Rick Rule says gold is the play in 2023; Bellevue is one of his favourites

“I do believe that the USD weakness in gold will end sooner rather than later, within 12 months.”

Gold may not need 12 months. Last week his thesis was validated when a cool US inflation report indicated to markets that the Fed may soon downshift interest rate hikes.

The USD tumbled and gold surged, perhaps helped along by the chaos in crypto.

Just a sniff of a Fed pivot sent gold to the high $US1,700/oz mark. What would an actual loosening on monetary policy do?

“I don’t believe the impact of high interest rates has worked its way through the economy yet,” Rule says.

“I suspect when the pain associated with those interest rate rises works through the US economy, the Fed will likely have to pivot.

“If they pivot, I think that gold in USD terms will surprise people to the upside.”

The play is gold in 2023

Rule, along with most experts, is expecting a recession in 2023. Because of that he sees limited upside for base metals stocks in the near term.

“I do allow my timid economic nature to constrain my bullishness around base metals stocks, which I see doing very well five years from now when we hit a supply cliff,” he says.

“Make no mistake, a supply cliff is coming in a lot of commodities, like copper. Absent a recession you could expect copper stocks, as an example, to do extremely well, because of the production shortfall relative to demand.

“But if we have a recession, I expect demand for commodities will fall. And even if commodity prices don’t fall further, they won’t rise the way they otherwise would.”

These are the conditions in which gold can thrive, Rule says.

“If we have a recession next year, it wouldn’t surprise me at all to have fiscal action which brings us back to the 1970s inflation, with economic stagnation simultaneously,” he says.

“That set of circumstances, if it occurs, would likely be as good for the gold prices as it was in the 1970s.

“If you weren’t around back then, take my word for it – while it was not good for other parts of your portfolio, it was very good for your precious metals portfolio.”

BELLEVUE GOLD (ASX: BGL)

Since January 2017 Bellevue’s share price has gone from 2.5c to +90c per share, driven by some unbelievable drilling success at its historic WA project.

Bellevue has now defined 3.1Moz grading 10 grams per tonne (g/t) gold — making it one of the fastest and highest-grade gold (re) discoveries in the world.

The mine is currently under construction and set to enter production in the second half of 2023.

Bellevue’s Stage 1 mine would produce ~200,000oz per annum over the first five years. It would be one of the lowest cost gold mines in Australia, with an all in sustaining cost of $1,079/oz – which means massive profits at a current gold price of ~$2,600/oz.

“They are in the process of building it now, so the unanswered question will be – in this environment, will they be able to bring the mine in on time, and on budget?” Rule says.

“Given the track record of the people involved, my suspicion is the answer is yes.

“A 10g/t orebody in a $US1650 gold price environment – that’s an extremely attractive proposition.

“I suspect the all in costs will be quite low, and, I think the probability of on time, on budget completion is high.

“And if it occurs, either the market cap expands substantially, or this thing gets taken over very, very quickly.”