Source: Jin10 Data
Author: Zhu Yu

Analysts say that politicians have not stopped printing money for political reasons, and gold and silver are the best protection against money printing.

The price of gold continues to consolidate above $2,500 per ounce. Although it may seem a bit hesitant, a fund manager believes that gold still has great potential for further increase.

Eric Strand, the founder of AuAg Funds, recently stated in an interview that considering the scale of money printing and sovereign debt, he believes the fair value of gold is around $4,000 per ounce.

He said, "We may see some fluctuations in the current gold price, but we believe any price below $4,000 is cheap. In the long run, gold is far from being overvalued."

Strand pointed out that despite the significant decrease in the money supply due to the Federal Reserve's active tightening of monetary policy, money printing has not stopped, and US debt has swollen to over $35 trillion.

Strand explained that the only time gold was slightly overvalued was in 2011. Although the Federal Reserve lowered interest rates to zero and launched quantitative easing for the first time in history, government debt was still relatively manageable at that time.

In 2011, the ratio of US debt to GDP was about 95.5%. Last year, debt accounted for 122.3% of GDP.

After reaching a historical high of over $1,900 per ounce, the gold market has struggled through a six-year bear market. However, Strande said that he does not expect the gold market to repeat the same mistakes in the future.

He said, "Over the years, politicians have realized that if they want to be elected, they need happy voters. Increasing taxes and cutting spending will not make voters happy. They have not stopped the political motivation to print money."

Strande pointed out that although the Federal Reserve has raised interest rates to reduce inflationary pressure, the increase in global deficit spending means that consumer prices are unlikely to remain low for a long time.

Strande said, "As inflation continues to rise, consumers need to protect their purchasing power and wealth."

He said, "Gold and silver are the best protection against money printing, which is why I firmly believe in them."

Although the momentum of gold price has weakened at the current price level, Strande believes that this is a short-term consolidation. He explained that with the Federal Reserve expected to cut interest rates next week, investors will begin to see the value of holding gold, even at such high prices.

He said, "Western investors are just beginning to buy, as we can see in"$Efund Gold ETF (159934.SZ)$As a result, they still have a lot of room to shift investment from stocks to gold. Comparing to historical standards, investors' gold holdings are significantly insufficient. The global gold allocation is about 1%. If this ratio normalizes to 5%, it will have a revolutionary impact on gold prices.

Although some investors may be reluctant to invest in gold because prices have already risen 22% this year, Stlande pointed out that they still have the opportunity to gain some exposure. He said that compared to Stlande's long-term price forecasts, gold prices are undervalued, but the degree of undervaluation in the mining sector is even greater.

The performance of mining companies this year has lagged far behind gold, despite increases in cash flow and profit margins. Stlande stated that with the easing of inflationary pressure and reduced wage pressures, the profit margins of gold producers will continue to rise, and the value of their balance sheets will further increase.

He said, 'If investors missed the rise in gold prices, the mining sector provides them with a second chance. I believe that in the coming years, we will see solid value in the mining sector. Even if gold prices rise 100% from their current level, they still have a lot of room for further growth.'

As for which investors will develop a more widespread interest in the gold market and mining, Stlande explained, 'It's just a matter of time.'

Stlande said, 'People expect the global economy to break free from all this debt through growth. I don't know if it's achievable, but it won't happen without mining. We are increasingly realizing electrification, but electrification is closely related to metals. Without mining, we can't achieve electrification.'

Editor/rice