The column – Market ideas
There growth of the gold value of recent years is a well -known fact To most people: from those who have taken care of us, to those who discovered that their “ingottate” from an inherited kilo is now worth more than 100,000 euros, from those who get married and find out how much a gold ring is costs to be put on the finger, to those who work in the jewelry and have problems related to the explosion of the cost of the raw material.
However, for any “distracted” we remember that the yellow metal has risen (in euros) of 12% so far this year, by 32% in the last twelve months, by 66% in the last three years, of 190% in the last ten. Star yields.
Much less known is the fact that the companyand who deal with raw gold extraction in mines (hence the name “gold miners“) and subsequent sale they are experiencing one of the best periods of their multi-ninety existence and comparable perhaps only in the final years of the decade 2000-2010.
They benefit from three favorable factors that are recording simultaneously:
➢ Of course the Holy prices ascent And therefore of the sale price of their “product”. Deputy to a series of factors that we can summarize in the increase in demand, especially the central banks of the emerging countries, and in the rigidity of the offer, due to the fact that the yields of the existing mines are in decline and that there are few investments in research of new mines.
➢ the novelty that while often in the past a good part of the future production and sale golden came “hedgy“ From the Gold Miners, that is, sold in advance using the Forward of the golden sales prices (almost always aligned with those spots), today this is no longer done except in the slightest part. Consequently, it benefits in full of the increase in the prices of the yellow metal that occurs in a classic Bull Market such as the current one.
➢ the limited growth of production costs and the consequent “Explosion” of the margins that these companies generate. This is not a discounted factor since in other phases the costs of the equipment, of the material used, of the staff had suffered important increases. Today for now it is not so and you can see it very well from the graphic (source Cresrat Capital) which shows how the delta between average sale price and the production costs is in continuous expansion, to the benefit of useful products and cash flows generated by the typical activity
What is the main consequence of all this? The fact that the gold miners listed on the ST stock exchangeiano by performing even better than gold!
The Bloomberg graphic designer that I propose shows how in the last year compared to +32% of gold in euros, the Dax index that groups the Gold Miners of this world (Canadian, South African, Australian, etc.) company marks +64% and therefore exactly the double and a couple of funds that invest in very well performing Gold Mines such as those of Schroders and Di Ixios, thanks to an active management, to do even better ( + 68% and + 77% respectively).
Late to enter On this form of investment? Of course we have been excellent for some years, but two factors would seem to show us that we are certainly not in a phase of excess of assessments or bubbles:
➢ the overall investments in gold and Gold miners are today a very small piece of the overall world investments (shares, bonds, real summer, etc.). About 1% as the graphic designer of Crescat Capital shows us. In the past, far away is true, they have been much more.
➢ The assessments of Aurifere companies are not particularly high as you can see by the proposed Bloomberg graph that uses two indexes in the Gold Mining sector. Price average on Cash Flow Produced (in the mining sector much more important than the useful product) around 12 times. Certainly uphill from the minimum around 7 times of 2022, but enormously lower than the peak 2010 when approached 30 times.
Meditated dear readers, meditated.
