The fundamentals of gold remain strong; inflation should outpace interest rates and global debt remains high. I think gold will find a floor at some stage, and when it begins to move up again it could be quite aggressive. Key catalysts will be ‘the three I’s: Inflation, interest rates, and Indian politics. Market sentiment following the U.S. election switched from the interest rates staying ‘lower for longer’ story to the current mindset of interest rates starting to move up. Six months ago, we were under the assumption that reflation was going to be very difficult to achieve, we've elected someone in the U.S. on a populist ticket, and suddenly it seems a lot easier. I don't think the outlook for interest rates has changed as much as the market seems to think. I'm watching inflation figures very carefully to see what they’ll mean for interest rates in the U.S. and globally.

The other thing worth watching is Indian politics, it may not be on many investors’ radar, but it’s an important driver of the price of gold. Recently, the Modi government announced that all large-denomination bank notes, which is ~85% of their currency in circulation, would soon be invalid. There’s been reports that the government may confiscate gold from people above a small amount if they can't prove how they’re unable to prove ownership.  

My number one stock for gold exposure is a company which has a project, a company which is trading in a lower metric to a lot of its peers, and that can produce some reasonable news over the next 12 to 36 months in terms of going from wherever it is now to where it could be in my investment time frame. This is Egan Street Resources, which is part of the Lion Selection Group portfolio. They’ve got a project and they’re looking to come out with a Scoping Study very shortly, which will tell us how quickly they can develop to production.

Base metals also look attractive, especially tin. Tin’s not moved as strongly as the other base metals this year. The demand for tin should remain strong, in part due to its use in solder, an essential component in many electronic devices. The supply side is deteriorating along with the grades of ore being produced by key exporter, Myanmar. Recently, Myanmar has come from nowhere to be an immense producer, but as they move from high-grade surface mining to lower grade underground mining, the situation is becoming more complex.

Some of the larger mines or areas of production globally coming to the ends of their life and closing, and there are very few new projects of the same sort of quality of those. There aren’t many new projects at all, but very few of quality projects coming to market to replace ageing global supply.

For tin, my second preferred commodity, the only company on the global scale which has a project that looks like it's got the grade and the tonnes in the ground to come to production is a company called Kasbah Resources. Kasbah is currently going through a merger with a company called Asian Mineral Resources, which will bring together an excellent team, two very good projects and with a tin development proposition now in Morocco.

Mark White

The approval for the Kasbah/AMR merger is being contested in court and is by no means a done deal, and how could you possibly describe AMR's Vietnamese nickel mine as a 'very good project' when it's currently in care and maintenance?