Banyan Gold Corp. (TSXV: BYN, OTCQB: BYAGF)
The New Yukon Gold Rush
It seems investors are confident that a series of expected measures will boost U.S. economy when Trump takes office in January 2025, which caused the sell-off of precious metals while driving the U.S. stocks market to new highs.
However, the latest data shows that in November 2024, the size of the US national debt exceeded $36 trillion, meaning that from $35 trillion at the end of July this year, it has increased by $1 trillion in just over three months.
Veteran investor Rick Rule, president and CEO of Rule Investment Media, said a few days ago that the only way for the U.S. to get out of the current debt crisis is to inflate the value of debt, as happened in the 1970s. This provides a bullish case for commodities such as precious metals, uranium and copper, while energy is also expected to benefit during the new presidential administration.
Rule believes that the US will eventually honour its nominal debt, but will allow inflation to erode the real value of US debt.When the crisis broke out in the 1970s, the purchasing power of the US dollar fell by 75 per cent while the price of gold rose from $35 per ounce to $850 per ounce. Rule points out that，”as far as I can tell, the only way for the US to get out of the debt crisis is through inflation.”
He explains that while the U.S. economy appears healthy on the surface, which is largely driven by credit, and the economic model of borrowing new debt to pay off old debt is unsustainable. Finally, the notion of ballooning debt will push up the price of gold, which was one of the main reasons behind the precious metal’s surge from $35 to $850 per ounce between 1970-1980.
Although gold has performed well in recent years, Rule believes it will go further. He points out that the precious metal’s market share in the U.S. is well below historical averages, which suggests significant potential for demand growth. Only a return to the mean level will see the US market share to quadruple. This means that the gold price will rise far beyond $3,000 in the future.
Rule also believes the energy sector, including the Canadian oil and gas industry, is likely to benefit from the new government’s deregulation, which is expected to boost LNG production and exports.
In addition, uranium is uniquely attractive in the current market. Unlike other commodities, producers have access to long-term contracts with fixed prices, which provides certainty and makes financing more available, making uranium companies particularly attractive for investment. And the trend for copper is also bullish next year, driven by supply constraints and growing demand, especially from developing countries seeking to expand their power supplies.
