Bombs and grenades have now become the solution

June was a stable month for gold prices. Gold remained close to recent highs without reaching a new all-time high. Silver, on the other hand, had a strong month and settling around USD 36–37 per troy ounce. This increase highlights underlying market strength.

In this monthly newsletter, we summarize market developments in June, take a closer look at the fund's strong performance during the first half of the year, where we top the lists, and provide a shorter outlook for the latter half of 2025.

Gold and Silver during the previous month

Gold closed the month at USD 3,305, nearly identical to its level a month earlier (+0.4%). Although gold did not set a new all-time high in June, it temporarily surpassed USD 3,440 per troy ounce, coming within just USD 60 of the record level. Gold reached over 40 new all-time highs in 2024, and the current consolidation of the past two months appears to be preparing the market for its next upward phase toward the range of USD 3,600–4,000 per troy ounce.

Our Gold Outlook for 2025 stated:

"2024 was a strong year for gold, with a +27% increase, or if you prefer, a weak year for the financial system as central banks reversed course and resumed stimulation with interest rate cuts. This occurred at the same time as the world’s largest economy, the U.S., continued to power ahead with massive budget deficits. Our forecast for 2025 suggests another strong year for gold. We predict that gold will break the 3,000 USD level during the year and potentially finish even higher, with a realistic target of 3,300 USD (+26%)."

Due to this, it might be time to update this outlook now that we have reached our target and are halfway through the year.

Silver closed June at USD 36.12, marking an increase of +9.4%. In our previous newsletter, we wrote that silver continued to build momentum in the USD 32–33 range and anticipated that the silver price could finally reach USD 35, opening the door for significant gains. This unfolded in June, with the price quickly rising above USD 36 in the first week and reaching USD 37.30 mid-month. We have now spent approximately three weeks in the USD 36–37 range. Although a quick move toward USD 50 is possible, it is beneficial in the long term if the rise happens more gradually. 

Our Silver Outlook for 2025 stated: 

"Our forecast suggests that 2025 will be an even stronger year for silver than 2024. 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)." 

It is common for commercial banks to attempt to suppress prices around quarter-end, half-year, and year-end reporting periods, particularly due to their own reports and various options expirations. Therefore, seeing such a strong close to the first half of 2025 demonstrates considerable underlying market strength.

We frequently receive media inquiries about whether it is too late to invest in gold, and we want to remind everyone of our recent statement: According to our models, gold is still undervalued under USD 4,290, indicating further upside potential. During the previous gold bull market from 2001 to 2011, gold became "expensive" only at the peak in 2011. Currently, we are only in year three of a bull market, compared to the ten-year bull market previously experienced.

We also note that gold is now the second-largest reserve asset held by central banks (after the USD but ahead of the EUR), see the chart below. Central banks continue purchasing gold, and various surveys indicate their intent to acquire even more.

AuAg Funds – Highlights

In our previous monthly letter, we wrote that it was time for AuAg Silver Bullet to target NAV 200. Just a few days into June, this milestone was already reached.

With the recent half-year mark behind us, we managed to achieve both first and second place among all Swedish funds in terms of returns. This achievement was highlighted by Placera.se, where AuAg Gold Rush secured first place with +35.53%, closely followed by AuAg Silver Bullet with +35.26%. Once again, we are delighted to share this with you, as such events are not common in the Swedish fund market.

Placera.se writes:

"The two best-performing Swedish-registered funds this year, traded in Swedish krona, are two sector-specific funds focusing on gold and silver. With gains of around 35%, they outperform other funds in the comparison by more than 100%," Eric Strand is not surprised by the performance.

"At the beginning of the year, in our outlook for gold, silver, and mining companies, we mentioned our expectation for rising metal prices but anticipated that mining companies would outperform the underlying commodities," says Eric Strand.

"This is precisely what happened with AuAg Gold Rush and AuAg Silver Bullet, each up around 35%, while gold prices in Swedish krona have only risen by 5.67% and silver by 3.07%," he continues.

The funds are managed jointly by Eric Strand, Stefan Abrahamsson, and Christopher Svensson.

Global Perspectives with AuAg

From tariffs and threats, we have now moved to bombs and grenades. The USA is once again involved in an offensive war, and the EU plans to finance a new defense with an annual budget equal to 5% of GDP. Of course, it's challenging to view this global development positively. However, as investors, it's essential to understand the implications and opportunities to position ourselves accordingly.

This increased cost cannot be funded through taxation, as that would mean an annual tax increase of up to 10% for all citizens. Instead, the path forward involves increased debt and further monetary inflation, naturally enhancing the value of monetary metals such as gold and silver. Like all other unfunded economic stimuli, this will be a key factor driving gold prices even higher.

Regarding the defense industry (and offensive industry), it will significantly increase the demand for metals. Tanks, aircraft, missiles, and ammunition are all made from metals. Technological systems are entirely dependent on metals and their unique properties, including various rare earth metals. Much military equipment consumed in recent conflicts now needs replacing, creating a demand scenario challenging to meet, which will drive up prices for several metals. Companies extracting these metals will benefit from improved financial performance.

The feud between the world's most powerful man and the world's richest man is escalating, with President Trump suggesting Elon Musk should be deported to his country of origin. This creates an explosive atmosphere in the USA, combining record-high debt, a budget increasing this debt further, and the high costs of servicing it. Trump urgently needs significant interest rate cuts. Besides strongly criticizing Fed Chairman Powell, he highlights Switzerland as an example, already at zero interest rates. Indeed, all industrialized countries are heading there, despite differing communications from various central banks.

Feel free to continue discussing these and other topics in the AuAg Club, where much is happening and discussed between monthly newsletters. We now look forward to and hope for a strong July as well!