A Race to the Bottom

2025 has started strong, and it's time to look ahead after a solid first quarter. The past period has been incredibly exciting for those of us who invest in metals and mining companies.

We've seen new all-time highs for gold and copper and a 10-year silver high. The main driver behind these increases is that countries continue to print money to finance their deficits.

This, combined with tariffs, creates uncertainty in the market. More about this further down in the letter.

Gold

Gold closed the month at 3,123 USD, increasing 9.3% in USD during March. The gold price also set a new all-time high of 3,127 USD per troy ounce during the month.

The price of silver closed March at 34.06 USD, an increase of 9.5%. During the month, the silver price has steadily passed 33 USD and is now approaching 35 USD per troy ounce. After 35 USD, it can rise rapidly, as we wrote in our "Silver and Silver Miners Outlook 2025".

We are now rapidly approaching the levels we wrote about in the previous monthly letter and Outlook for 2025; "We see silver breaking through several significant levels, such as 31, 35, and 40 USD in 2025. All to break through its former all-time high from 2011, which is just below 50 USD per troy ounce (which corresponds to as much as +73%). The first major target will be to surpass 2024's peak of 35 USD (+21% from the end of 2024/25)".

Mining Companies

Mining companies have had very strong margins in recent years, which has led to reduced debt, increased dividends, and share buybacks. There has also been a lot of activity in the M&A space—that is, acquisitions or mergers of companies. Unlike the last bull market, when many companies acquired so-called "explorers," the focus now has shifted to acquiring already producing companies. This is because they want to avoid the risks they took during the previous bull market.

However, what's interesting is that buying already-producing companies does not increase the future supply of the commodity. If supply doesn't grow while demand continues to rise, this typically results in higher and higher prices for the commodity, which, in turn, benefits the companies’ earnings potential.

We’re now also starting to see bids being rejected. During the month, Australian company Gold Road Resources turned down an acquisition offer worth 3.3 billion Australian dollars from South African mining giant Gold Fields. The bid included a 24.5% premium. However, Gold Road rejected the offer, calling it “materially undervaluing” and “highly opportunistic.” High M&A activity indicates that the sector is heating up more and more.

AuAg Macro - Monetary Inflation

China has pledged to intensify its monetary and fiscal stimulus efforts to reach its 5% growth target for 2025 while also trying to soften the impact of an escalating trade war with the United States. Measures so far have included several initiatives to boost domestic consumption, support the property market, and counter the deflationary pressure that has emerged.

For 2025, Beijing has now “raised” its planned budget deficit from the previous 3% to around 4% of GDP. However, if you compare actual revenues to total spending, the real deficit is soon approaching 10%. Money printers are running hot across the world.

AuAg Macro - Electrification

Since most media attention is now focused on Trump and tariffs, industrial development has fallen into the background since the AI hype settled down. At the same time, the copper price has shown strength and reached a new all-time high during the month. Here, we see a mix of tariffs and Chinese investments playing a major role in supporting the copper price.

In the long term, the demand for copper looks set to increase – also for reasons that might not get much attention. One key driver we see “under the radar” is upgrading power grids and water infrastructure in the U.S. and several other countries. This is an important puzzle piece in the future demand for copper.

Fund of the Month

AuAg Gold Rush continues to shine and has now completed its first three full months with its new active portfolio and a fresh new name! In the first quarter, when both global funds and the USD took a hit, our new addition held up strongly, delivering a return of +22.75% year-to-date (in SEK).

The fund’s structure – with both a defensive and an offensive part – has proven to work well even in this upward market phase. The fund’s return also stands at +3.87% compared to BGF World Gold, the largest fund in the sector (which has been around since 1994). We’re also happy to see the fund grow so quickly during these months, now surpassing 100 million SEK in assets under management. Of course, we hope to see AuAg Gold Rush available on even more platforms going forward.

We’re also very pleased to announce that the fund has been passported to Norway, where it will become our first fund available for trading in NOK.

Macro Observation of the Month

We are now in the era of tariffs and will see significant volatility in markets worldwide. Buyers have become more cautious, which can sometimes lead to near-free-fall scenarios. But every share or ounce that’s sold has a buyer – and it’s often during this kind of turbulence that weak hands lose their positions to strong hands, laying the groundwork for future upward moves. We wrote more about tariffs in last month’s letter.

However, we see what’s happening now more as a major currency war. Tariffs and devaluations are key ingredients in this battle. When it comes to currencies, it’s always important to compare three currency pairs to determine if a currency is truly strong due to a healthy economy—or if it’s just rising because another currency is weaker. Financial media often gets this wrong when reporting on strong and weak currencies.

Very few people recognize that it’s “a race to the bottom for all fiat currencies.” As we now begin to open our eyes to alternative currencies and new partnerships between countries aiming to reduce their dependency on 80 years of U.S. dollar dominance, we may be approaching a turning point in the global financial system.

Even though gold has performed strongly (or, more accurately, fiat currencies have been extremely weak), gold’s qualities as a currency are now shining even more clearly. We’ll end with the following quote from former FED Chair Alan Greenspan in 2017:

“I view gold as the primary global currency. It is the only currency, along with silver, that does not require a counterparty signature. No one refuses gold as payment to discharge an obligation. Credit instruments and fiat currency depend on the creditworthiness of a counterparty.”