Are You Prepared For The Gold And Mining Stock Bull Market
The bullish factors for gold, copper and silver are converging to create a scenario that will cause a much stronger bull market than the one from 2001 to 2011.
An example is recently, Elon Musk, on X-Twitter put out a couple posts that suggests he sees key problems that are extremely bullish for gold. One was a post about the debt crisis with the dire warning that the US is going bankrupt. The other was about the devaluation of the US dollar (USD) destroying its value.
His posts are often succinct. He could have added that it’s not only an American issue, there is a global debt crisis with government debt at over $300 trillion. He didn’t add what the solution is. Without a doubt that is a return to the Gold Standard.
The ramifications of the worldwide Death Spiral of Debt is clear to see. The USD is losing its purchasing power as are most fiat currencies. This is why gold is at all-time highs against practically every currency including the USD.
That is sort of a mic drop moment that every investor worldwide should pay attention to.
The return to the Gold Standard is underway and the only thing that can stop it is if politicians worldwide dramatically cut spending. The chances of that happening are slim and none, and Slim has left the building.
Politicians are junkies when it comes to spending while the central bankers are their dealers that seem to have a never ending supply of their drug. Meanwhile servicing the debt is becoming a horrible problem that will have the junkies and the dealers take notice.
In the month of June, servicing the debt used up 76% of personal income tax taken in by the government. That is an astounding number that is only getting worse by the day.
Even if the Fed were to quickly cut interest rates by a percent or two, which they won’t, the weight of the debt and interest on it won’t change things in any significant way.
The Fed will have to go back to QE. If the politicians dramatically cut spending with QE happening and increased the taxes they could change the course of the Death Spiral of Debt.
I’m not holding my breath for the politicians to get religious on fixing the debt crisis because the cures don’t buy votes. Meanwhile the Fed is painted into a corner. To QE or not to QE, that is the question.
There is a very expensive game of economic chicken happening with two extremely expensive cars racing toward each other waiting to see who will swerve first. The debt car with the politicians at the wheel is a self-driving car with the politicians asleep at the wheel. The QE car is driven by the Fed and they better swerve or there will be a massive car crash.
The politicians will never wake up to recognize their insane spending habits. The Fed is honking the horn and trying to get their attention, but that is futile. All they are left with is to swerve before the crash happens and get back into the QE game.
The Death Spiral of Debt and excessive money printing has been very efficient at destroying the purchasing power of fiat currencies. Create debt in an insane way and you get what we have now.
Gold has done its job for smart investors that have bought gold to preserve and enhance purchasing power. There are no examples of where investors would have been better off protecting their purchasing power by holding fiat currencies instead of gold.
Gold is winning the race, by a significant margin as the most sound money. It is about to extend its lead.
The BRICS nations are seeing the writing on the wall and aggressively buying gold as a reserve currency. Recently, gold surpassed the Euro to become the second leading reserve currency held by the world’s central bankers, only behind the USD. I have no doubts it will become numero uno due to the American debt crisis.
Investors have plenty of time to protect their wealth and combat devaluation of their purchasing power by owning gold.
A good start would be to at least back up their personal debt in a significant way. This will get them ahead of the trend that will see the central bankers of the world more significantly back up the $300 trillion in worldwide government debt with gold.
A common theme amongst investment advisors, it to recommend a heavy weighting in big cap stocks and debt, with a small allocation to gold. This is considered good diversification. It looks very risky to me when you also factor in the destruction of purchasing power that eats into gains.
With big cap stocks trading at historically high valuations and a Death Spiral of Debt in full force, it seems much better to significantly reduce the holdings of debt and big cap stocks while dramatically increasing the allocation of gold.
Despite gold trading at all-time highs against every currency, I still think we are very early in the bullish trend for gold. As the world moves back to the Gold Standard and gold gains importance in international trade for goods, it will go much higher.
This year, I have been reporting on why I think gold is heading to $20k in the next 10 years.
The three pillars for this argument are that the Death Spiral of Debt needs to be backed more significantly by gold. Plus, as central bankers back the enormous debt with gold, they will also start using it in a more significant way for international trade. Thirdly, the demands of physical gold for a modern Gold Standard will be enormous.
The supply chain of physical gold will be overwhelmed for decades.
Production of physical gold has peaked and is going into long-term decline. The reasons are that for many years there hasn’t been enough funding for exploration which results in far too few much needed discoveries.
The well known gold regions of the world have been well picked over for the past couple hundred years.
Most of the easy to find outcropping gold deposits in the well known gold jurisdictions have been found, developed and mined.
