Rocks And Stocks News 2024 Year In Review Says Gold Is Good

The biggest story in mining during 2024 was the impressive bull market for gold. Other big stories for the mining sector are the increase in mergers and acquisitions, as well as bigger companies making strategic investments into smaller companies.

Gold went from the bottom left of the yearly chart to the top right and is well positioned to do the same in 2025. The key drivers for gold was the Death Spiral of Debt in America, and throughout the world, destruction of purchasing power of fiat currencies, and central bankers led by the BRICS nations loading up on gold.

The gold miners are generating a lot of free cash flow as gold is well above their costs of production. Which has caused them to start getting more active in mergers and acquisitions in copper and gold projects. I see more of this happening, but it does have its limits.

One of the limiting factors is that there just aren’t a lot of mid-tiers and small miners available for the majors to take over. Plus, there aren’t enough new gold and copper mines in development that can move the needle for the majors. The same can be said for explorers with important discoveries.

Which is why majors have started a trend to make strategic investments in smaller companies to help them move their projects forward. Due to long-term underinvestment in exploration that resulted in important discoveries of gold, silver and copper, there is a dearth of high-quality development projects and explorers with important discoveries. Especially in the context of the demand for gold, silver and copper.

In a big picture sense, the supply chains for these metals from the majors down to the explorers is broken and poorly prepared for the demand. Which is a very bullish scenario for the metals, best in breed miners, developers with high-quality projects and explorers with important discoveries.

Politics

Trump won a landslide victory making a lot of promises that will be difficult to impossible to keep. One such promise, espoused by his wealthy cheerleader Elon Musk was to slash spending. This one defies logic for key reasons, one of those being that Trump already proved in his first term that he loves spending and running up the debt.

Prior to his first term, Obama was the record holder for spending for a two-term president, and Trump almost beat him in one term. Then Biden came along and followed in the footsteps of Trump, trying to set a new record in one term. Elon Musk, posted a lot on X (formerly Twitter) during the campaign and since the election about the government spending on a path to bankrupt the country. What he conveniently forgets is the insane spending of his guy Trump.

The math just doesn’t add up. Medicare/medicaid, social security, servicing the debt and defense consume more than what comes in from taxes and they are effectively untouchable. Messing around with them is a sure way to cause a voter uprising.

All the other spending won’t be easy to slash, as we saw in the recent government funding battle. The first version of the bill was a monstrous bill that had bipartisan support. Showing everybody that whether on the left or the right, politicians are spending junkies. Sure, Elon Musk was able to use his X website to send them back to the drawing board, but the final bill was pretty much the same on spending.

Musk, rightfully wants to slash spending, and he has significant power with his squawk box X to make noise. He also has his department of government efficiency, but the problem is that it is a department with little power. To slash spending he needs to get the politicians on side, and that won’t be easy because all their wasteful spending is how they pay off their donors and get rich in office from kickbacks.

Musk may also like to forget that Trump is a wasteful spender of the highest order. But the inconvenient truth is that the first thing Trump asked for when the funding battle arose was to eliminate the debt ceiling. Trump clearly has not kicked his spending addiction, and this issue will be grounds for a divorce between Musk and Trump.

They both can’t win on spending, I don’t think we have heard the last from Trump on eliminating the debt ceiling. Musk may be able to play the president on his social media website, but Trump will have the real controls on spending and the numbers, logic and math suggest he will create even more debt in his second term than he did in his first term.

Another key platform that Trump campaigned on was mass deportation. Just in the last few days there was a war on X, between the MAGA crowd that wants Trump to fulfill this promise on deportations and the tech bros (as they are called) that want immigration through the H-1B visa program. Elon Musk has a tightrope to walk as he believes in the mass deportation, but he and his fellow tech bros need the cheap workers from the H-1B visa program.

It got pretty wild on X, on one side was Laura Loomer and others representing the MAGA crowd demanding that Trump go through with the mass deportation and they aren’t fond of the H-1B visas either as they feel they take jobs away from Americans. On the other side were the tech bros, led by Elon Musk who were waging war first with Tweets, and then they got on Spaces for a war of words using the X podcast platform.

