Gold vs. paper<\/strong><\/p>\n What would happen if, for example, China were to peg the yuan to gold? The yuan would rise sharply in value against the other currencies. Conclusion: Gold is significantly more valuable than unbacked paper money.<\/p>\n The former US Federal Reserve Chairman, Ben Bernanke, expressed the following possibility during his time in office: “The US government has a technology called the printing press. It can produce as many dollars as you want”. The US dollars created electronically by the Federal Reserve and commercial banks already dominate this unlimited multiplier.<\/p>\n “The level of distrust\/confidence in the monetary policy of the central banks (as well as the level of confidence in economic and geopolitical developments) can be seen from the physical demand for gold, which supports the gold price trend.”<\/p>\n Rising gold price<\/strong><\/p>\n For the first time in around 20 years, the price of gold is rising even without investor demand. Various central banks have offset investor sales with their purchases. The reasons: Following Russia’s invasion of Ukraine, Russia was cut off from trading in US dollars. As a direct consequence, the BRICS countries in particular have started to diversify part of their US dollar currency reserves into gold and other real assets. In 2022 and 2023, these central banks (China clear number 1) bought up around 33% of annual production. This trend is likely to continue, especially as the arguments remain unchanged. In previous years, this figure was somewhat lower on average, at around 10% of annual gold production.<\/p>\n For the immediate future, we expect a stagflation-like scenario. In the past, gold has performed much better than equities in a stagflationary environment and has risen significantly despite rising interest rates. Under these circumstances, financial investors will also build up or expand their gold holdings again. This would give the gold price an additional and sustained boost.<\/p>\n Gold mining shares<\/strong><\/p>\n The gold price is trading close to its all-time high. That is not the case for gold mines. One of the main reasons is probably the fact that the central banks are only buying physical gold, but not shares in gold mining companies. We assume that investors will soon return to the market as buyers of gold and at the same time also consider the extremely favourably valued gold mines as an investment or add them to their portfolio.<\/p>\n Almost all valuation ratios for gold stocks are close to all-time lows (35 years of data)! The North American gold producers are currently trading at a record discount of around 20 % to the gold price. The shares of gold miners are also more favourably valued than ever before compared to the physical gold price, i.e. in relative terms.<\/p>\n Most gold production companies have greatly improved their balance sheets in the last 10 years (massive debt reduction, streamlining of the cost structure, no expensive takeovers, etc.). This has resulted in solid free cash flows. In terms of financial results, gold mining companies are very transparent compared to the past and pursue a dividend and share buyback policy that is shareholder-friendly. Many gold mines now rely on solar power to generate energy, with which the required electricity can now be produced significantly more cheaply than with the conventional setup (diesel, etc.).<\/p>\n![\"EV\/EBITDA](\"https:\/\/www.univest.ch\/wp-content\/uploads\/2024\/03\/EV_EBITDA-neu.png\")
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