Gold has reached another record level of over US$2,300 per ounce. Investors are betting that the U.S. Federal Reserve will cut interest rates later this year. Gold has been on an upward trend since mid-February.
On the one hand, it has a reputation for maintaining or increasing its value during periods of inflation. On the other hand, it is seen as a store of value should FIAT money be significantly devalued – after all, gold has been considered a currency for millennia.
For Desert Gold Ventures (TSXV:DAU; FSE:QXR2; OTCQB:DAUGF), the timing is right to complete its exploration drilling program in Africa. Demand for the precious metal is unabated. These are good times for gold explorers and producers.
Barrick Gold (TSX:ABX; NYSE:GOLD) CEO Mark Bristow suspects stagflation in the United States will further drive up the price of gold. Declining economy and rising inflation? It is not a suitable environment for U.S. companies.
One company seemingly lagging behind is Intel (NDAQ:INTC). The company issued a profit warning this week. We take a look at what this means for investors.
Desert Gold Ventures: Exploration core drilling in Africa completed; new findings in Mali
The massive purchases by central banks, especially in China, contribute to the rise in the price of gold. Chinese investors are increasingly turning to the precious metal. In the last 16 months alone, the Chinese central bank has added considerable quantities of gold to its reserves. Gold is more sought-after than ever before.
For Desert Gold Ventures, it is precisely the right time to ensure a supply of the coveted precious metal. Four exploration core holes have now been successfully completed. Drilling totaled 729 metres, including two holes at Mogoyafara South and two at the Frikidi Zone.
“Thanks to the support of our shareholders, we were able to utilize the core drill that was on site for our preliminary economic assessment (PEA) to drill four additional high-priority exploration core holes,” CEO Jared Scharf said. “These holes were designed to answer specific geological questions. The findings from the core are very encouraging, and we look forward to the assay results.”
Mogoyafara South hosts estimated mineral resources of 412,800 ounces of gold with a grade of 1.05 g/t Au, constrained by an open pit. This deposit represents the largest known gold deposit to date at the SMSZ project and is open along strike and at depth. Two core holes have been completed in one area.
61 rock samples were collected from the Frikidi gold target, of which five samples returned 100 g/t Au or higher. Frikidi represents an area of numerous artisanal mine workings within a 5 km by 2.5 km area. Core intervals with quartz-veined portions, intersected from 23.9 m to 39.0 m, are consistent with gold-bearing rock grab samples collected on surface.
Assay results are pending, including validation of a historical drill intercept of 1.07 g/t Au over 26 m, which may represent a new trend of mineralization. Step by step, Desert Gold Ventures is approaching the gold deposits in their area.
Investors can be part of the journey from the beginning. CEO Jared Scharf will present live at the 11th International Investment Forum (IIF) on April 17, 2024, and will be available for Q&A with investors. Click here for registration.
Barrick’s Gold price forecast: How global economic trends affect the market
Global economic challenges and the state of the U.S. economy can create a long-term dynamic for the gold price. If the inflation rate continues to rise, this will lead to upward pressure on gold. This is good news for one of the largest gold and copper producers like Barrick.
In a Bloomberg TV interview, CEO Mark Bristow said: “I have been talking for some time about how everyone is hoping that (FED) interest rates will come down quickly and that will bring back interest in gold. But I think there is a much deeper problem, which is that the global economy is not in good shape, and neither is the U.S. economy. So, I think we will see higher interest rates for an extended period of time and the risk of stagflation. Ultimately, that will put upward pressure on gold again because then there is a risk to the global economy and, of course, to the U.S. economy.”
Stagflation describes the rise in prices for goods and services while economic growth stagnates or declines.
Barrick’s balance sheet, which was recently burdened by high levels of debt, is now one of the most robust in the industry. Thanks to strong operating cash flows, the company has the ability to finance existing and new organic growth projects. Barrick is also expanding its copper assets.
The Reko Diq gold-copper mine in Pakistan is one of the largest undeveloped copper-gold projects in the world and is 50 per cent owned by Barrick. The project’s re-establishment was completed in December 2022, and the first production is planned for 2028.
According to MarketBeat, Barrick has received an average “moderate buy” rating from nine rating agencies. Two analysts recommend “holding” the stock, while seven recommend “buying” it. The average price target for the next 12 months among analysts who have updated their coverage of the stock in the last year is C$28.81.
Those working in an industry potentially affected by stagflation and facing rapid competition from rivals are at a disadvantage, especially if action is taken too late. This seems to be the case with technology giant Intel, which announced a profit warning this week.
According to Intel, the foundry business recorded a loss of US$7 billion in 2023, with total revenue of US$18.9 billion. This is the first time Intel has announced the revenue of its foundry business separately. Intel currently outsources about 30 per cent of its chip processing to Taiwan Semiconductor Manufacturing Co. Intel is thus strongly influenced by geopolitical factors.
In processors and servers, Intel has lost its place to AMD and Nvidia. In manufacturing technology, it has been overtaken by companies such as Samsung and TSMC. The consequence has been declining revenues and falling profits for around two years.
After this week’s trading session, Intel announced its foundry business is not expected to turn an operating profit until 2030. That is six years from now. The company also anticipates becoming the second-largest semiconductor foundry in the world by that time.
For investors, the share price plunge means one thing above all: Take a close look at the supply chains and answer the question, who will emerge as the No. 1player in the semiconductor foundry industry during this period?
According to Visual Capitalist, it is TSMC, which is struggling with earthquakes in its own country. Intel is heavily dependent on its Taiwanese supplier. The tensions between East and West make ongoing business a balancing act.
While the U.S. government aims to support Intel with subsidies to manufacture chips domestically, Intel hesitates to embrace the idea.
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