Gold is the gift that keeps on giving. This may change at some point but for now the signs continue to look promising.

A lot’s been happening here in recent days. Initially I wanted to cover three new miners as opportunities abound (Shanta Gold, Highland Gold, and Caledonia Mining, with Serabi and Pure Gold also waiting in the wings).

But there is new news this week for two previously mentioned stocks: AAZ and POG. Shanta Gold has also just announced its second quarter results, so I’ll focus on these three today. Users have just posted about Serabi (here) and Pure Gold (here) so those might be worth a look for anyone interested.

In the meantime, this Edison report is thought provoking. The key point is that the research house calculates a very strong correlation (0.909) between the price of gold and the US total monetary base since at least 1968. Basically, the more dollars in circulation, the higher the expected gold price.

Applying that correlation to the Fed’s huge asset-buying binge post-COVID implies a powerful tailwind.

After all the post-2008 concern around never before seen levels of QE, the Fed has gone and increased its monetary base by some 58% in just eight months to $5.2tn. Given that, and using its 0.9 correlation, Edison touts an implied gold price of $1,892/oz with an upper range figure of $3,000/oz.

At the current rate of monetary expansion, that $1,892 figure should continue to increase by $500 per ounce per year. Let’s see if the linear relationship holds in such an extreme environment...

Either way, it shows that if you’re concerned about the economic impact of lockdowns in 2020, gold is one of the primary ways to address that concern.


Shanta gold (LON:SHG)

  • Share price: 15.25p
  • Market cap: £129m
  • Forecast revenue: £92.2m
  • Production ounces: 80,000-85,000oz
  • All-in sustaining cost: $771

Shanta Gold (LON:SHG) is an East Africa-focused mining operation with a ‘highly compelling’ growth pipeline. This profitable and (now) net cash miner has three projects across Kenya and Tanzania.

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Source: company presentation

The management team has worked together for a decade or more and they, along with other insiders, own 9.3% of the £129m company.

The key point to this one is that up until the most recent quarter, Shanta had been focused on reducing its net debt position. Now,…

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