Agio Gold Sector Fund Market Update: February 2024

Global Macro Economy

It’s official: Japan is no longer the third largest economy behind the US and China; the new holder of that distinction is now Germany.  Fourth quarter GDP statistics were anemic as Japan’s economy shrank and is now officially in recession. The UK is now in recession as well. Among the largest developed market economies, the US appears to be the strongest. However, the common theme among both developed and emerging markets is a general slowdown of international trade and business volume. While labor markets appear tight, wages are not keeping up with consumer price levels. Real incomes have not been growing as a result. Regardless of the mixed picture, US and Japanese equity index prices are at or near all-time highs so the urge to speculate on future brightness is as strong as ever. Seasonal market strength can be expected to run into March.

With respect to interest rates the six-month treasury bill set its high 5.61% in August of last year and is now at 5.27% as the downtrend remains below the 20 week moving average - which is also declining. In 1929 the T-bill yield set its high in June and in declining was quietly indicating that the sensational boom was over.

Recently with a relatively sharp hit to the S&P 500, the US Dollar Index jumped up, which makes sense. The washed-out seasonal low was set at 100.32 in December. So far, the high has been 105 and trading well above the 20-week moving average at 103.52. Contrary to popular dogma the senior currency becomes chronically firm during Post-Bubble contractions. At 105, our initial target has been 107. After that 115.

Gold Sector

Gold and Gold Equity prices are approaching minor oversold levels and represent good intermediate to long term value. Golds’ nominal price is hovering around $2,000 and seems poised to bounce in the not-too-distant future. We will maintain our methodical approach of determining that as Gold’s price outperforms costs Gold Miner’s earnings will go up. Making, as we note the Sector and investment rather than a speculation in FX markets.

History is in the early stages of a Post-Bubble contraction wherein GDX and GDXJ will enjoy some strong rallies. At certain times GDXJ could outperform the S&P 500 which may bring in more equity fund managers who might not ordinarily participate in the sector. This down the road.



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