The Allure of a Shaky World
Let’s be honest, the story selling this gold rush is compelling. The US dollar, for so long the undisputed heavyweight champion of the world, is looking a bit punch drunk. Central banks are quietly stuffing their vaults with gold bars, and geopolitical uncertainty is the new normal. In this sort of environment, gold shines. It doesn't pay a dividend, it just sits there, but its true value is that it isn’t tied to the promise of any government.
This backdrop creates what looks like a perfect storm for the miners. The logic seems simple enough. If the price of what you sell goes up dramatically while your costs stay roughly the same, your profits should go through the roof. It’s the kind of beautiful, simple arithmetic that makes investors feel terribly clever.