Monthly Letter

Elements | July 2023

11/07/2023

June has been eventful, mainly regarding the chaos in Russia and the riots in France. In this letter, we delve a little deeper into how the war is affecting the investment environment for metals. More on this further down.

On June 20, we had our quarterly digital investor meeting, with the theme "Metals for the green transition – an outlook for industrial and technology metals". During the meeting, Eric and Christopher discussed macro, green metals, and the funds. The recording is available in our Research Centre in both video and podcast format. You will find the links below.

We have also participated in several recordings during the month, i.a., Wallstreet Silver, Soar Financially, and ETF Stream. In these recordings, the focus has been on the market for gold, silver, and the mining companies. These links can also be found below and in our Knowledge Center.

AuAg Essential Metals is now available at Futur Pension, for which we are proud and happy.

Use our unique "Research Centre" on an ongoing basis to take part in our current view of the market and the macro environment. We communicate all the time.

Here are a few media links from the past month:

Investment Solutions

Click on one of the funds below to get to the respective fund page. There you can find more information, such as: how to invest, the updated fund sheets (under "Documents"), and the live ticker price on the holdings.

AuAg Thoughts

New interest rate hikes and speculation about more hikes have been in the spotlight over the past month. Even if the rate of inflation has decreased, we still see elevated prices for items such as food. Together with increased costs related to household debt, this has resulted in a significant burden on consumers and their spending capability.
The real estate companies are likely to face a continued and possibly escalating crisis during the autumn when more loans must be converted into loans with higher interest rates. At the same time, the rental business for commercial real estate is continuing its decline.
The world saw a truly chaotic situation in the Russia/Ukraine war when the so-called "Wagner group" suddenly turned on their own. This was probably the most dramatic event of the month. Also, the threat of a "planned" accident at Europe's largest nuclear power plant has gotten significant attention.
Russia is one of the world's richest countries in raw materials, and the sanctions against all the Russian commodities that the world needs have been about reducing Russian revenues. This has led to, e.g. China, India and Saudi Arabia buying oil, gold and other commodities at around a 30% discount from Russia. This has resulted in less revenue for Russia but also profits for the countries that are buyers. Since the outbreak of the war, this new situation has thus created a certain pressure on world market prices. On the other hand, a chaotic situation in Russia could disrupt deliveries and have the opposite effect with sharply rising commodity prices on the world market.
We hope for an end to this war which has already cost so many lives. Unfortunately, we see more and more soldiers deployed simultaneously as the West supplies enormous amounts of weapons to Ukraine. It is the first occasion in modern times that weapons from global superpowers meet each other on this scale. Weapons manufacturers and further innovation of future weapon systems have come into focus. A country's defence forces and weapon systems are needed, but it is so tragic when it needs to be used.

AuAg Trends

Russia's invasion of Ukraine has benefited defence companies that produce missiles, aircraft carriers, bomber jets, surveillance technology, and military satellites. Estimates suggest European defence spending could increase by about two-thirds between 2021 and 2026, reaching approximately 500 billion euro.
Rare-earth elements are playing a significant role in technological advancements in the last 50 years. Everything from GPS navigation capability to cell phones, fibre optics, computers, automobiles and missiles relies heavily on rare-earth elements for development and production. For example, each F-35 Lightning II aircraft requires 420 kilograms of rare-earth materials.
Rare earths, including yttrium and terbium, are used for laser targeting and weapons in combat vehicles. High-strength rare-earth magnets have allowed numerous electronic components used in appliances, audio and video equipment, computers, vehicles, communication systems and military gear to be miniaturized. Fibre-optic cables that use erbium can transmit signals over long distances because the erbium amplifies the signal.
As rare-earth elements gain importance, they have become an essential tool in international political trade negotiations. In the past 20 years, China has emerged as the biggest player, controlling approximately 90-95 per cent of the world's rare earth elements.