The future of gold mining
The end of the great moderation
After the inflationary 70s, Paul Volcker managed to tame inflation. The period of the great moderation began, in which constantly low inflation rates prevailed and became the norm. This now seems to have come to an end. However, investors, governments and central banks still seem to be playing by the old rules. This poses great risks. It all started with Janet Yellen when she succeeded Ben Bernanke in 2013. Since then, inflation rates have risen and neither of the two major parties in the US seems to have much of a problem with this.
Gold the big disappointment?
Many are disappointed by gold’s seemingly weak performance in such an inflationary environment. It must be remembered that gold has performed very well in recent years and one should not expect price increases like Bitcoin. Bitcoin also stole a lot of attention. However, since tapering and rate hikes were announced, gold has been infused with new energy. Moreover, with the increasing polarisation of monetary policy, it looks quite like an expansion of financial repression. All this should be good for gold.
The mining sector
Mining stocks are still extremely cheap. Many companies pay dividends and have share buyback programmes. A good example is Endeavour, which have a good balance sheet and also spend very little money on exploration. This makes them extremely attractive. Another point is that West Africa should become the world’s largest gold producer. Another interesting point is that there have been no major gold discoveries recently. This also challenges theories like “peak gold”.
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