April monthly letter | “Blatant kleptocracy in a democracy”

The gold price closed the month at $4,672 (previously $5,277) and fell by 11.46%. It has been a genuinely turbulent start to the year, with sharp moves in both directions. Despite all the volatility, gold finished the first quarter up 8.27%. Now that most speculators have left and weak hands have sold to strong ones, the outlook for the rest of the year is very encouraging. Our forecast (shared by most major US banks) of $6,000 remains in place.

All things considered, the investment case has only strengthened. War and destruction cost money. Money that must be printed on top of all existing stimulus measures. News of higher oil prices and expectations of higher inflation and delayed rate cuts were enough to push speculative longs from gold and silver into oil. At the same time, speculative shorts moved to bet against gold and silver. In the longer run, shedding those speculative longs is a positive, and fresh fuel from speculative shorts covering their positions will be a further tailwind.

The silver price fell from its February close to $75.14 (from $93.87), -19.95%. Despite the correction in March, silver still finished the first quarter up 5.37% – and if gold is well positioned, then silver looks even more compelling.

Oil prices would need to remain elevated for an extended period before meaningfully raising mining companies’ costs. Many companies have also been progressively reducing their dependence on oil and diesel as energy sources. One feature worth noting in AuAg Gold Rush is that 40% of the fund is made up of royalty and streaming companies. These businesses finance mining operations but own no mines themselves. As a result they have no energy costs, have no operational risks, and yet still gain exposure to metal prices. This makes for more stable and predictable returns, particularly in volatile market conditions like those we are experiencing now, and it makes these companies especially resilient in a prolonged high oil price environment.

It is also worth remembering that mining companies continue to post extraordinary results that are still not reflected in their share prices. On top of that, we are now in a situation where yet more fiat currency will be created to finance the escalating costs of war and destruction. At some point in 2026 we are likely to see quantitative easing in the United States to bring long-term interest rates down, which should send gold and silver prices surging to new highs. The conditions for fresh records in Q2, Q3 and Q4 look very strong indeed.

Despite the correction in March, AuAg Silver Bullet and AuAg Gold Rush are as of 31 March still 5% ahead of the Swedish stock market and 10% ahead of Nasdaq. It is important to zoom out when markets are at their most turbulent and focus on the opportunities that emerge when sentiment is at its lowest.

The AuAg funds - Highlights

AuAg Essential Metals has quietly grown into a fund with assets under management exceeding one billion SEK. It is also the best-performing AuAg fund in the first quarter, returning +13.26% (SEK). The fund has not only delivered strong returns over the pastyear but has also outperformed comparable funds from the major fund houses since inception.

AuAg Essential Metals also received a strong launch rating from Morningstar after its first three years, and it is worth bearing in mind that their methodology effectively penalises volatile funds like ours, making a solid rating there almost impossible to achieve.

The number of investors continues to grow, and increased interest from institutional investors is becoming tangible. The fund is clearly gathering real momentum, and 2026 could prove to be a genuine breakthrough year.

In AuAg Silver Bullet we have made a minor portfolio update, removing a number of smaller positions that had served their purpose and adding two new companies. See the full portfolio update here.

High oil prices push up costs for both households and industry. In economic models this feeds through as higher price inflation, which is why markets expect central banks to stop cutting rates and possibly raise them instead. But the rise in oil prices is structural, and raising the cost of borrowing has no effect on the oil price; it simply adds another layer of cost for households and industry. Consumption would be squeezed from two directions, most likely leading people to spend less. Raising rates in an overheating economy is one thing, but doing so in the current environment would produce a range of negative consequences that politicians and central banks have little appetite to cause. The more likely response is the opposite: unfunded stimulus to artificially suppress prices such as fuel costs. We do not foresee rate rises ahead, even though the expected rate cuts have been put on hold given the considerable uncertainty that prevails. We will see both monetary and fiscal stimulus deployed to prop the system up.

In a world where presidents change their position every other day, there is enormous scope for algorithmic trading. This type of trading is powered by vast computing resources and thrives when a constant stream of news causes markets to swing sharplyup and down. The algorithms pick up keywords from presidents, for example, and take short or long positions depending on what the news is expected to mean for the market.

If algorithmic trading is a nuisance, it is arguably worse that insider trading in the United States appears to be taking place entirely in the open, with no regulator bringing meaningful enforcement action. Those in the innermost circle around power are enriching themselves by accessing market-moving information before it becomes public. Trading on such information is prohibited under normal circumstances, but it now appears that no one can resist the extraordinary power these decision-makers hold. This is nothing less than blatant kleptocracy at the heart of a democracy. The consequences of this corruption, inadequate oversight and self-enrichment of the inner circle will, as always, one day lead to a complete collapse of trust. A breakdown of trust in the political and financial system could have far-reaching effects, and it is important that we keep this trajectory in mind when assessing future events and their impact on financial markets.

We are also seeing the early signs of a stress scenario. Several funds with exposure to private credit in software companies have faced such large redemptions that they have been forced to halt further withdrawals. Insurance companies in particular appear vulnerable if this unravelling spreads. We are not there yet, but this is something that could trigger a cascade of further consequences and still more outflows from illiquid funds holding assets that are difficult to value at genuine market prices.

It may be early, but make a note in your calendar now for Nordic Funds and Mines. AuAg will as always be there in full force, and you will also have the chance to meet several of our portfolio companies. Do not miss the year’s premier mining event on 15 to 16 October in Stockholm at https://nordicfundsandmines.com/ and we hope to see you there! More details on how to register will follow in due course.

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.