I expect that price of gold +/- will have a growing influence on...

I expect that price of gold +/- will have a growing influence on PDI’s share price as the company transitions to a mining entity, whether independently or as part of an acquisition by an established producer. So, the below thesis, publish on Friday by Angus Gedde’s (FatProhets), bodes extremely well and the timing, if it plays out, couldn't be better for holders of this great company.

One report out on Bloomberg, which is interesting, pointed to the rally in gold this year to record highs, which “longtime market watchers struggled to explain”. Most commentators have attributed the move to growing expectations of US interest rate cuts, which would undermine the dollar, and make the non-yielding asset relatively more attractive.

Yet other “analysts say none of the factors that have driven gold’s bull run over the past 16 months as the catalyst for recent rally. Those include record levels of central bank buying, Chinese households looking for havens for their money and the war in Ukraine and the Middle East. It has been the quietest, most confusing rally. What took it from $US2000 to near $US2200 is the head-scratching part.”

I think there are deeper forces beneath the surface. Globally, gold is being accumulated because of the deep-seated problems with profligate government fiscal spending and the rising indebtedness of nations. The US is at the centre of this trend, where the national debt is rising by $1 trillion every three months.

During the 1970s, gold surged over 16-fold between 1970 and 1980. There were two prominent inflation surges accompanied by soaring commodity prices. The first wave saw gold jump 800% from $50 to $200. The 2^nd wave saw another 400% advance.

In terms of the past 20 years, gold recovered from the selloff to the 2016 lows at $1000 and since doubled. The past five years have seen an extended base building and consolidation with multiple retests of the $2000 level, which has only recently been taken out on the topside. The technical setup favours another phase of upside extension, which will be over the next year, in my view.

Ultimately, this will undermine the dollar, in my view, with this year potentially being the tipping point. There is no political willpower to reduce fiscal spending with either political party. Some big pockets around the world will gold as a natural hedge – similar to the dynamics that played out in the 1970s – which is a cycle that could repeat.