Gold And Silver Are Having A Great January Effect - Which Is Teeing Up A Stellar Year For High-Quality Gold And Silver Stocks
Featured companies in this report are Alamos Gold And Goliath Resources.
During the last couple trading days of 2024 through to Friday, gold has performed very well with the up days significantly more than down days and the up days stronger than the down days. This has got gold off to a great start for the January Effect after a stellar 2024 that saw gold go from the bottom left to the bottom right of the chart. The trend is shaping up for 2025 to be as strong as 2024, likely stronger.
Another great indicator that gold is heading toward a great year is that silver has been performing much like gold, in fact it has outperformed gold on a percentage basis in the recent rally. For gold to be in a true bull market, silver needs to join the party and silver improved nicely in 2024.
A key reason that I have high conviction for why gold and silver are getting off to a strong start to 2025 is because I see concerns of stagflation growing. If the economy is soft and inflation is strong, which is exactly what the Fed members predicted in their December meeting, then we have stagflation, even if the Fed doesn’t admit that is what they are forecasting.
In the 1970s, the economy was weak and inflation was strong which devastated the purchasing power of the US dollar. Over the past couple of years, we have seen a similar trend in the inflation pummeling purchasing power in the US dollar and other fiat currencies.
The bond vigilantes are doing the analysis for investors and since before the election have been on a buyers strike and drove up yields. They are doing the math and looking at the unprecedented supply of debt due to politicians (both on the left and right) addiction to spending, plus the economic challenges and inflation problems, means they want a higher yield if they are going to lend money to the government.
The Fed relies on highly manipulated government statistics, but the bond vigilantes live in the real world. They place their bets based on what they consider the credit worthiness of the government. US debt instruments peaked in prices in September of 2024, since then they have been in a serious correction that has driven yields higher and shown the bond vigilantes are concerned about the economy and inflation.
Over the past few days, there has been an uptick in the yields, but that looks like a dead cat bounce, certainly not like a change in the correction in debt instruments and jump in yields.
Stagflation is what the Fed and bond vigilantes are forecasting for 2025, but not many on Wall Street and the financial media are talking about it. That is because they know how challenging stagflation was for Wall Street stocks, US debt, US dollar and the economy in the 1970s.
What makes it more troubling now than back in the 1970s is the level of debt. Which I describe as a Death Spiral of Debt and point out that the cost of servicing the debt is the straw that will break the debt camel's back.
When stagflation was in play during the 1970s, the debt level and cost of servicing the debt was nothing like it is today with the debt-to-GDP ratio at nearly 130%. Back in the 1970s, the debt-to-GDP ratio was under 40% which was the lowest since the 1940s.
A key reason for the low debt-to-GDP ratio in the 1970s was because America ended the last vestiges of the Gold Standard in 1971. Until then, politicians had constraints on their ability to drive up debt as they had to deal with discipline imposed on them by the Gold Standard.
It didn’t take much more than a decade for the debt to start growing and by the time Reagan left office, he had grown the country from the largest lender to the largest debtor. All the politicians since Reagan have driven up the debt and now it is at an unsustainable level that is bankrupting the nation.
The four worst presidents for causing the Death Spiral of Debt were G.W. Bush, Obama, then Trump and finally Biden. These four presidents grew the debt from around $6 trillion to its current level of over $36 trillion. Obama was the worst two-term president, but Trump almost beat him in one term and Biden is as bad as Trump.
Many are conveniently forgetting the spending habits of Trump, he is getting a pass, and it is shocking that people, including Elon Musk, believe that Trump will cut spending. The chances of that are highly doubtful, in fact, it is much more likely that he will increase spending because the debt growth is on cruise control. Medicare/medicaid, social security, servicing the debt and defense exceed the income from taxes.
Trump campaigned on cutting taxes which on its own could cause the debt to grow more rapidly than most think.
His plans for tariffs and mass deportation will slow the economy and cause inflation. Which means that the bond vigilantes have many reasons to be fearful of stagflation. Not only is it likely that economic growth will be significantly lower than inflation, the supply of debt is only going to get worse.
