Finansavisen Börsmorgon | "Gold price ticking upwards: this is what is driving the gold and silver market now"

In this interview with Finansavisen, Eric Strand, fund manager at AuAg Funds, discusses the gold and silver markets following the five-month correction that ran through the spring.

The market has got US interest rates wrong. Inflation is coming mainly from rising costs rather than from an overheating economy, which is not something rate rises can fix — and with debt at this level, every year spent at high rates adds sharply to what the US pays in interest. Lower long-term rates would ease that, but the long end of the market is set by whoever is willing to buy government bonds, and the foreign central banks that once absorbed much of that supply are buying less.

That leaves the central bank itself to fill the gap with newly created money (quantitative easing) which brings long-term rates down at the cost of the dollar. Gold is priced in dollars and, unlike a currency, no one can create more of it at will, which is why it draws interest in this situation, at a time when investors hold far less of it than in earlier decades, bonds offer little, and stock market gains rest on a handful of large companies.

Valuable Insights:

• Industry now accounts for around 55 per cent of silver demand, up from 50 per cent, drawn by electrification, data centres and defence — silver conducts both electricity and heat better than any other metal.
• A car contains only 30 to 40 grams of silver and cannot be built without them, so when a raw material is a negligible share of the end price but a precondition for production, industrial buyers have every reason to keep paying rather than stop the line.
• Gold mine supply grows by roughly one per cent a year, which gives the behaviour of large buyers unusual weight — and central banks have lately been spending more dollars on gold while buying fewer tonnes.