North American Gold Rush Spotlights Strategically Positioned Explorers Like Austin Gold (AMEX: AUST)

If you haven't noticed, a 21st-century gold rush is underway, as soaring demand sent the price of the precious metal to an all-time high of close to $2,500 per ounce in May. 

However, traders and investors remain jittery about an indecisive Federal Reserve on the direction of interest rates this year, watching and waiting for any sign of easing inflation. As a result, after reaching a new record, the price of gold retreated last month, including a drop of over $100 in the United Arab Emirates (UAE) to a two-week low, before recovering. 

Nevertheless, long-term catalysts remain intact. In addition to providing diversification, gold serves as a hedge against inflation and offers investors a safe-haven asset in an otherwise volatile market environment. Analysts believe the gold price will test the $2,280-$2,300 range next. 

While gold never really goes out of fashion, economic headwinds coupled with geopolitical tensions have further increased the allure of the precious metal. This backdrop has given exploration companies and investors alike good reason to be more bullish than ever on gold. 

Whether it's bars, coins or ETFs, investors are earmarking more of their portfolios for gold these days. In response, the gold price has been on a tear, climbing over 15% higher in the past six months alone, outshining its digital counterpart Bitcoin as investors opt for the physical asset. 

Through a long-term lens, the price of gold looks even better. Since hitting a bottom in Q4 2022, the value of gold has ballooned by 40%, while increasing almost 500% over the past two decades. As a result, gold explorers like Austin Gold AUST, with drilling projects planned this year on two North American fields, are strategically positioned to benefit from this phenomenon. 

Gold's Resilience 

The Federal Reserve's hawkish monetary policy combined with high inflation have kept traders and investors on edge. No assets are immune to pullbacks, and gold is no exception. Soon after reaching a new record this year, gold experienced a correction to below the psychologically sensitive $2,300 level in May. 

If there was any question about the current gold rush, central bankers put it to rest when they started stocking up on the commodity recently. While their interest in gold is nothing new, they have been buying in droves of late amid heightened geopolitical uncertainty, most notably U.S. sanctions on Russia amid U.S. dollar weakness. The bullion buying has been led by the People's Bank of China, with the precious metal comprising 4.3% of its central bank reserves as of year-end 2023, up from 3.6% in 2022.  

Many investors view gold's recent pullback as an opportunity to buy more of the precious metal at a discounted price. A sure sign of this demand can be spotted at big-box retailer Costco, which is having a difficult time keeping enough gold bars on its shelves, owing to robust demand. 

As of Q4 2023, Costco has been selling gold bars at approximately $2,000 per ounce. The company is generating sales hand over fist, in the range of $100 million-$200 million per month, despite tight profit margins, according to Wells Fargo analysts.

Additionally, investors in Bitcoin, which is known as digital gold, are beginning to reconsider whether they should be betting instead on the physical asset. Bitcoin is similarly designed to serve as a safe-haven asset but has not produced the type of gains investors expected of late. Instead, one sector that looks especially attractive is gold mining stocks, which are looking increasingly bullish as the price of the precious metal soars. 

Billionaire investor and long-term gold bull Ray Dalio, who describes gold as "timeless and universal," has given a plethora of reasons for owning gold in one's portfolio. Most recently, Dalio said he's using gold as a hedge against a potential debt crisis and high inflation, a similar catalyst among monetary policymakers. “[Gold] is held by central banks for this reason. In fact, gold is the third-most-held reserve currency by central banks," he noted. 

Dalio, who also holds gold as a way to diversify his portfolio, fears a U.S. debt crisis could send the economy reeling, even into what he calls a "balance sheet recession." That's when businesses and households spend more to service debt than to grow the economy, making an even more compelling case for holding a resilient precious metal that is uncorrelated to the broader financial markets. 

Austin Gold's Drilling Projects Shine 

Led by seasoned industry executives and advisors with impressive track records of mineral discoveries, Austin Gold's management team boasts a deep bench of mining successes. 

The company's seven directors have experience bringing exploration projects from discovery to more advanced stages and through to production. They've participated in the creation of three billion-dollar market cap resource companies, a model Austin Gold is looking to emulate. Having an experienced team is critically important in the mining sector, where past wins pave the way for future performance. 

Austin Gold specializes in district-scale gold discoveries in the Southwestern Great Basin area of the United States, with projects in the gold-rich regions like North Central Nevada as well as Southeast Oregon, where they recognize potential for significant discoveries. 

Nevada comprises three-quarters of U.S. gold production, rivaling the production of entire countries like China, Australia and Russia.

"Our view with Austin is let's go looking in the best jurisdiction for gold in the world, which is Nevada, and look for projects. We're looking for elephants because we want to take them from discovering them to advancing them and selling them off to a major [mining company]," said Austin Gold Executive Chairman Joseph Ovsenek in a recent interview. 

As serial mine finders, Austin Gold's trio of projects include Nevada's Kelley Creek and Lone Mountain, as well as the Stockade Mountain Project in Oregon. Most recently, the company experienced promising results at its Stockade Mountain, where upon drilling three holes recovered "a high gold value of 9.32 grams per tonne." 

In response, Austin Gold plans to initiate another drilling program at a greater depth in this area in the hunt for the high-grade vein deposits formed deeper in the hydrothermal system. The company is encouraged by some positive developments by other producers on the permitting front in the state of Oregon, which sets a precedent for a similar experience at Austin Gold.

Investors who are looking to gain exposure to the gold mining industry and all the benefits that this precious metal has to offer, not least acting as a hedge against inflation and a rising price, could consider Austin Gold during these exciting times. 

Featured photo by Sebastian Pichler on Unsplash 

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