As the economic crisis deepens, world conflict expands and after covid has scarred the world forever everyone is trying to hedge their bets to maintain their financial assets.
My wife wanted to divest us of our mutual funds in favor of gold or silver bullion. I have no idea how to buy a case of beer with gold bullion. Friends suggested cryptocurrency but as my accountant mother-in-law once said, “let me get this right, you can’t hold it, see it, spend it easily but you can put it into a fake wallet”. I’ll let others dabble in that one. Hmmm, a dilemma.
Who Controls the World’s Resources?
I decided that while the market is soft in resources I’ll invest in gold, nickel, palladium, and copper stock. Crazy? Maybe, but if you own the resources that the world desperately needs isn’t that like money in the bank?
According to recent estimates of the International Energy Agency (IEA), the demand for lithium will grow more than 40 times by 2040, while for cobalt and nickel by 20 times within the next two decades. The same situation is expected to be observed in the case of other precious metals.
Igor Sechin, Chief Executive Officer of Rosneft, Russia’s largest state-owned oil producer, said this demand may lead to the shortage of this and other metals in the global market, as the current investments in their exploration and development remain insufficient to ensure their stable supplies to global market.
Igor Sechin said,”Under these conditions, we expect an explosive rise in prices for some metals. The increase of global prices for lithium and nickel will offset the expected decrease of the costs of battery production, which were initially expected by some analysts.”
I’ve been recently seeing articles focusing on global shortages of resources we may take for granted with some I’ve never heard of, like palladium. Palladium is one of those minerals that is the main component in catalytic converters. It’s also a main ingredient in electronics, fuel cells, solar panels and even medicine. It’s also 30 items more valuable than gold.
The largest producer of Palladium in the world? RUSSIA!
If you’ve heard that new cars are a lot more expensive and that dealers are buying up late model cars from their customers it’s because of the shortage of palladium, a major component of microchips for your automobile’s computer module. Semiconductor manufacturers have put priority on making chips for Smartphones – they’re more lucrative! Taiwan is the country that produces the most number of chips globally, thanks to TSMC – Taiwan Semiconductor Manufacturing Company, which controls 51% of the global chip market. What country is determined to take over Taiwan? CHINA!
Copper, surely, is a safe bet to remain stable and abundant, right? Well, the refined copper ‘deficit’ deepened in 2021 to almost double the demand of 2020 to 900,000 tonnes. The demand for copper annually exceeds its’ output growth. The demand for copper comes from increased environmental demands for clean energy, electric vehicles and energy storage systems. Goldman Sachs said that by 2030 copper demand will grow past 600% of current supplies.
What country consumes the most copper in the world and is the number three in production of copper? CHINA!
What about nickel, that often overlooked, mineral we only think is used to make money? It’s a key component in most lithium-ion batteries.
As the EV industry ramps up, it could be hindered by a global shortage of nickel, Tesla recently signed a deal to source nickel from a ‘proposed’ mine in Minnesota. Musk sees the necessity of seeking mineral deposits close to home.
Why? In 2020, Russia mining company Norilsk Nickel, also known as Nornickel, was the world’s largest nickel producer, with a production volume of some 178,200 metric tons of nickel that year. Nornickel has long been the world’s largest nickel producer. Musk sees the need to invest in domestic resources.
What’s Going On?
Now, in a situation like the US/China on-going trade war one would expect scarcity. Add, world economic domination by China (last year, China dethroned the U.S. to become Europe’s top trading partner for the first time on record), a possible pact with Russia coupled with the Ukrainian invasion, include Russia’s domination in a couple of the world’s most necessary resources and the resource industry is ripe for investment especially in exploration outside Europe and Asia, in particular, North America.
Reuter noted on March 3, 2022, Palladium extended gains to a more than seven-month high, spurred by concerns over supply shortages following harsh sanctions on top-producer Russia that accounts for 40% of the global supply, while the Ukraine crisis and soaring inflation lifted demand for safe-haven gold.
Who would have thought basic minerals like nickel and copper could affect the global economy?
How stupid do I sound now?
Gold Glitters Amid Geopolitical Crisis; Time to Buy Now?
According to the IndiaTimes, Market experts believe that outflows from the equity market amid the rising global inflation worries, a possible war scare, and the safe-haven appeal of bullion has pushed gold prices higher.
Gold historically performs well in periods of high inflation so any period of elevated inflation and market pullbacks will likely sustain demand for gold as a hedge.
Pullbacks are likely to continue in the face of the seemingly endless stream of new variants, as well as simmering geopolitical tensions and overall buoyant equity valuations fuelled by a long-lasting ultra-low-rate environment. In this context, gold can be a valuable risk management tool in an investor’s arsenal. Gold has a proven historical record of mitigating the negative impact of equity market pullbacks in periods of systemic risk.
A North American Hedge Against Scarcity
I am a large (well, large for me) shareholder of General Gold Resources Inc. (CSE: GGLD) (FSE: 7S5). It’s a Vancouver-based gold property located in a gold-rich area of British Columbia, Omineca Mining Division, known for its’ successful gold deposits. This area includes several filings with minerals showing from rare earths to gold, nickel, copper, uranium, and silver.
Drilling is expected to begin in April, 2022
General Gold also owns the Clark Brook Property in Newfoundland. Drilling has been done to 400m vertical and has shown a gold system that appears to continue at depth and remains open along strike and at depth.
In 2022, GGLD changed its’ name to General Gold & Copper Resources to reflect a large copper deposit that GGLD acquired adjacent to the gold property.
I’m not a promoter or a Director of the company. I’ve seen the value proposition by buying into this property because I know the owners and know their past performance with other resource companies.
The kind of investment people need to make in this economy is to not buy into safe bonds, mutual funds or Fortune 500 companies but to buy into the resources that makes the economy stronger.
If you want to know more about GGLD drop me a note and I will connect you to the right people or tell your broker about CSE: GGLD or FSE: 7S5