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AuAg Funds founder and CEO Eric Strand joins Proactive's Stephen Gunnion with the latest developments affecting the gold price and gold miners included in the AuAg ESG Gold Mining UCITS ETF.
Strand said gold prices near all-time highs is very advantageous for gold miners, despite a historical lag in their response to gold price increases. The costs for miners have stabilized while gold prices are rising, promising improved profitability. Strand emphasizes the leverage effect in gold mining, where a 20% increase in gold price could result in a 40% gain for gold miners, attributing this to the net return difference between gold prices and operational costs.
Furthermore, he highlighted gold miners as undervalued, both in relation to gold and historically against the S&P 500. The current market dynamics, with strong holdings and reduced retail investor presence, present a ripe opportunity for valuation adjustments. Strand also notes a trend towards shareholder-friendly practices among miners, including reduced debt and cautious project investments, potentially avoiding past mistakes.
Consolidation activities within the sector are acknowledged, with a preference for acquiring known entities over costly exploration. The mid-sized companies are viewed as prime targets for larger firms, indicating a dynamic market.
Lastly, Strand projects a 20% rise in gold prices for the year, targeting nearly $2,500 by year-end, driven by anticipated lower interest rates and the sustaining momentum above $2100, which fosters a positive outlook for continued investment in gold.
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COMTEX_448950691/2655/2024-03-08T10:13:59
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