Note from Dudley Pierce Baker
While achieving $2500 by year-end sounds impossible, it is not. Hang on!!
I am not familiar with the company mentioned in this article as there are many, many opportunities in which to invest.
July 14, 2022 | Posted by: Matthew Evanoff
While some analysts continue to lean bearish when it comes to gold lately, Goldman Sachs is not one of them. In fact, they’ve recently raised their year-end gold price target to $2500/oz, signalling a strong finish to the year for the precious metal.
This latest move comes after gold prices ended 2021 down approximately 4% despite a strong economic recovery and growth throughout the year. Many investors moved towards riskier assets, but concerns of a potential US recession in the coming year could lead to increased demand for gold.
Mining companies will also benefit from a higher gold price, with more attention swinging to companies in the industry as gold becomes more valuable. Trillium Gold Mines (TSXV:TGM) is a Canadian gold exploration company with highly prospective properties in the Red Lake Mining District, Ontario. The company recently announced that it had closed the acquisition of the Eastern Vision property holdings in the Confederation Lake assemblage, acquired from Imagine Lithium.
The total land package is 13,958 hectares between the Fredart, Confederation North and Confederation South properties. Trillium Gold now has a dominant contiguous land package over more than 100 kilometres of favourable structure on trend with Kinross Gold’s Great Bear Project and Evolution Mining’s Red Lake Mine. The company has built a dominant land position in the Red Lake Mining District when asset values have continued to climb, and future gold prices could be set to move far higher.
The strong recovery in 2021 meant that gold prices slumped for some time, losing some of the momentum gained in the first year of the pandemic. Investors moved to riskier assets as the vaccine rollout continued and economies reopened.
However, the coming year has investors worried about a recession, which would lead to higher gold prices if the case. The other side of this dynamic is a rising inflation rate that has consumers, investors, and central banks concerned. Goldman Sachs believes those fears are exaggerated and that inflation will ultimately remain contained.
Risk appetite is often influenced by several global factors that can be difficult to predict. One of them is the strength of the jobs market in the United States.
Currently, the US job market is looking strong with unemployment at a pandemic low. This has been the case for some time now, showing strength in the real economy. At the same time, asset prices have taken quite a haircut, spooking some investors into safer havens, including gold. The other ongoing risk is the Russian invasion of Ukraine, which has created supply chain issues inflating food and energy prices, and presenting significant challenges for the European bloc and North America.
Russia is a major exporter of food and commodities, so the situation is especially being scrutinized by those in the industry. A new plan to contain some of the risks of the sanctions placed on the Russian economy may not protect the U.S. or Canadian economies in perpetuity, and that has sparked a selloff in equities, trimming gains from 2021.
If the slide continues, or buyers prove apathetic to ease some of the pressure, investors will assuredly turn their attention to gold and particularly those gold mining companies with assets that offer discovery and development potential.
Overall, Goldman Sachs’ bullish stance on gold is predicated on global factors that continue to generate uncertainty. With a higher gold price target, mining companies are poised to benefit from growing attention and investment. Trillium Gold Mines is one company that is ideally positioned to benefit from a higher gold price.
The stock has sold off with a range of other mining stocks and may present a compelling buying opportunity for deep value investors with a keen eye. And even as the share price has drifted precipitously from its two-year highs, the company has forged ahead in consolidating strategic holdings under the radar; a sign that investors may not be seeing the whole picture yet.