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Global debt rising faster than GDP, gold waving hello

Ever since the official end of the gold standard in August 1971, after which US dollars could no longer be exchanged for gold, global debt has risen exponentially and has shown no sign of slowing down. 2022’s estimates stand around the US$300 trillion dollar mark, which equates to US$37,500 of debt for every person in world, compared to a GDP per capita of just US$12,500.
Ever since the official end of the gold standard in August 1971, after which US dollars could no longer be exchanged for gold, global debt has risen exponentially and has shown no sign of slowing down. 2022’s estimates stand around the US$300 trillion dollar mark, which equates to US$37,500 of debt for every person in world, compared to a GDP per capita of just US$12,500. Despite rampant post-covid easing, the world still remains far more leveraged than it was during the GFC, with global debt-to-GDP hovering around 349% at June 2022, compared to 278% in June 2007. This is a clear indication that productivity overall has decreased, and raises numerous pessimistic questions about the trajectory of the global economy if it continues down this path of borrowing money that is gradually contributing less and less towards GDP growth. Investors also need to consider how safe cash has been, especially if it is being used to sit on dry powder during volatile or difficult markets. This strategy is usually viable for short durations, but the more time goes by – the less cash is worth. The US dollar lost 99% of its value against gold over the past 100 years. The complex issues that are troubling the global economy have been brewing for a long time, and aren’t just going to go away if a relatively ‘soft’ landing is achieved.  Reach is working with a number of gold companies and will be hosting gold-focused events for investors over the coming weeks. To register your interest for upcoming opportunities, click here. Precious metals may well be a worthwhile option for every investor’s portfolio, and their liquidity allows for a relatively easy readjustment according to market conditions and other potential investment opportunities that may arise. Gold is both a hedge and a haven because while a portfolio does benefit from gold exposure during a market crash, it also benefits in a remarkably similar way during average times. Global markets may or may not be in for some type of crash, but it’s possible that equities will be in for a rougher time then they have had throughout the past decade of historically low interest rates. This could persist, as central banks around the world wrestle with inflation and continue to adjust monetary policy accordingly, while prospects of growth are thrown into question. Investors have access to a variety of different assets that allow them to take exposure to gold, whether that be bullion, miners, explorers, royalty companies and more. There are many genuine reasons why the commodity, that has historically served as a preserver of wealth, continues to trade around US$1,930/oz. The most valid to mention could be that risk appetite is generally down, and may possibly stay suppressed for a while. However, a high and rising gold price presents potential opportunities for investors that allow them to take advantage of gold’s safer nature while still taking some risk to chase alpha. A reduction in mine development capex over the past decade has been largely led by gold, and tier 1 assets are continuing to become rarer. The majors are starting to take a good long look at each other, as seen with Newmont’s potential US$19.43 billion acquisition of Newcrest. The mid tiers are also making eyes and trying to figure out how they can become a major, as seen with Ramelius’ $130 million takeover of Breaker.

Alaskan gold explorer

Felix Gold Limited (ASX: FXG) is a junior gold explorer with multi-million ounce gold potential located in Alaska’s prolific Tintina Gold Belt. The region is home to multiple +10Moz resources mined by the likes of Barrick, Kinross and Northern Star. World leading geos believe Felix could be the next Tier 1 gold deposit and there are a few critical aspects investors should consider. The company has a strategic location just 20km away from the Fort Knox Mine which is running below mill capacity and actively searching for new sources of feed – this could create a pathway for near-term production without the capex and time needs of building their own infrastructure. Their 2023 drilling campaign delivered broad gold intercepts, with grades and near-surface nature of the mineralisation indicating the potential for a low cost open-pitable mine. Felix are now just months away from releasing their maiden JORC resource which could put them on the map for Fort Knox owner Kinross. Join an investor briefing with Anthony Reilly, CEO and MD of Felix Gold, to hear more about the company’s gold resource target and potential for low capex gold production. Click here to register for the investor briefing on Thursday, 7th September at 12pm (AEST). Reach Corporate provides Corporate Advisory Services, including managing investor communications on behalf of Felix Gold Ltd and may receive fees for its services. Past performance is not a reliable indicator of future performance.

 

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