The newsletter is a roundup of financial news, investment status, and other financial trivia, giving you the insight you need to manage your money in any economic situation.

The geopolitical risks that emerge following major shifts in military power can have very long-term consequences for both the individual country and the international community as a whole.

Economics is no longer the only factor in investment decisions, which will have consequences for business efficiency. This will also lead to a structurally higher inflation rate. If China dominates production, it will be able to sell goods at prices tailored to its interests.

The world is gradually being divided into two large blocs

According to Professor Mrak, the world is gradually dividing into two large blocs, although they are not formally defined. The US-led bloc includes Europe; the other will be led by China; and it includes Russia and the other BRICS members, as well as Iran and Saudi Arabia. The consequences of being divided into two blocs could be quite unpleasant for the economy.

Even the big European countries are not big players globally, so the transition to the new system is a greater threat to Europe than to the US and China.

A second wave of inflation?

A second wave of inflation is becoming increasingly evident. Global transport costs are rising steadily. The challenge for the Federal Reserve (Fed) is that the potential benefits of lowering interest rates to reduce the debt burden are becoming more important than the need to fight inflation.

Source: Bofa

Peter Berezin, chief global strategist at BCA Research, an investment research firm, believes that a recession could start either towards the end of this year or in early 2025. If this happens, Berezin predicts that the S&P 500 stock index could fall by more than 30%. He expects growth in Europe, which is only just starting to recover, to be slow. Investors could start to shun the euro as the situation in Europe deteriorates. The euro’s status as a reserve currency is at risk.

Source: Marketwatch

The gold price could reach $3,000 an ounce in the next 18 months

Interesting. Last year, Africa was the biggest gold producer, with China retaining its position as the biggest producer.

Source: Gold.org

Bank of America has published a report suggesting that the price of gold could reach $3,000 per ounce in the next 12 to 18 months.

Source: Bloomberg

According to Goldman Sachs Research, investors are warning of inflation risks in the US as corporate profits exceed expectations, the US persistently runs large budget deficits, and because of the possibility of inflationary policies after the November presidential election. Commodities have shown strong resilience to inflation and have been a key protective mechanism for bonds and equities in times of rising prices and wages.

Gold has proven to be the best commodity for potential protection against inflation and geopolitical risks. Goldman Sachs Research forecasts that gold will rise to USD 2,700 per troy ounce by the end of the year, up around 16%, driven by robust demand from emerging market central banks and Asian households. Gold could help protect against potential stock market falls if trade wars break out and has the potential to rise if worries about the US debt burden increase or if the Federal Reserve becomes subordinate to the new administration.

Goldman Sachs Research also sees an opportunity in oil as a geopolitical/inflation hedge, both because of its strong historical record as a broad inflation hedge and because of the potential hard stance of the US against some of the major oil-producing countries.

Semiconductor industry

The semiconductor market is expanding because it automatically leads to higher electricity consumption. How can we move to a world where artificial intelligence, manufacturing payback, and the green revolution can flourish without significantly increasing the importance of the metals and mining industries?

Not long ago, the global semiconductor industry had a total market capitalization similar to that of the metals and mining industries. Today, the semiconductor industry is almost six times larger than the entire mining industry.

Source: Crescat

Commodities are rising in price as the Fed cuts interest rates… How will it be this time? Will the Fed really start cutting in September?

Source: Ronnie Stoeferle

Will the increase in metal prices allow for one of the most positive periods for the mining industry?

In recent years, the average time to build a mine has increased to almost 16 years. This calculation is based on the favorable macroeconomic conditions of the past 20–30 years, such as low energy costs, low interest rates, a globalized environment, and low labor and material costs. We are currently facing the opposite conditions, which will make the long-term supply of metals even worse, thanks to ESG efforts. In addition, the construction boom, driven by the return of manufacturing, the overhaul of the electricity grid, new data centers, industrial capacity, and infrastructure projects, will increase demand for these raw materials.

Paradoxically, despite the current high costs, the expected increase in metal prices will allow for one of the most positive periods for the mining industry, making it an increasingly crucial and strategic sector of the global economy. Importantly, the expected shortage of existing reserves will also fuel one of the most intense periods of mergers and acquisitions in the history of the industry. In the coming decade, those with high-quality R&D assets are likely to stand out as the main winners in this environment.

Source: S&P Global

Important…

Before you make any investment, make sure you know your risk profile. Don’t fall for the giraffes.🙂

The newsletter “Financial insights and trivia” does not constitute an investment advisory service. Its content does not constitute recommendations to buy or offers to buy, but is intended to inform the public about developments in the financial field. Past returns are not a guarantee of future returns. Please consult a financial adviser for advice.