With this backdrop, especially concerning the probability that stagflation will get recognized by more as it gets worse, it is an extremely good time to be bullish on gold and silver.
Even better to be bullish on gold and silver miners, new mine developers and explorers with important discoveries. In 2024, the gold miners ended a multiple year bear market early in the year.
This trend has really not moved down the food chain yet, but I am highly confident that 2025 will be a much stronger year for gold and silver stocks. I don’t see it being a rising tide lifting all boats kind of market, but definitely one that will lift the boats of those with high-quality stories all along the food chain.
Top Picks In The News
Alamos Gold
Alamos Gold is one of my top picks for gold miners because they are an excellent miner that has kept strong controls on their costs to produce gold which has resulted in them making records in free cash flow. They have rewarded their shareholders by significantly outperforming the bullish action in gold during 2024, and their recent quarterly report highlights their excellence in execution.
Below are some of the highlights pulled from their January 13, 2025 news release:
Alamos Gold Achieves Increased 2024 Guidance with Record Annual Production; Three-Year Operating Guidance Outlines 24% Production Growth by 2027 at Significantly Lower Costs
“With the solid finish to the year, we met both our quarterly and increased annual production guidance. Production increased 7% from 2023 to a record 567,000 ounces and combined with strong margin expansion, we generated record revenues and free cash flow while investing in high-return growth,” said John A. McCluskey, President and Chief Executive Officer.
Met increased guidance with record annual production: produced a record 567,000 ounces, achieving the mid-point of revised guidance which was increased by 13% in September 2024. Full year production increased 7% from 2023, including a strong finish to the year with 140,200 ounces in the fourth quarter, in line with quarterly guidance.
Costs expected to meet 2024 guidance: costs have not been finalized for 2024 but all-in sustaining costs (“AISC”) are expected to be at the top end of the range of revised full year guidance at $1,300 per ounce. Fourth quarter costs are expected to be slightly lower than the third quarter, as previously guided.
Record financial performance: sold 141,257 ounces of gold at a realized price of $2,632 per ounce for revenues of $375 million, inclusive of silver sales. Full year sales totaled 560,234 ounces of gold at an average realized price of $2,379 per ounce for record revenues of $1.3 billion. The strong operational performance and higher realized gold prices are also expected to drive record annual cash flow from operations and free cash flow.
Strong balance sheet: ended the year with approximately $325 million of cash and cash equivalents, up from $225 million at the end of 2023 reflecting strong ongoing free cash flow generation, while continuing to reinvest in high-return growth. The Company remains in a net cash position with $250 million drawn on its credit facility. The proceeds from the credit facility were previously used to retire debt inherited from Argonaut Gold.
Rocks And Stocks News Summary Of Alamos Gold Quarterly Report
As you can see clearly from the numbers above, Alamos Gold is a best in breed gold miner. They are increasing production while also decreasing costs, from a position of already producing gold for well below the average costs of their peers.
Key reasons for their stellar performance on the bottom line and in the trend of their stock is that they are high performance miners. Additionally, they were disciplined buyers of high-quality assets in the past that has enhanced their mix of gold mining assets.
The first thing that stands out to me is that they are making new records in free cash flow. This is because of their low-cost of production relative to their peers, and even more impressive is that they are bringing costs down even further over the next few years. They are having no problems increasing their production and replacing ounces mined with new ounces to mine.
They are hitting on all of the key metrics that I look for in a large gold miner and are well positioned to keep doing that well into the future. For investors that want exposure to gold with less risk and the potential for a gold stock to significantly outperform the bullish move in gold, Alamos Gold was a great pick in 2024 and is primed to do even better in 2025.
As I see them perfectly positioned to keep delivering on their metrics as a best in breed gold miner. And also that I see gold performance rivaling 2024, with high conviction that it will do even better in 2025 than the remarkable year it had in 2024, which will put wind behind the sails of Alamos Gold.
Goliath Resources
Earlier this week, Goliath Resources announced the best hole ever from their Surebet high-grade gold discovery in the Golden Triangle of British Columbia. The hole returned 10 metres of 139.32 g/t of gold. This makes for a 1392 gram/metre hole, which puts it in the top percentile of high-grade hits industry wide over many years.
