February monthly letter | “Run it hot”

The year started at full speed, both geopolitically and macroeconomically. Continued unrest and ongoing conflicts have contributed to the market turbulence we have seen in recent weeks.

We recently published our Outlook 2026 for silver and silver mining companies, outlining the key factors we believe will shape the market in the period ahead. Our Outlook for gold and gold mining companies will be out later this week, so keep an eye on our digital channels.

In this month’s letter, we take a closer look at these developments and reflect on the outlook for metals and mining equities going forward.

Au and Ag in the past month

Gold closed the month at USD 4,833 (USD 4,315), representing a strong gain of +12.0%. Late in January, before the broader correction set in, gold reached a new all-time high on 29 January at USD 5,594 per troy ounce. More than USD 1,000 higher than the record set in December. As we closed the previous year, our estimate was that “gold at 5,000” wasn’t far off. An estimation that was validated quickly. The next milestone for gold is USD 6,000.

Silver ended January at USD 85.19 (USD 71.31) after a historically volatile month. In an exceptionally rapid move, silver reached a three-digit price for the first time, continuing almost immediately to a new all-time high of USD 121.31 on 29 January. This was followed by a coordinated sell-off. Large market participants established substantial short positions, creating significant selling pressure. As prices fell, highly leveraged speculators faced rising margin requirements, forcing rapid liquidations. This intensified the downward move, with weaker hands (often late entrants) exiting the market. On the buy side, it was frequently the same strong hands that had initiated the selling pressure.

Despite the sharp pullback, silver still gained +19.4% in January — a strong monthly performance. Once again, silver outperformed gold. Our expectation of a three-digit silver price during 2026 was therefore realised much sooner than anticipated. While prices have since retraced, we believe silver can still finish the year around USD 133. More importantly, we expect several interim milestones on the path towards our long-term target of USD 300 in the coming years.

We expect the Gold–Silver Ratio (GSR) to end the year around 45:1 (6,000:133), marking the beginning of a continued long-term descent. A scenario with gold at USD 10,000 and silver at USD 300 would imply a GSR of 30:1. Looking further into the future, we see both a substantially higher gold price and a GSR potentially falling below the natural geological ratio of 16:1. In this “bull market without an end”, we even see the potential for the ratio to reach 10:1.

Mining equity funds have once again ranked among the top-performing fund categories in 2026. The year is shaping up to be at least as strong as 2025. Despite the significant gains achieved last year, mining companies are (from a valuation perspective) actually cheaper today. If gold and silver prices continue to rise during 2026 — or even if they simply remain at current levels — mining equities have the potential to appreciate significantly, as today’s commodity prices are not yet reflected in share valuations. Overall, the outlook for 2026 remains highly favourable.

The AuAg Funds - Highlights

Although AuAg Silver Bullet delivered the strongest performance, we would like to highlight the momentum in AuAg Essential Metals this month. The fund has advanced quietly despite delivering strong returns of more than +70% over the past year. Investor numbers continue to rise steadily, and assets under management are rapidly approaching SEK 1 billion.

AuAg Essential Metals is a broad-based metals fund that truly lives up to its name. These metals are essential to the modern world — whether in mobile phones, computers, vehicles, aircraft, renewable energy, nuclear power or the defence industry.

Global perspectives with AuAg

Donald Trump has nominated a new Federal Reserve Chair, Kevin Warsh. While Warsh has at times been perceived as hawkish, it would be inconsistent with Trump’s agenda to appoint a Fed Chair unwilling to cut interest rates. In interviews, Warsh appears highly aligned with Trump’s policies, raising questions about how he will establish an independent stance going forward.

President Trump’s economic mantra is “run it hot” — an aggressively stimulative economic policy characterised by low interest rates and, most likely, renewed quantitative easing to maximise growth. We view this as the dominant force ahead, with a less independent and increasingly politicised Federal Reserve providing the stimulus the President desires in order to keep the economy running with the pedal to the metal.

US government debt is now approaching USD 40 trillion. The concern is not only the size of the debt itself, but also the growing cost of servicing it. Long-term bond yields remain high, but demand is weak. The Federal Reserve is the only buyer large enough to push yields meaningfully lower. At the same time, total debt keeps growing. The U.S. is running an annual budget deficit of about 7%, which is funded by continued borrowing.

While there will undoubtedly be periods when the US dollar strengthens against other currencies, the country’s large and persistent budget deficits, unfunded fiscal position and the loss of global trust resulting from attempts to exert control over other nations suggest that the so-called “debasement trade” will most likely continue. Over recent decades, the world has effectively had two reserve assets — the US dollar and gold. Today, in our view, only one truly remains: gold.

For those wishing to explore the silver sell-off in more detail, we recommend the attached reading. We now look forward to a continued eventful spring and, hopefully, a more peaceful period in an increasingly unsettled world.

Disclaimer:

This material is marketing communication. The information does not constitute investment advice or a personal recommendation. Investment decisions should be based on the fund’s information brochure and fact sheet, as well as your own considerations.

Investments involve risk. Past performance is not a guarantee of future returns. The money invested in the fund may both increase and decrease in value, and it is not certain that you will recover the entire amount invested.

Before making an investment decision, you should review the fund’s information brochure and fact sheet, available under Documents on the respective fund page at www.auagfunds.com.