Since the Spaces battle royal, the two factions have only hardened their positions. Laura Loomer and others on the MAGA side want mass deportation and nothing to do with the H-1B visa program. While Elon Musk has hardened his position and vowed to go to war on the issue. Trump still hasn’t jumped in to cool the tensions, but it certainly looks like it will be hard to appease both sides.

Another issue that could boil over are the tariffs that Trump has set the stage for with threats to Canada, Mexico, China and any other country that try to diminish the use of the US dollar as the world reserve currency. This is another topic that the hardline MAGA crowd wants him to go full out on.

Mass deportation and tariffs will crank up inflation when it already looks like a second wave of inflation is gaining momentum. What a lot of folks don’t seem to get about the immigration issue is that it helps the economy with cheap workers. Mass deportation will slow the economy when it is already on shaky ground, and tariffs will put inflation into overdrive. At a time when the economy doesn’t need it.

Trump also campaigned on reducing taxes in a big way, but didn’t have any details about how he is going to pay for it, other than the hopes that Trickle-down economics will work. It certainly didn’t work for Reagan as he transformed America from the biggest lender into the biggest borrower. It didn’t work for Trump either in his first term as he didn’t have a plan to pay for it and helped him create huge deficits and massive debt.

After Trump won the election in a landslide, legendary gold bull Pierre Lassonde (who made his fortune investing in gold mining) did an interview, in which he said that he has never been more bullish on gold as he is now. The basis for his bullish position is that he believes that Trump will drive the debt and inflation much higher. His party controls everything, and with Trump wanting to eliminate the debt ceiling, it looks like Pierre Lassonde has hit the golden nail on the head.

Interest Rates

The Federal Reserve has serious issues to contend with. In September, they declared victory over inflation when they cut interest rates by a half-point. But, the bond vigilantes didn’t agree and have been on a buyer’s strike driving yields on debt higher.

Since the September meeting, the Fed has cut interest rates two more times, a quarter-point each time, to have brought them down by one percent. At the same time, the bond vigilantes have increased yields on the debt by one percent. This is the first time in history that the Fed and bond vigilantes have been at such odds.

The bond vigilantes feel that the Fed was premature in declaring victory over inflation and that they shouldn’t have changed course from the higher for longer game plan to start a rate cutting cycle. In the December Fed meeting, it sounded like the Fed members agreed because in Powell’s press conference he mentioned that their models on inflation slowing have fallen apart.

During the December press conference, Powell kept to the party line that they have a dual mandate for price stability and maximum employment. And that they don’t want to be too late or too early with rate cuts. Too late and they throw workers under the bus, too early and inflation gets out of control. I think they have to start worrying more about stagflation.

The jobs market is much softer than the highly manipulated government statistics. From November 2023 to November 2024, there have been 1.8 million full-time jobs lost, at least that is what they are willing to confess to. During the same period, 400 thousand full-time government jobs have been created. It is hard to pay much attention to the unemployment numbers because they ignore the effects of reducing who they count as employable.

Yet, Biden and Powell keep telling everybody that the economy is near full employment and suggest the jobs market is healthy. The reality is it isn't, which is why the voters came out to give Trump his landslide victory. The problem with the jobs market is that workers have been losing full-time jobs for well over a year and needing to take on a couple part-time jobs to keep up with inflation.

Another startling prediction that Powell made during his press conference, that got little coverage in the financial media, is that the policy makers are forecasting that economic growth will be around 1% below inflation in 2025. Powell didn’t say that they are predicting stagflation, but that is exactly what their forecasts are suggesting.

The reality is that if the government used the same methods to calculate the economy and inflation, as they did in the 1970s, we would already officially have stagflation. The 1970s was the last time there was a bout of stagflation and it was very bullish for gold.

Stock Market

The S&P 500 is priced for perfection like it was before the stock market crash following the Dotcom boom and bust. It is well into irrational exuberance territory.

Does this mean that I see a major correction coming for Wall Street stocks? That is a hard call to make for a couple reasons. One is that the politicians will spend to pump liquidity into the economy. Secondly, although the Fed says their dual mandate is for maximum employment and price stability, their unspoken third mandate is to protect Wall Street at all costs.

They are losing the battle on both their stated mandates. The jobs market is a lot weaker than the government suggests and the economy is much too soft for voters. They may be willing to throw workers, the economy and inflation under the bus, but one thing they won’t do is throw Wall Street under the bus.

