RE: Gold explorer8 Mar 2021 11:46
I copied this extract(excuse the pun) from a newsletter I receive.
The truth is, regardless of inflationary risk, I’d be looking at gold right now.
That’s because we’re entering a secular bull market in gold.
Here’s what that means:
Many assets — especially commodities — follow predictable patterns, on semi-predictable timelines.
Let’s take gold as an example.
Say that gold prices are relatively low. Indeed — they’re so low, that a lot of the stuff in the ground isn’t economical to dig up.
So, gold will remain low . . . until supply dries up. With fewer miners digging — and those mines aging — eventually demand will outstrip supply.
When that happens, prices start to rise.
As prices rise, miners that were sitting on the sidelines get in on the game.
In fact, as prices keep heading upward, it’s not uncommon for veins that had never been considered economical to start looking attractive.
More and more miners get in on the action, trying to take advantage of the high price of gold.
Until, eventually, demand outpaces supply to such a degree, gold prices start to fall again.
But that doesn’t matter for miners. Once a mine is operating, it makes sense to keep it operating as long as it’s profitable.
After all, it takes years to get a mine up and running. And a lot of the cost is front-loaded — as part of exploration and finding rich ore veins in the first place. Once that money has been spent — back in the boom times — the mine can just keep churning out gold.
Until, at some point, the price of gold drops so low, simple mining isn’t economical anymore. We’ve got a glut.
And the price will remain low, until we’ve worked through that glut.
At that point, demand will outstrip supply, starting the whole cycle all over again.
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