This is what people in the gold business call a jewellery box hit, and making it even better is that if you look at a 50 metre radius around that hole there are additional high-grade gold hits in the drilling. It doesn’t have a lot of pierce points with drilling around it, so it is open to expand immediately around it as well as along strike in both directions. It certainly looks like the jewellery box can grow much larger.
The location of the spectacular hit is also impressive. It is at a point where a series of stacked veins at the Surebet Zone in the sediments meets the Bonanza Zone at the contact of the sediments and volcanic rocks. This area is now being referred to as the Bonanza High-Grade Gold Zone. This emerging zone is highlighted by having very high grades of gold that are spread out over a very large area. With abundant fine-grained gold, including coarse-grained visible gold.
What impresses me most about the Surebet discovery is the transition from sporadic fine-grained gold high in the system in the series of stacked veins in the sediments to abundant visible gold and coarse-grained gold deeper into the system at the contact of the sedimentary and volcanic rocks.
I haven’t picked a lot of Golden Triangle picks over the years, only a handful, one of those was Pretium Resources for their Brucejack discovery that went into production and then was bought out by Newcrest. They were bought out by Newmont which considers their Brucekjack Mine one of their Tier 1 gold mines. I followed them closely from their early discovery success through to being taken over. I reported on them many times during their road to take over, making it one of the companies that I got behind in a big way. I see Goliath’s Surebet on a similar path to success.
When I look at a discovery, I try to figure out analogues for it and what I see at Surebet is a Pogo Mine lookalike based on the geological similarities. Both have stacked veins that are gently dipping, with widespread high-grade gold, and associated with vertical reduced intrusion related gold.
At the risk of being accused of being overly promotional, I can see the potential that Surebet could be even bigger than the Pogo Mine. I don’t say that lightly which is why I underlined and put the word potential in bold. The Pogo Mine is one of North America’s great high-grade gold mines, and Surebet needs more drilling to confirm how big it is.
But, the drilling of the stacked veins in the Surebet Zone and in the Bonanza High-Grade Gold Zone fit nicely into the model of the zones at the Pogo Mine. I am going to be doing a deep dive into the Surebet discovery in an upcoming video in which I will show more of the evidence of why I am willing to make such a bold comparison between the Surebet discovery and the Pogo Mine.
In Closing
I wanted to highlight key reasons why I see the performance in gold and silver being set up for a stellar year in 2025 at the beginning of this report.
Then I wanted to highlight a couple of top picks, one a best in breed gold miner and the other my highest conviction gold explorer with an important discovery.
Tomorrow, Donald Trump takes office as the new president and I’m expecting plenty of fireworks as he takes office for his second term. His actions could have long-term impacts on the economy, the US dollar, jobs market, stagflation and the Death Spiral of debt which will all affect the price of gold, silver and other metals.
I suspect I will have plenty to report on about President Trump and what his second term means for the price of the key metals I follow closely.
Plus, I am about to launch a series of reports on individual companies, because I see plenty of value not being recognized in miners, developers and explorers. What I will focus on in those reports are how drilling is the lifeblood of the mining business, and how important it is to understand where a company is in their metals mineralizing systems and on the Lassonde Curve.
All the best,
Allan Barry Laboucan
Disclosure
Allan Barry Laboucan is a shareholder of Goliath Resources and holds warrants to purchase additional shares.
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Allan Barry Laboucan, the founder and owner of Rocks And Stocks News, has extensive experience in the mining sector, beginning in 1993. Since 2005, he has been reporting on the sector. He has worked with talented geoscientists in geology, geochemistry, and geophysics throughout his career in mining. Allan applies the expertise gained during his career to evaluate sponsors and sector picks for reporting purposes. Whether a company is a sponsor or a sector pick, it undergoes the same rigorous review process, with coverage focusing on significant news or developments. Allan may hold shares in companies discussed in the reports, whether they are sponsors or picks, and he discloses such holdings when relevant.
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