Monthly Letter

Elements | October 2023

10/10/2023

This month, we write about the latest price development for gold and which factors investors should keep an eye on going forward. We have also focused on communicating with you, our investors, and you will find several links below.

Our new fund, AuAg Gold Mining, which is a daily-traded version of our ETF (Exchange-Traded Fund), is now available on Avanza, Nordnet, SAVR and Fondo. It will become available on more platforms over time. In our press release, you can read more about the difference between our new fund and the ETF (link below).

During the month, one of the larger fund platforms in Sweden also decided to replace two existing funds, both from the world's largest fund company, Blackrock, with our funds, AuAg Essential Metals and AuAg Silver Bullet. This is truly a feather in the cap for AuAg.

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

During the last week of the past quarter, the price of gold decreased by around USD 100, which can be considered a relatively large movement. The underlying factors are, i.a., the dollar, which has gone strong, +7% against the euro (+8% against the Swedish krona), since mid-July. This has been prompted by the FED's hawkish communication both in July and at the last meeting on September 20.
Retail investors and trend-following funds have sold heavily as gold broke below its 50- and 200-day moving averages. A real clean-out and capitulation, often seen at the bottom, creates a sound basis for future investments in gold. It must also be noted that there is always a buyer for the retail investors' sale - and the buyers have been commercial banks and central banks now positioning themselves for a rise in the price of gold. Don't forget that when it comes to central banks, you should "do what they do and not what they say".
Despite the recent decline, gold has set a new all-time high during September in countries/currencies such as Japanese YEN (September 20) and Swedish SEK (September 18). In 2022 and 2023, gold has reached ATH in currencies like USD, EUR and GBP. Despite the recent decline, gold is up +51.5% in USD over the past five years. We had both a strong USD and an enormously fast interest rate hike cycle during this period. For an investor, it is essential to remember that the currency you trade in is important, so the price of, for example, gold in USD does not matter to a European investor trading in euro. You can read more about how currency movements affect your investments here.
The World Gold Council states that in the first half of 2023, a new record was set for gold purchases by central banks (387 tonnes). WGC's surveys also show that central banks' sentiment regarding gold remains positive.
Even if central bank members believe they can keep interest rates high for an extended period, the next trend is another cycle of interest rate cuts and associated dollar weakening. We think this will come as soon as the financial system indicates more substantial underlying problems. During the great financial crisis (debt crisis) of 2007/2008, the world had barely 200 trillion USD in debt. Now, in 2023, we have passed 300 trillion.
High interest rates on these large debts for longer will not be possible. The next trend with an interest rate cut cycle will likely happen sooner rather than later and definitely sooner than the central banks would like to communicate and give the impression of. Gold will react strongly with new upward momentum as soon as the market feels that we are reaching this point, and we see that the big investors are already positioning themselves for this scenario.

AuAg Trends

The US gold reserve grew in connection with the US taking over as the world's superpower and the dollar becoming the world's new primary reserve currency. But because the dollar would be "as good as gold" and the USA started printing a lot of money, e.g. to finance the Vietnam War, several countries led by France chose to request gold instead of dollars. This caused the US gold reserve to drastically decrease from 16,000 tons to 8,000 tons in just a few years. In a historic video, President Charles de Gaulle explains that France wants gold as payment instead of dollars. Click here to watch it.
The United States began to panic, leading to the historically important day, August 15, 1971, when President Nixon removed the possibility to convert dollars into gold. Since then, all currencies are linked to the dollar, but the dollar is not linked to anything. This has allowed politicians to create a massive debt bubble, which now, a little over 50 years later, has become such a giant snowball that it risks our entire financial system.