Looking at gold miners to hedge against rampant inflation in 2021 - David Erfle
Kitco News has launched its 2021 Outlook, which offers the most comprehensive coverage of precious metals markets in the new year. Trillions of dollars were pumped into financial markets in 2020 and that won't come without consequences. Economists expect that investors will be Bracing For Inflation in 2021.
Although the precious metal sector is attracting new investor attention, the mining sector continues to underperform. The mining sector's value is well below what it was during the last bull market in gold and silver.
However, some market analysts think that this will change and investors won't be able to ignore the value being generated in 2021.
With that in mind, we decided to reach out to some mining experts and ask them how they would invest $10,000 in the mining sector and what themes they see playing out in 2021.
Expert: David Erfle
Claim to Fame: founder of juniorminerjunky.com
How would you invest $10,000 in the mining sector?
What three companies do you like the most in 2021 and why?
What investments would you avoid next year?
With total global debt nearing $280 trillion, I would avoid government bonds and the financial sector.
What do you think are going to be the big themes next year: M&A activity, earnings, exploration, record gold prices?
With juniors now trading at huge discounts to their Net Asset Values (NAV), combined with gold in the process of creating a solid floor at $1800, I expect the acquisitions cycle to heat up next year, along with more “mergers of equals” deals taking place. Also, I expect precious metals stocks to be seen less of a hedge against the economy/markets, but rather more as a hedge against inflation.
What are your final comments on what you think 2021 is going to look like for investors.
With the Fed letting inflation overshoot its longstanding 2% target, while Washington seems likely to continue dishing out trillions in fiscal aid under the Biden administration, stagflation is inevitable in the U.S. Although it’s far too early to be concerned about runaway inflation due to global governments recent massive stimulus efforts, I expect stagflation to ramp up as the economy begins to reopen. Armed with low rates from the Fed once lockdowns subside, consumers and businesses may begin to spend aggressively after being quarantined. The last time we saw rampant stagflation in the U.S. was in the 1970’s, when gold zoomed from a low of $100 in 1976 to $850 by January of 1980.
Full disclosure: I have purchased shares of USAS, DSV.V, and PRB.V in the open market earlier this year and also recommend all three stocks to my subscribers. Please do your own due diligence before purchasing any mining stock.