“Here we go again”

August was a strong month for both the markets and the funds. Gold and silver reached new highs, and all our funds closed the month with positive returns. In this month's letter, we discuss upcoming interest rate cuts, energy production, and, as always, developments in metals and mining companies. More on this in this month’s letter below.

Au and Ag during the previous month

The gold price closed the month at USD 3,449 (3,290), rising almost 5% during August. After the first four strong months of the year and a longer pause, gold has now resumed its journey toward new records. We see the next step as an establishment in the 3,500–3,600 range. From there, it could move quickly toward 4,000–4,200, which several major banks have set as their targets.

Gold began to strengthen significantly after the Fed, with Powell at the forefront, yielded to Donald Trump in its communication. It is becoming increasingly clear that the U.S. will move forward with aggressive rate cuts. Trump is fully triumphant and is essentially doing whatever he wants when it comes to dismissals and appointments of officials in the U.S.

In August, the silver price ended at USD 39.75 (36.72), marking a relatively significant increase of +8.2%. It was a very strong monthly close, where on the final day, we briefly touched USD 40 per troy ounce. Despite silver’s strength this year, the Gold-Silver Ratio (GSR) is still around 87. This is lower than last month’s 90:1, but it still has quite a way to reach 70:1, which we have set as the target for 2025. With a stagnant gold price, that would imply a silver price of USD 49, and if gold were to move another +10% this year, to 3,800, it could take silver to USD 54 and a new all-time high.

The companies are showing strong results as a group, and we are seeing the margin improvements we had been expecting. In addition, we have an environment with a weaker dollar, which has created the effect we have referred to as “2xFX.” For European investors, this means that the “built-in leverage” the companies have to the underlying commodity occurs before the currency effect for the investor. Over the past year, we have argued that there is an especially strong “opportunity” right now for European investors to own the companies rather than the commodity itself. This is a new trend in the precious metals market. Typically, the companies tend to provide a 2x leverage (in both directions) over time.

Here is the year-to-date performance so far:

USD

• Gold (USD): +31.4%
• Silver (USD): +37.5%
• Companies measured as AuAg Gold Rush (USD): +79.1%
• Companies measured as AuAg Silver Bullet (USD): +94.5%

EUR

• Gold (EUR): +16.4%
• Silver (EUR): +21.8%
• Companies measured as AuAg Gold Rush (EUR): +65.74%
• Companies measured as AuAg Silver Bullet (EUR): +70.10%

SEK

• Gold (SEK): +12.3%
• Silver (SEK): +17.5%
• Companies measured as AuAg Gold Rush (SEK): +60.16%
• Companies measured as AuAg Silver Bullet (SEK): +63.80%

So far this year, the companies' leverage compared to the underlying commodity has been about 2.5 times for a U.S. investor, while for a European investor, it has been as much as 3.5–5 times.

AuAg Funds – Highlights

AuAg funds had a historic month with over SEK 200 million in net inflows. Thanks to you – all our investors, and of course, a “fairly” good return, total assets under management have now reached SEK 2.8 billion. Thank you! 

AuAg Silver Bullet has just passed SEK 2 billion, but when it comes to August performance, our youngest fund, AuAg Gold Rush, took the lead. With +16.45% in return, just behind AuAg Silver Bullet’s +18.34%, it ranks at the very top among the AuAg funds for the month. And just like AuAg Silver Bullet, it is also among the 10 best-performing funds in all of Sweden.

AuAg Gold Rush has made a phenomenal journey since we transitioned it to active management under our own concept. In less than a year, it has grown from SEK 20 million to over SEK 300 million in assets under management. The fund, with its somewhat cautious component (40% royalty and streaming companies), has outperformed the sector giant BlackRock World Gold, which makes us truly proud. Silver Bullet should watch its rearview mirror as Gold Rush comes closer. Although, as some say, rockets don’t have rearview mirrors…

Global Perspectives with AuAg

We have long said that central banks will cut rates because they must. That means they don’t have the control they seek to project; instead, they are forced to act to keep the financial system afloat. That Trump would push the process so hard from his side was somewhat unexpected, yet logical, as he wants to pursue expansionary policies and views the relatively high interest rates as a significant brake. It’s also the case that the costs of the United States’ growing debt are soaring and have become its largest line item. This, in turn, fuels the annual budget deficits around 6–7%, necessitating taking on even more debt to make the system function.

The problem is that confidence in the U.S., its central bank, and its governance could fall so low that cutting short rates won’t help. We will likely see some form of quantitative easing (QE) ahead. The trend is clear: rates are heading back toward zero, and Switzerland, for example, is already there.

We see energy production as a key to success. Those who can produce the most energy will be the strongest in the future. Human progress has a very high correlation with our ability to generate energy. A major shift is underway in Sweden, where the policy is now more positive toward nuclear power. That view is further reinforced as the government removes the ban on uranium extraction. It’s genuinely positive that Sweden is becoming part of the solution for Europe.

However, when it comes to building new nuclear power plants, China is totally dominant. China is constructing 29 new reactors; after that, India, Egypt, Russia, and Turkey are building 18 new plants. The rest of the world combined amounts to 15.

Rockets in space and missiles for national defence have often made the headlines over the past year. Funds investing in defence stocks have also performed well, as everyone recognises the trend of increased spending on defence and weaponry.

We see that, after the enormous need for metals for the large data centres being built and the capacity expansion in power grids, there is now a significant need for high-tech metals in both expanded investments in space rockets and all types of weapons. All these trends create demand for metals and their unique properties at levels we have never seen before.

We’ll close the monthly letter by reminding you to meet the entire AuAg team and the companies we are major shareholders (AyA, First Majestic, McEwen, GoGold) at Sweden’s major “mining event.” Let’s meet on 8–9 October in Stockholm. We have so much to look forward to during the rest of 2025!