Why Mining and Metal Investments Could Shine in Coming Years

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Central banks around the world are worried about inflation. There is a lot of financial stress in the system and still some huge time bombs have not been deactivated, such as all the derivatives that may fail and ignite some kind of chain reaction in the financial system.

Why not start with the most important question. Is it already too late to buy precious metals or commodities in general?

Not at all. Gold and metals generally have very long cycles; ups and downs tend to be for typically 15 to 20 year periods. We are now seven-eight years into the cycle. So depending on which way you look at it, you could be in the one-third or a mid-cycle. In nominal terms (at $900 odd dollars an ounce now) the previous high was $850 in the 1980s. If you take into account inflation then the equivalent price of that now is over $ 2,300. So if you look at where you are in a cycle then it also in some sense reaffirms the direction in which or the potential to where gold can go.

After over 20 years of a persistent bear market in commodities, we have entered a new bull market in 2001 which has still a long way to go. Typically, a bull market peaks with a new high in real terms – which means currently over $ 2,300 per ounce for gold. It’s the same situation for other precious metals such as silver, platinum or palladium.

What else speaks for gold from an investor’s point of view?

The other couple of things that really make a difference to gold are that it is counter cyclical to the US dollar. So, if you expect the US dollar to weaken, then gold moves the other way and appreciates. Gold is also a store of value and therefore is valuable in times of geopolitical stress or calamities in markets or during times of inflation (because of inflation gold price goes up).

You’ve got multiple drivers for why gold is technically a good investment. We are seeing a lot of the above playing out now. Central banks around the world are worried about inflation. There is a lot of financial stress in the system and still some huge time bombs have not been deactivated, such as all the derivatives that may fail and ignite some kind of chain reaction in the financial system.

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