Far East Capital Newsletter
Gold producers have been the best performers
14 Oct 2023

In This Issue

Gold producers have been the best performers

If you have a look at our traffic light style of trend indicators, you will see the vast majority of the tiny number of stocks still in uptrend are gold stocks - primarily producers. Our preferred producer for some time has been Emerald Resources (EMR). Two years ago it was hovering around $1.00 and it is now sitting at $2.45. Don't we wish that EMR was our only holding!

There is only one commodity that qualifies for the "making money" tag; gold. It is a constant in our market. If you have the right orebody and the right cost structure, you will be making money and you can turn it into cash the minute it leaves the mine gate. Sure, you get buying and selling waves from time to time that affect the gold price in any particular window of time, but recent history shows that these movements are at the margin rather than at the core. There will always be demand for gold just as there is always demand for money.

Look around the globe today and you will see that wars are becoming more, not less common. For all the supposed increasing sophistication of society, for all the inclusion and tolerance of diversity that is promoted, particularly in Australia, it seems that in many other places around the world these themes get lost in the challenge to even stay alive. Democracy is in decline throughout Africa with coups increasing the propensity for war in that continent. Conflict is always on the doorstep in the Middle East. War is raging in Europe and the spectre of war in the Far East is being stoked by China's increasing militarisation.

Physical gold has always been considered the currency of safety. It is not going to lose this mantle while ever the world is such a messed up place. It is the perfect store of value but not everyone wants to hold bullion because holding for value is not the same as making money. For that you need leverage. What better leverage than owning shares in gold companies? All the better if the companies are expanding production rather than just being steady state producers. Liquidity is always offered through the tradeability of shares on the ASX, should you want to convert your gold company holdings to cash.

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