More evidence that the economy is softer than Powell and Wall Street point out is that the earnings in corporate America are challenged. While the prices of Wall Street stocks are going higher, which is why the price to earnings ratio is so stretched.

The combination of the spending by politicians pumping liquidity into the economy, the efforts of the Fed to help with the liquidity to protect Wall Street, and the Wall Street bankers doing their thing, it is hard to call for a big stock market correction. It is for sure has bubbly valuations, but the powers that be will go to every length to prevent a crash.

What I am comfortable in saying is that Wall Street stocks are very risky at their current valuations. There is a high probability of a significant correction and barring a steep correction there is likely to be a long period of a sideways action with a bearish bias.

I would also point out that the last time the S&P 500 was trading at such a stretched price to earnings ratio was just before the 2001 to 2011 gold bull market that drove gold and other metals much higher. And was a magical time for the mining stocks.

Bitcoin

The last time the S&P 500 was trading at such a stretched valuation, was also when the NASDAQ was on fire due to the Dotcom stocks. Our current version of the Dotcom mania is Bitcoin.

In a world that has debit and credit cards that allow consumers to pay for things in a couple seconds, Bitcoin is much too slow to be used in any meaningful way as a payment method that can rival debit and credit cards. Bitcoin and other cryptocurrencies have no utility, their only purpose is for trading, which constantly needs greater fools to keep joining in to drive the price higher.

It is a perfect example of a Ponzi scheme that would make Bernie Madoff proud. It is actually a Ponzi scheme wrapped up in a mania.

Just like all past manias, it requires madness of a crowd that is absolutely convinced that it can only go up. Its key pumper is Michael Saylor that continuously raises his projections of how high it can go. He gives the faithful their talking points and tries to convince everyone that will listen that it can only go higher, into the millions, and that investors should sell everything they have, and borrow whatever they can to buy more Bitcoin.

Wall Street helped the pump when they came out with Bitcoin ETFs. The average price that most of the Bitcoin ETF buyers bought at is around $65k per Bitcoin. When there is a steep correction, that level will be one level to watch for it to drop through.

Mining Bitcoin is not cheap, the estimates are that the average cost to mine Bitcoin worldwide is around $75k to $80k per Bitcoin. This is a crucial number, because if it is unprofitable to mine Bitcoin, then the whole system breaks down.

It won’t crash immediately if it trades below that level, it will start with the highest cost miners failing. Then it will work its way down the cost curve. It is the kind of thing that could be like a snowball rolling down a hill, starting out slowly and then picking up momentum.

The latest surge in Bitcoin was partially due to the belief that Trump will start a Bitcoin reserve. He spoke sweet nothings into the ears of the Bitcoin faithful on the campaign trail, but the chances of him building a Bitcoin reserve is highly unlikely, he has other places he prefers to spend like a drunken sailor.

Another factor that helped Bitcoin surge to over $100k is Michael Saylor borrowing money, and issuing convertible debentures with his Microstrategy stock, to then buy more Bitcoin. This ultimately has to have a limit as investors start to look beyond the mania and run the numbers. I would guess that they are near the point that they start to ask why am I doing this at double the valuation of Bitcoin per share of Microstrategy stock? Leverage is great on the way up, not so much on the way down.

There is a very good chance that Bitcoin has already topped and is in the start of a correction that could shake the faithful. Let’s see how convinced they are when it trades below the average cost of mining it and the average price people paid on the ETF hype.

After that it will go into freefall as the mining network starts to break down and folks start panic selling to get out, including the Microstrategy lenders and those that convert to stock at near the record highs.

Ultimately, Bitcoin and other cryptocurrencies have sucked in a lot of generalist speculators that in the past would have been into gold and the gold stocks. The smart ones that are sitting on big gains, or any meaningful gains, would be well served to lock in those gains well they are still around and consider gold and gold stocks. Silver and silver stocks are another place well suited for the Bitcoin and cryptocurrency crowd.

BRICS

The central bankers in the BRICS nations started increasing their gold reserves after the 2008 GFC and in the past few years have ramped it up to set new records. They aren’t the only ones, and as of this year, gold has become the second highest reserve currency held by central bankers as it surpassed the Euro.

