Page 25 - Bullion World Volume 4 Issue 1 January 2024
P. 25
Bullion World | Volume 4 | Issue 1 | January 2024
"Golden Prospects: Navigating
the Path to Potential Wealth with
Precious Metals Miners in 2024"
Baker Steel Capital Managers LLP
Gold has largely fulfilled its traditional role
in recent years, protecting purchasing
power in the face of rampant inflation,
and withstanding the headwinds of rising
real interest rates and surging US dollar
strength. In contrast, precious metals
miners, which typically offer operationally
leveraged exposure to gold and silver, have
faced weakness since late-2020, as mixed A new bull market for precious metals?
investor sentiment towards equities in • The end of US rate hike cycles historically
general, weighed on share prices. Following pushed gold to new highs – In the past three
this period of consolidation, the gold sector cycles, gold rose >50% in the aftermath of a
now finds itself well-supported by near- and “pause” in hikes. Conviction is building that the
long-term tactical themes, while miners US Fed has finished.
appear historically undervalued despite • Gold tends to perform well amid economic
being in healthy financial shape and paying and geopolitical uncertainty - Economic risk
encouraging dividends. is rising in the US under the “higher for longer”
interest rate scenario. Confrontational geopolitics
The catalysts for gold’s move to new highs will likely continue.
and precious metals miners’ recovery are • De-dollarisation is gaining traction – The US
increasingly clear. A major macroeconomic share of global trade is retreating, US debt growth
shift appears to be underway as the US is accelerating, and many emerging market
rate hike cycle turns, inflation fades, and central banks are reducing US treasury holdings.
economic risks rise. Historical precedent • Physical gold demand is robust - Gold
indicates a strong period ahead for precious jewellery consumption continues to recover from
metals and, perhaps more so than in previous COVID lows amid higher local prices (e.g. yuan,
cycles, we believe that an actively managed rupee), while central bank buying may reach
precious metals equities strategy can deliver another record high in 2023.
superior returns potential relative to physical • Gold miners are in strong shape - Miners offer
gold and silver. healthy margins and balance sheets, growth, ESG
performance and dividends, while constructive
M&A continues. The sector remains historically
and relatively undervalued.
25