Which means gold exploration is forced to go into less well known jurisdiction, to drill for deeper deposits, in more challenging terrains. If a mine is found, the permitting is at a historical maximum and costs to build new mines are at all-time highs.
The chronic under investment in gold exploration, plus the challenges to find new gold deposits put long-term pressure on the supply chain. Evidence of the ramifications are readily apparent in the discoveries that have moved into the development stages. The development projects are woefully unable to replace what the current mines produce.
Going through the development stages takes a long time and is costly. The ability for explorers to find and then advance discoveries has not happened nearly enough and the pipeline of development projects is pretty bare.
From junior gold miners through to the majors, they are challenged to maintain production let alone increase their gold production. A key reason is that they don’t have great projects in their inventories, and the average head grade at mines has been in long-term decline.
The gold miners are squeezing out as much production as they can. Nevertheless gold production is declining and they are nowhere near replacing what they produce.
These issues for gold mining, from exploration through to production are also the same problems for copper. Earlier this week, Codelco, the largest copper producer in the mining sector, reported that production in their recent quarter was down 8.6%. This is a big problem.
Another problem for them is that as copper goes higher, Chile’s miners have strikes because they want better pay. The copper supply chain can’t handle production declines or sudden strikes.
The major brokerage houses are correctly predicting copper deficits over the next few years and beyond.
Copper discoveries have been down for many years, exactly when more are needed. There aren’t nearly enough projects in the development stages, in fact some of the much needed extremely large copper deposits in development have long-term permitting issues.
Copper production has been relying on very old mines for a long time, which is why they are struggling to meet the demand.
Yet, the demand keeps growing. From alternative energy, aging power grids in developed countries, building power grids in developing countries, technology needs for cloud computing, internet, crypto currencies and artificial intelligence, plus of course electric vehicles. All of these things use tremendous amounts of copper.
I agree that deficits are coming immediately in front of us, I think it could be much more than many believe.
Silver is another interesting metal as both a monetary metal and industrial metal used in solar panels. It is actually already in a supply and demand deficit that is only going to widen.
Considering that gold is at all-time highs, normally that would mean silver would be rocking as well. Yet, it is not. Silver is still only a bit above half of its all-time high. It has a lot of catching up to do and is primed to go much higher.
When I look at gold, copper and silver stocks, I like to place them in the Lassonde Curve. Legendary mining executive Pierre Lassonde put out this curve many years ago to illustrate the progression of a project from exploration that results in a discovery, then goes through development and ultimately turns into a mine.
The first peak is in exploration success where a lot of wealth is created. The second peak is when a discovery turns into a mine which is another area of exceptional wealth creation. In between those two peaks is a valley when they are in development.
When I look at companies and where I see them in the Lassonde Curve I am seeing tremendous opportunities throughout the curve.
On the exploration side, I’m finding projects that based on the quality of their discoveries have valuations that should be charging up the left side of the Lassonde Curve. But, instead they are trading with valuations that are at the bottom of the left side of the curve. This is amazing to me considering how few discoveries are out there, and how badly they are needed.
When it comes to the development stage, represented by the valley in the Lassonde Curve, plenty of great projects are trading well below the valley floor.
Even projects that are in the sweet spot when they transition from spending money to build a mine and then turning it on are trading at historically low valuations.
I’ve written a lot lately about the catalyst I see coming to bring the gold stocks into the gold bull market.
The first quarter of 2024 had the highest average price of gold ever, then the second quarter of 2024 soundly beat that by around $300 dollars per ounce of gold. This made for back to back quarters of record highs for the average price of gold during a quarter.
Next week Agnico Eagle, the second largest gold producer in the business, will report their second quarter. It has been performing exceptionally well since the middle of the first quarter. Then has been juiced up with the strong performance of gold.
What I haven’t seen yet is the market pricing in what looks to be a blowout quarter. I think it will catch plenty of generalist investors by surprise and start bringing more attention to the gold stocks. What I expect to see happen is that there will be a rising tide that lifts many boats higher.
How that plays out against the Lassonde Curve is I can see the potential for explorers with great discoveries to move higher up the left side of the curve.
Development companies that with extremely low historical valuations should see marked improvement. As should companies in the sweet spot of the Lassonde Curve. And those into the second peak of the Lassonde Curve as projects become mines in full commercial production.
What I’m talking about is a significant rerating for a lot of gold stocks, copper stocks and silver stocks.
Things are shaping up for plenty of generalist investors to start positioning themselves in the stocks of gold, copper and silver companies. It could be explosive, one because plenty of them are trading at historically low valuations. Secondly, the menu of stocks in the various parts of the Lassonde Curve is remarkably small.
The power of the crowd of generalist investors will be shocking to many mining stock investors. Buckle up.
