New balance, but high risks
US President Donald Trump's actions are unsettling world trade patterns. The risks of lasting negative impulses are high. A hedge with gold and gold shares therefore appropriate
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Economists speak of first-round effects and succession effects, i.e. second- and third-round effects, when political decisions are made. At the moment, the noise from Washington is so loud that market participants seem to be recognizing the first-round effects in particular. However, the current US policy is likely to cause some long-term economic disruption.
On the one hand, tax breaks and high government spending are boosting investment. But these incentives for the population are financed by borrowing. It can therefore be assumed that after about two years of good growth rates there could be a slump. Secondly, trade tariffs are to strengthen domestic manufacturers. But this is not possible in the short term. Firstly, stronger economic growth and the associated increase in consumption will stimulate imports. The tariffs therefore initially have a strong price-driving effect in the USA. And thirdly, there are second-round effects from a stronger US dollar. Interest rates in the USA are driven up by the stimuli. This increases the demand for US dollar investments. In the longer term, demand for foreign currencies could also decline if tariffs were to have a negative impact on imports.
However, the rising US dollar is undermining the competitiveness of products manufactured in the USA. The current development of the US economy and the currency markets is therefore likely to be only a transitional phase. Debt that is no longer manageable and inflation is rising sharply could create a great deal of uncertainty. Investors with farsightedness are therefore already positioning themselves in the long term. This includes gold investments in particular. The current strong dollar is holding back the gold price and thus ensuring moderate entry prices. As soon as the dollar weakens, the pent-up pressure on the gold price should ease and push up prices. This benefits not least the shares of companies with gold projects. These include TerraX Minerals and Treasury Metals.
Treasury Metals - https://www.commodity-tv.net/c/search_adv/?v=298478 - is making good progress with its Goliath Gold Project in Ontario. First an open pit mine will be built, then the gold mining will continue underground. It is estimated that 1.14 million ounces of gold and around two million ounces of silver will have to be extracted from the ground.
TerraX Minerals - https://www.commodity-tv.net/c/search_adv/?v=298245 - controls one of six major high-grade gold districts in Canada with its Yellowknife City gold project in the Northwest Territories. With the recent acquisition of two additional properties, the project now covers a huge 780 square kilometers of land.
Current company information and press releases from TerraX Minerals (https://www.resource-capital.ch/en/companies/terrax-minerals-inc.html) and Treasury Metals (https://www.resource-capital.ch/en/companies/treasury-metals-inc.html).
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