The trend that started back in 2008, had a lot to do with the growing debt in America and the realization they were holding too much American debt and US dollars. So they started diversifying into gold. After Russia started the war with Ukraine and got hit with sanctions and removed from the SWIFT banking system, central bankers realized that if they got on the wrong side of America, the same could happen to them. Which caused them to start setting records for buying gold.

Due to the unsustainable debt growth and the concern about running afoul of America, they came to the conclusion that holding US debt and US dollars in excessive amounts was not a good idea. They wanted an alternative to the world reserve currency and as gold has no counterparty risk, gold became the go to asset for them as it is the soundest money.

They started talking about the potential for a BRICS currency, and many outside the network scoffed at the idea of it replacing the US dollar as the world reserve currency. I agree with the skeptics of a BRICS currency, it is a long way off in the future. At least in the sense of creating a new fiat currency. What I do think they are in the process of doing is backing their debt up with gold and at some point in the not too distant future, having gold return to a position of playing an important role in international trade.

They are already making trade pacts to transact in their domestic currencies, and once gold reaches a larger position in their reserves, it will start resuming its past importance in international trade. Fiat currencies all over the world are constantly destroying purchasing power, which makes them less than ideal for international trade.

Whereas gold is doing its job to protect against purchasing power destruction against every fiat currency, including the US dollar. It is the soundest money because it has no country creating debt around it and no country owns a printing press like they do with fiat currencies.

It is the perfect solution to the Death Spiral of Debt in America, and to protect against the ravages of inflation destroying purchasing power. The central bankers in and outside of the BRICS nations see this reality. Which is why they are loading up on gold.

The central bankers in the West want to keep it business as usual with their debt creation and printing money. But they are on an unsuitable path that is only getting worse as they refuse to cut spending and the cost of servicing the debt is getting more severe and they keep destroying the purchasing power of their fiat currencies.

US Dollar

The USD index was under pressure from the summer until October, and then it started a significant rally that picked up strength after Trump’s landslide victory. The pressure was due to the market starting to price in the Fed going into a rate cutting cycle. The rally got underway when the bond vigilantes went on a buyer’s strike and drove yields up.

The trade looks to be based on the Fed ending their rate cutting cycle much sooner than expected. The bond vigilantes are certainly worried about a second wave of inflation starting and that they disagree with the Fed declaring victory over inflation. Plus, that Trump will be bullish for the US dollar.

The US dollar is looking seriously overbought and due for a significant correction that will be very bullish for gold.

Gold Is Setting The Standard

It is no wonder that when Nixon ended the last vestiges of the Gold Standard, the politicians went on a debt and money printing spree. It removed the guardrails that politicians need to curtail their ludicrous addiction to spending.

As is often the case when it comes to economics, the pendulum swings too far and America is at that point now and it will keep swinging in the wrong direction because it is on cruise control. Debt to GDP is nearing 130%, which is the kind of statistic that was reserved for basket case economies, not the largest economy in the world. While servicing the debt has overtaken defense to become the third highest expense of the US government.

Gold is highly correlated to debt growth and with American debt growth out of control, and the BRICS nations recognizing the debt crisis, gold is going to head much higher.

With the largest economy in the world in a Death Spiral of Debt, run by politicians on the left and right that are spending junkies, and a compliant central banker that is their drug dealer, and a turbo charged money printing press, gold is the beacon of light shining brightly.

The debt crisis has gotten so bad that it is on a collision course with only two solutions. One is to default on the debt, or a modern Gold Standard, maybe it won’t be a formal one, but it will be a version that is similar. Either solution is good for gold.

My hope is that folks in the West start following the lead of Eastern investors and central bankers to put themselves on their own personal Gold Standard. It is the only way to protect their wealth and against the havoc of fiat currencies destroying their purchasing power.

In Closing

There you have it, the Rocks And Stocks News year in review for 2024. Next up will be our Outlook 2025 report.

2024 has been a great year for gold and 2025 is perfectly set up to rival 2024. Which will also be bullish for high-quality gold stocks, as well as silver and copper and the stocks in companies mining those metals, developers of new mines and explorers with important discoveries.

We will start 2025 with our outlook report and then be launching a series of videos digging deeper into a group of gold, silver and copper stocks that are well positioned to outperform bullish moves in these metals.

All the best,

Allan Barry Laboucan