Featuring:
Axel Merk
President & Chief Investment Officer
Merk Investments
Markets are volatile and investors are rethinking diversification. Axel Merk breaks down what's driving today's supply‑shock environment, why gold and miners still offer value, and how active management in junior mining can impact long‑term returns.
Merk Investments focuses on gold, precious metals, and minerals, and is the Advisor to ASA Gold and Precious Metals Limited (ASA), a closed-end precious metals fund. Learn more here.
Transcript
CEFA:
Welcome to CEF Insights, your source for closed-end fund information and education, brought to you by the Closed-End Fund Association. Today we are joined by Axel Merk, President and Chief Investment Officer for Merk Investments. Merk Investments is the investment advisor of ASA Gold and Precious Metals Limited, ticker ASA. We're so glad you could be with us.
Axel Merk:
It's great to be with you again.
CEFA:
Axel, markets have seen some volatility with shifts in U.S. trade policy, as well as geopolitical tensions. Federal deficits are challenging, but the U.S. economy has been resilient. Where do you see the investment markets currently, and what is your outlook for the rest of 2026?
Axel Merk:
Thanks for asking me when the news is changing every day, it seems. For the time being, and we're recording this three weeks into the Iran war, for the time being, the market is pricing things in as a shock. And the reason I phrase it this way is because looking out a few months, the market seems to be pricing in some sense of normalcy, whatever that might mean. The one thing I would suggest as a word of caution as to where we're going to go, the shock we're experiencing is a supply shock. And the economically sound reaction to a supply shock tends to be politically not attractive. Politicians tend to do the economically wrong thing when we are faced with a supply shock. If you go to the 1970s, for example, you have an oil shock and you react with price controls. Not that price controls are in the cards right now, but for the time being, we have extensive volatility. There are supply issues, and if you go through the noise that's extremely volatile, yields are higher, inflation might be higher, but for the most part, markets are holding up.
CEFA:
Merk Investments has specialized expertise in the gold, precious metals, and minerals sector. When we last spoke in October 2024, gold was trading around $2,650 per ounce, and now gold trades over $5,000. What is your outlook for this sector?
Axel Merk:
The price of gold has been very strong. There have been many factors ranging from central banks buying more as the dollar has been weaponized to gold bugs not just being bugs anymore, but those fringe views coming more to the mainstream as diversification buyers buy more. Interestingly, even with the shocks we've had, and gold is off its highs, gold is still hovering around 5,000. And one of the things to keep in mind is that the gold market is much smaller than many other markets. So, it doesn't need many investors to come into the space for these prices to be as strong as they are right now.
CEFA:
Where are valuations in the precious metals mining space? And do you consider these to be attractive levels?
Axel Merk:
Given where we are on the price of gold, the miners are very, very cheap, I would argue. They've obviously come up quite substantially, welding in many times multiples in the last year and a half or so. But the margins are astounding. One of the things I'd like to mention is that in 2011, Marc Andreessen said, software is eating the world, so to speak. Now, fast forward, AI is eating software in some ways. And the big difference is that software used to be a low barrier to entry, low cost to get into that market in high margins. But now in the current world with AI, you have huge investments and margins are questionable. The reason I mentioned this is that we suddenly have a level playing field across industries where in the gold mining side, of course, you have very high investments, but the margins are high, 50%, 60%, 80% gross margins at times. And even with the energy shock that we are experiencing, let's assume for a moment that energy prices will remain elevated for some time, that yes, energy costs can be 20%, 25% of a producer, often they're a little bit less, but there can be this sort of magnitude. Even with that, the margins are phenomenal, and the market has been very conservative in valuing the gold in the ground. And in this context, despite the very substantial volatility we are seeing, this is actually one of the places where there might be quote-unquote value in the market.
CEFA:
Axel, we mentioned the closed-end fund you manage, symbol ASA. How is the portfolio currently positioned?
Axel Merk:
We have used ASA in a way that we believe closed-end funds are designed to be used in the sense that we have focused in on smaller, often a little bit less liquid names. And when one does that, think about it as venture capital light, that as these companies grow to the extent that they succeed, of course, not all companies will succeed, that there is more than just the price of the underlying metal, gold or silver or other precious metals that they're mining, but there as these companies grow and go into production, valuations tend to be higher. And so, we are aiming at taking advantage of those regardless of the price of the metal. And the history has shown since we have taken on ASA, the management of ASA since April 2019, that that strategy has worked very, very well.
CEFA:
Looking back about two years ago in March 2024, the net asset value of ASA was about $18 per share, and the fund's discount was about 15 to 16%. Here in March 2026, the NAV per share is over $80, while the discount is roughly 13%. So, the market price performance of the fund is quite similar to the net asset value performance over time. Is it reasonable for investors to consider net asset value performance as the critical driver of shareholder returns as they evaluate their long-term expectations for the fund?
Axel Merk:
Yes, is the short answer. The current price as we're talking is about $66 a share. And the discount had been narrowing for an extended period, almost every year since we started to manage the fund. The discount had been narrowing. In recent months, the discount has been widening again a little bit. But for the most part, yes, there is a very, very strong correlation, between the NAV and the equity. And of course, we are, as the advisor, focused very much on the active management of the underlying positions. And in doing so, we are trying to add value by being invested in the sector and through the active management. I'd like to add that the mining sector is the one with the greatest dispersion of returns of any of the S&P sectors. And that's a fancy way of saying that active management really matters. The junior mining space where we are active to a significant extent does have slightly different risk dynamics as the producers on the large cap end. And we've been trying to add value through that. And yes, the share price tends to mimic what we do in the NAV. I'd like to add that we are very transparent. We are publishing our holdings, with some delay, on a monthly basis, and we're trying to communicate what we do, and that helps to keep the NAV and the share price somewhat aligned.
CEFA:
Axel, ASA provides investors with somewhat unique exposure to junior mining companies. How important is active management for this segment of the market, and what benefits does an allocation to junior mining companies provide in an investor's diversified portfolio?
Axel Merk:
I alluded to, kind of, that we're positioned on the junior space in part because we want to have investors participate in the accretion of the value beyond the price of the underlying commodity. The value added in a diversified portfolio is directly linked to the statistical characteristics of investing in the space. That tends to be not too closely correlated to the S&P 500 or the bond market. One of the reasons the gold space has gotten more traction is because investors are somewhat disillusioned with the bond market after decades of rising bond prices and falling yields. Not that this is a direct substitute, but investors are looking for diversification and the uncorrelated returns that ASA provides or the space in general provides has historically been a very potentially beneficial diversifier and being able to add value with that.
CEFA:
Axel, thank you so much for taking the time to join us today.
Axel Merk:
My pleasure.
CEFA:
We want to thank you for tuning in to another CEF Insights Podcast. For more educational content, please visit our website at www.cefa.com.
Podcast recorded March 2026.
Disclosure
This material is not, and is not intended as investment advice, an indication of trading intent or holdings, or the prediction of investment performance. All fund-specific information is the latest publicly available information. All other information is current as of the date of this presentation. All opinions and forward-looking statements are subject to change at any time.
Merk Investments disclaims any responsibility to update such views and/or information. This information is deemed to be from reliable sources; however, Merk Investments does not warrant its completeness or accuracy. This presentation is not intended to and does not constitute an offer or a solicitation to sell or solicitation of an offer to buy any security, product, investment advice, or service, nor shall any security, product, investment advice or service be offered or sold in any jurisdiction in which Merk Investments is not licensed to conduct business and/or an offer, solicitation, purchase or sale would be unavailable or unlawful.