Will Pension Funds Demand Overwhelm Gold Equities, Leading to Parabolic Move Higher?

- With Large Investment Funds turning to Gold, Fosterville South enters the Spotlight with Recent Stellar Result

The $16 billion Ohio Police & Fire Pension Fund approved a 5% allocation to gold, something that would have been unheard of a few months ago but today represents just another domino falling as generalist investors start to enter the gold space to guard against global monetary, fiscal and geopolitical uncertainty.

While the recent bet by Warren Buffett on gold equities, via his purchase of Barrick Gold (GOLD:NYSE) has attracted the most media attention it is the greater movement of pension and institutional fund flows that could drive mainstream gold equities such as Newmount, Franco Nevada and Barrick higher.

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High grade miner Kirkland Lake Gold (KL:TSX), which owns the famous Fosterville Gold Mine in Australia, one of the world’s highest grade and lowest cost gold mines is also poised to benefit from this new influx of capital into gold equities. The company currently has a market capitalization of approximately $19 billion and is undergoing strong growth.

While the world’s largest gold companies have seen a nice increase in interest during recent days, smaller market capitalization gold situations are also seeing increased interest. Fosterville South Exploration (FSX:TSXV , FSXLF:OTC ), which has what is arguably the premier gold exploration land package in all of Victoria, Australia including 600 sq km adjacent to Kirkland Lake’s Fosterville tenements is one of those companies.

Fosterville South has recently raised $22 million to increase the pace of exploration on its land holdings, which include significant historic gold production, and the demand for these financings far outstripped supply. Interestingly, the company has Eric Sprott who is the former Chairman of Kirkland Lake Gold as one of its large shareholders.

CEO of Fosterville South, Bryan Slusarchuk, notes, “In the past few months, we have seen increasing interest from generalist investors in what we are doing. In the early days of our company, some of Canada’s most successful mining entrepreneurs liked what they saw in our land package and provided the capital to get going on the ground. We have put out some rather spectacular gold results in drilling to date and I think that in combination with an improving trend in the gold sector has given us some nice upward momentum. We are taking advantage of our first mover status in this region and are well funded to drill hard for the foreseeable future. No doubt that more people are starting to pay attention to Fosterville South and what we are doing.”

Slusarchuk and his network know a fair bit about how impactful success in the high-grade gold space can be. He is co-founder and former President of K92 Mining (KNT:TSXV), a rapidly growing gold miner in Papua New Guinea which has grown from being a true micro cap situation a few years ago to now boasting a $1.7 billion market capitalization driven by outstanding resource growth, production growth and exploration success.

So, where do gold equities go from here? While gold is well known worldwide, the actual sector is very small in comparison to other sectors. In fact, it was recently noted that the market capitalization of Apple Inc alone is 3x that of the entire precious metals sector. And, with quantitative easing infinity, unprecedented fiscal and monetary stimuli and a low to negative interest rate environment, it can be argued that gold can go much higher from here.

Slusarchuk notes, “The setup has never been better for gold. And, traditionally in bull markets for gold bullion, gold equities outperform gold itself. These are exciting times.”

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