Inflation, Gold, and Gold Mining Companies
While physical gold is not in our buy zone, many gold mining companies are selling as if the price of gold is currently $800 to $900 per ounce, which is 28% to 36% lower than gold's closing price on January 31, 2014, and well within our buy zone.
"There are two ways to conquer and enslave a country. One is by the sword. The other is by debt."
- John Adams, 1735 - 1826
Overview:
- We continue to be concerned about the increasing levels of federal debt, Fed policy and quantitative easing, and the overall lack of political will to change the present course. As a result, we believe that the probability of elevated inflation over the next 5 years has dramatically increased and have been reviewing gold as a potential investment for our portfolios.
- During our study of gold, we arrived at a methodology that prices the commodity from five different viewpoints. Currently trading at $1,220 to $1,300 per ounce, we believe gold is selling in a fair value range.
- While physical gold is not in our buy zone, many gold mining companies are selling as if the price of gold is currently $800 to $900 per ounce, which is 28% to 36% lower than gold's closing price on January 31, 2014, and well within our buy zone.
- With or without high inflation in the future, we believe many gold mining companies have been selling at bargain prices and have added them to our portfolios.
Disclosures: The gold pricing in this report is measured using the London PM Fixing price, quoted in U.S. dollars per ounce. Past performance is not indicative of future results. Century Management reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. The content of this report/letter should not be deemed, nor is it intended to be considered an investment recommendation to purchase or sell any particular security or an offer to sell any product. Certain statements included herein contain forward-looking statements, comments, beliefs, assumptions, and opinions that are based on Century Management's current expectations, estimates, projections, assumptions and beliefs. Words such as "expects," "anticipates," "believes," "estimates," and any variations of such words or other similar expressions are intended to identify such forward-looking statements. These statements, beliefs, comments, opinions and assumptions are not guarantees of future performance and involve certain risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in, or implied by, such forward-looking statements. Viewers are cautioned not to place undue reliance on these forward-looking statements, which reflect Century Management's judgment only as of the date of this report/letter. Century Management disclaims any responsibility to update its views, as well as any of these forward-looking statements, to reflect new information, future events or otherwise. Factual material referenced in this report/letter is obtained from sources believed to be reliable and is provided without warranties of any kind, including, without limitation, no warranties regarding the accuracy or completeness of the material. Century Management is a registered investment adviser. More information about Century Management, including its advisory services and fee schedules, can be found in its Form ADV Part 2 which is available upon request or you can download from our website at www.centman.com.