation.
That’s not a short-term risk because the velocity of money is at an unprecedented low but stimulus often proves sticky and any improvement in economic conditions is going to result in a surfeit of money sloshing around.Click HERE to subscribe to Fuller Treacy Money Back to top