David Erfle - founder of JuniorMinerJunky.com commented that gold prices skyrocketed as geopolitical tensions, economic instability and drastic trade policies from the US pushed investors into safe-haven assets. The gold rally may just be the beginning.
Gold is starting to soar. The chaos and instability of Donald Trump's administration in his second term has turned the situation into an event that has forced investors to pay loans, affecting the process of reducing the use of financial leverage.
Thousands of billions of dollars in market value were erased and then added to the portfolio. This has created a lot of anxiety among investors and caused some investors to shift some of their capital into the gold sector," Erfle told Kitco's senior mining editor and host, Paul Harris.
Amid this volatility, the USD index has fallen below 100 and long-term bond yields have surged. Erfle said the combination has removed Treasury bonds from their traditional safety asset role and opened up opportunities for gold's dominance.
The US Federal Reserve (FED) can only control short-term interest rates... With $9 trillion worth of bonds needing to be restructured and higher interest rates, this is a real problem, he said.
The mining industry responded quickly. Newmonts stock (one of the worlds largest gold mining companies, based in the US) has risen sharply and is close to a significant resistance in a long-term growth model, while large companies in the industry such as Agnico Eagle have proven superior to their competitors.
Meanwhile, Barrick Gold's decision to rebranding itself as Barrick Mining - reflecting its shift to copper - has faced skepticism from the market. Erfle said that Newmont's market value is now almost double Barrick's.
Erfle also said that China may be accelerating plans to reduce its dependence on the US dollar.
After the new tariffs, China may be selling US Treasury bonds to buy more gold. They used to be the biggest buyers of bonds, now they are the biggest sellers."
Small mining companies and gold stocks, which have been overlooked in the AI and cryptocurrency fever, are starting to recover for a long time. "The dispersance has gradually decreased. Gold stocks are finally showing a link to gold prices," Erfle said.
Looking to the future, he maintains a cautious but strategic view. I have warned my investors as we enter 2025. I have allocated 30% to precious metals, 20% to cash, and 50% to low-value gold stocks. So far, this strategy is working."
