Interest rates down, gold up

Interest rate hike in 2022 no longer "highly unlikely" – that’s simply the Bayern LB experts‘ summary of the results of the latest central bank meeting of the European Central Bank (ECB). "The ECB today significantly changed its assessment of inflation risks and thus opened the door for a faster tightening of monetary policy," write the bank experts in their research. Gold fans will press this sentence at first glance the fear sweat on the forehead. But what will actually do the European monetary guardian? First, the next time at the meeting will probably be the end of some bond purchases in prospect. At some point, that will also be implemented and then there will be flirtations with an increase in the key interest rate.

In fact, the key interest rate could rise. But what is the order of magnitude? Will it be 0.25 percent at the beginning and then, after small steps, a total of two percent? With an inflation rate of 5.1 percent – the latest figures – that would still result in a negative real interest rate. That’s even if you assume that the market interest rate would be higher than the key interest rate. Negative real interest rates mean a loss in the value of idle money. Moreover, due to low interest rates, this also means opportunity costs of holding gold holdings that should not be taken into account.

A gold exposure therefore continues to make sense. Especially also for institutional investors and central banks. Private investors can also hope for returns with fundamentally good gold stocks. Because if the gold price rises again towards an all-time high, the shares of the gold companies would increase with leverage. Since the ECB admitted anyway that inflation is likely to stay longer than previously assumed, the risk-reward profile seems good at the moment. Examples of gold companies with good projects are Mawson Gold or Revival Gold.

Mawson Gold – https://www.youtube.com/watch?v=ysjmwpskpMU – owns the Rajapalot gold-cobalt project in Finland and an option on 85 percent of the Skelleftea gold project in Sweden. There are other gold exposures in Australia.

Revival Gold – https://www.youtube.com/watch?v=IRhTepSaUVg – is focused on the past-producing Beartrack-Arnett property in Idaho.

Current corporate information and press releases from Mawson Gold (- https://www.resource-capital.ch/en/companies/mawson-gold-ltd/ -).

In accordance with §34 WpHG I would like to point out that partners, authors and employees may hold shares in the respective companies addressed and thus a possible conflict of interest exists. No guarantee for the translation into English. Only the German version of this news is valid.

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