I don't think so GreenFlint. I am a gold bull, and always have been, but I see a gold price back to USD $1,750 by the end of the year, mainly attributable to inflation, rising interest rates, and a rising USD dollar value.
I think rising inflation, rising interest rates, and a rising USD dollar value, and rising bond yields, and the RBA lifting rates next week much earlier than expected (because they originally stated 2024 - so how wrong can so called expert national economists be?) will have many effects, including;
1. It will cost a lot more to build a gold plant, up to 30% more.
2. It will cost a lot more to maintain and run a gold plant, all costs will go up, including wages.
3. It will cost a lot more in debt and interest payments to borrow money for gold exploration.
4. It will cost a lot more to drill.
5. When there is limited growth, because of the previous 4 points, funds will move their money to value investments, stocks with good dividends, low debt, good cash surpluses, stocks capable of making profits in a higher interest rate environment, and that is clearly not gold exploration companies, or production companies with a high AISC. If you want to invest in gold in this new upcoming environment, you need to find companies who are producing at a low AISC, who already have a good solid cash balance in the bank, and who have low or nil debt. These type of gold companies are rare. If you want to invest in gold exploration companies, then they better have no debt, and a whopping great resource at high grade.
6. The gold price is likely to fall, making many projects untenable.
7. It will be harder to raise cash from investors, and from banks, especially for problematic projects with a history of high AISC costs.
Quite frankly, I can see DCN falling back to 11 or 12 cents in a high interest rate and high inflation environment, but I'm probably over-exaggerating and it will only get to 15 cents.
DCN will be my SMSF tax loss selling stock this year, a dubious honour, I'll unload my losses in mid to late June in order to balance up my profits for the year so that I don't have to pay any tax. And I won't be back, but at least it will have had some purpose for me, and will have saved me paying money to the tax man. I suppose every portfolio should have one dog that saves it tax.
Gw
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