In Closing
When I look at gold stocks, copper stocks and silver stocks, the most important thing I look for is the quality of the projects. Which comes down to what is in the drill holes for explorers, and the quality of the discoveries moving through the development stages and then into production.
Another crucial factor that I pay a lot of attention to is the work that management of companies are doing to get their story in front of investors.
Telling the story has never been more important because due to the internet, investors are constantly pulled in many directions. Management needs to get out on social media and in video interviews to tell their story. Pretty much constantly.
What surprises me most is how few mining companies are utilizing X-Twitter which has a strong mining stock investor community. It truly is the primary go to social media site where folks go to see breaking news. I see plenty of companies with a profile on X-Twitter, but they don’t use it to its full potential.
They could do much better at posting their own content and relevant content. Plus, engaging with their followers. It is much more than a portal to put news out on, few do it well.
Another fantastic tool for mining companies are videos, interviews, and webinars on Youtube. People love watching videos. I see it in the backend stats on the video content I produce. Often they have hundreds of views that can get into the thousands.
The real secret sauce is how long the average viewer watches the videos. I do long form shows and the average watch times can range from 30% to over 60%.
I find too often, management of mining companies get much too focused on the viewer count per video. This can be and is often manipulated through buying of viewers with digital ads.
The reason I recommend management not be so focused on the viewer counts is because if they are bought, the viewer will often click on the video and then leave quickly. Sure, having 5k to 20k or more views looks good, but if 95% or more are clicking then leaving within 15 seconds, it is meaningless.
Another crucial thing that I like to make management of mining companies aware of is the cost per qualified investor viewing my content. It is far and away less costly than attending mining conferences in person.
For the cost of going to one mining conference. When they consider the flights, hotels and cost to attend, I get many more engaged mining stock investors paying attention by doing multiple videos over a six month or twelve month sponsorship program.
Most importantly, keeping a serious mining stock investor's attention during an in person mining conference for 10 minutes is challenging. My interviews regularly have viewers watching for 10 to 30 minutes at the comfort of their own desks.
Those high engagement statistics happen for a few key reasons. I’ve been in the mining business for over 30 years, during that time, I have been mentored by extremely talented geologists, geochemists and geophysicists that taught me what to look for in projects.
I have also done hundreds of interviews with some of the most talented executives in the mining business. This has helped me to know the right questions to ask and how to draw the guts of a company’s story from executives.
In addition, I have a passion for rocks, so when I see impressive results and hear about how a company will explore, develop and mine their projects, I have genuine enthusiasm.
When I conduct interviews, and find high quality projects then discuss them with an executive that is talented at telling their story, it makes for great content with impressive engagement statistics. Which my curated audience of engaged mining stock investors pay attention to.
I wanted to discuss these topics in the closing of this report because it helps readers to understand what I do.
I have several peers that also do interviews, but very few, almost none of them have the kind of experiences I do. Anybody can turn on a camera and post a video on Youtube. Extensive experience in the mining sector is much harder to come by, on that front, I have very few peers.
Another reason I wanted to highlight these topics is to explain how I look at companies. First and foremost, it is about the project and results, but it is also very important to me that companies make the efforts on X-Twitter and Youtube to get the story out.
If they have a great project, but don’t use the social media tools, they run the risk of not being a top of mind company for investors in mining stocks. These days, I think it is crucial to have both.
All the best,
Allan Barry Laboucan
Disclosure
Rocks And Stocks News does not make buying or selling recommendations. The reports are for information purposes only. Sponsors pay a fee to Rocks And Stocks News for content creation. The business model of Rocks And Stocks News is to fund research and reporting on the sector, picks and sponsors through corporate sponsorship. We are thankful to sponsors for enabling commentary free of charge to readers and viewers of the reports. When reporting on sponsors it is on behalf of the sponsors discussed in the portion of the report mentioning the sponsor. Before making any investment decision it is important for you to speak with your financial advisors to consider your risk profile. It is also important to do your homework. To help in that process, Rocks And Stocks News means to be a gateway by doing reports and interviews of management of sponsors and picks. The reports and interviews should not be considered investment advice. Allan Barry Laboucan is the founder and owner of Rocks And Stocks News, he has worked in the mining sector since 1993 and has been reporting on the sector since 2005. He has worked with and been mentored by very talented geoscientists in geology, geochemistry and geophysics. He uses the skills he has picked up during his career to assess sponsors and picks in the reports. Whether a company is a pick or a sponsor they go through the same filter and are reported on when important news is made that Allan Barry Laboucan wants to discuss on the Rocks And Stocks News platform. He may own shares in sponsors and picks for investment purposes which he discloses when discussing them in the reports.
