Eric Strand, CEO of AuAg Funds, recently sat down with Proactive to discuss the fund's revised price target for gold, the potential for continued growth, and the broader outlook for precious metals like silver.
With AuAg Funds raising its gold target from $2,475 to $2,750, Strand offers insights into the drivers behind this bullish momentum, the challenges facing short sellers, and the opportunities ahead for investors in gold and silver.
In addition to gold, Strand shares his thoughts on silver's rising potential, emphasizing the improving gold-silver ratio and the long-term prospects for AuAg’s Silver Bullet Fund, which has recently surpassed €100 million. He also provides a look into the mining sector, where margin expansions could lead to impressive financial results as energy costs stabilise and precious metal prices continue their upward trend.
Proactive: Eric, great to have you with us today. You’ve recently raised AuAg’s price target for gold to $2,750, up from $2,475. What’s driving this adjustment, and how do you see the current momentum in gold unfolding?
Strand: Thanks, it’s great to be here. Yes, we’ve had to raise our target because gold is really building momentum and approaching all-time highs. The environment is very favorable for gold right now, and we’re just at the beginning of a rate cut cycle. Initially, we had set what we thought was a pretty high target at $2,475, but with everything that's happening, we now see $2,750 as achievable in the near term.
Proactive: You mentioned interest rates, but what other factors are contributing to this upward trend?
Strand: Interest rates are a big factor, but there are other key drivers as well. The upcoming U.S. elections tend to bring market volatility, and we’ve seen gold prices dip during previous elections. However, the larger picture is about the U.S. economy dealing with significant deficits—potentially 8% of GDP this fiscal year—and we expect the next administration to continue printing money. Additionally, China is injecting stimulus into its economy, which is also positive for gold. So, all these elements combined are creating strong tailwinds for gold prices.
Proactive: You’ve talked about short sellers struggling with their positions in gold and silver. Can you elaborate on the dynamics there and how that could impact the market?
Strand: Absolutely. Commercial short sellers, especially the big banks, have been very effective at controlling prices in the past, but lately, they’ve struggled to push gold and silver down. They’re sitting on large short positions, and with prices continuing to rise, they’re facing losses. If they can’t bring prices down soon, they’ll have to start buying back to cover their positions, which could trigger a short squeeze. This would add even more momentum to both gold and silver, pushing prices higher.
Proactive: Speaking of silver, we’ve seen the gold-silver ratio narrowing recently. What’s your outlook for silver, and how does it compare to gold?
Strand: Silver is in a very strong position right now. The gold-silver ratio has been quite high, stuck at around 85-to-1, but we expect it to come down to about 70-to-1. Based on our revised gold target of $2,750, we’re now forecasting silver to hit $39 per ounce, up from our previous target of $35. We actually think silver has more explosive potential than gold at this point, with a lot of room to outperform.
Proactive: That’s great news for your Silver Bullet Fund, which has crossed the €100 million mark. Can you tell us more about the fund's performance and what’s driving its success?
Strand: Yes, we’re really proud of the Silver Bullet Fund. It’s been a strong performer and just hit a new all-time high. It’s probably one of the top UCITS funds in Europe right now. Part of that success comes from the rising silver prices, but we also expect significant margin expansion for the miners we invest in. As energy prices stabilize and commodity prices continue to rise, miners will see stronger profits, and that should drive further gains for the fund.
Proactive: Let’s talk more about the mining sector. How do you see margin expansions playing out for miners in this environment?
Strand: Miners have had a tough time over the past couple of years due to rising costs, particularly energy costs. Even though gold and silver prices were up, their profits weren’t as strong as they could have been. Now that energy prices are stabilizing and precious metals are continuing to rise, miners are in a much better position to expand their margins. Once they start reporting these stronger financials, we think their stocks will really take off.
Proactive: With U.S. elections on the horizon and potential market volatility, are you still optimistic about the outlook for gold and silver?
Strand: Absolutely. While there might be some short-term volatility around the elections, the long-term picture remains very positive. As I mentioned, China’s stimulus efforts are also a big factor, particularly for silver, which has industrial applications. So, between the macroeconomic drivers, improving fundamentals, and the potential for a short squeeze, we believe gold and silver are set for continued gains.