The second major trend for miners is the growth of fiscal and monetary imbalances, including the build-up of inflationary pressure caused by years of loose monetary policy by central banks and the movement towards higher levels of government spending and rapid debt expansion. These trends have been exacerbated by the policy response to the COVID-19 crisis. Backed by a supportive macroeconomic environment, many gold producers are in the best financial shape they have been for a long time, but company valuations do not yet reflect this. The US election results are unlikely to change the fundamental economic outlook for government spending, monetary policy and economic risk, which provide a supportive backdrop for gold. We believe there is far more to come from the precious metals sector in the months and years ahead.
We have reached a critical juncture for the mining sector, as the global economy moves into recovery supported by historic economic stimulus packages, funded by debt, with a particular focus on boosting the growth of low carbon industry and green technology. Going into 2021 we believe there is a lot more to come from the mining sector, as the global economy moves into the aftermath of the COVID-19 crisis and towards recovery. Speciality metals producers face a transformation of demand, driven by the green recovery and transition towards sustainability, while precious metals are backed by a highly supportive macroeconomic environment of low real interest rates, soaring debt and rising inflationary pressure.
Most importantly for Baker Steel, however, is the margin expansion underway currently, led by the gold equities sector. Producers’ margins are expanding, and dividends are increasing, yet the sector remains fundamentally undervalued relative to broader equities. Our team remains focused on identifying those producers which are best positioned to benefit from margin expansion and a share price re-rating as metals prices moves higher. Click through here to gain a better understanding of our range of funds and strategies which reflect our outlook for the next year.