The Catalyst To Bring Gold Stocks Into The Gold Bull Market Is Taking Shape In Real Time

While gold has been showing a lot of strength in 2024, especially since just prior to the PDAC in early March, some gold stocks also improved, but the vast majority have not.

Many gold stock investors have been wondering when it will be their turn. I see a key catalyst immediately ahead that will drive the gold stocks higher. 

It is a pretty straight forward thesis. The way gold is trending, the average price of gold during the second quarter will likely be around $300 or more per ounce than the gold miners sold it for in the first quarter. 

During the past two quarters, Agnico Eagle had record production and record free cash flow. After two exceptional quarters, much better than the other major gold miners, their second quarter will be a total jawdropper. 

When generalist investors see Agnico Eagle and other gold miners making a lot of money, they won’t be able to ignore it. Then if you look back at their stock chart, they will see they have significantly outperformed their peers.

Even before they report the second quarter, it won’t surprise me that they will be trading at their record highs and go on to make a series of new record highs.

To put things in perspective, the key drivers of the gold price this year have been central bank buying of gold and retail buyers in China. These various buyers buy gold, not gold stocks, which is the main reason gold has done so well yet the gold stocks for the most part haven’t done as well. 

Generalist investors buy whatever they see moving, the gold stocks are ready to start attracting those kinds of investors. It is going to get a lot harder to ignore the gold stocks. The gold miners are about to receive a very pleasant gift when they report their second quarter earnings.

The higher price of gold during the second quarter will cause several gold miners to blow it out of the park in the second quarter. The one I’m most eager to see reported is Agnico Eagle as they have been my top pick for major mining companies, and have significantly outperformed the other majors. 

I’m looking forward to seeing the Big Three major gold miners, Newmont, Agnico Eagle and Barrick report their second quarters. In fact, I think well before they report, big money will be positioning themselves.

Prior to, and after the second quarters are reported, I see Agnico Eagle will continue to be the best performer, Newmont and Barrick will also have solid performance, but not as good as Agnico Eagle.

The blowout quarters will cause strong flow of funds into the funds that have exposure to gold stocks. The better the money managers are at picking gold stocks, will result in them seeing the best funds coming into their coffers.

They will surely want Agnico Eagle on their books, as well as Alamos Gold, SilverCrest Metals and Equinox to show a strong bench.

Alamos Gold and SilverCrest are low cost producers with strong free cash flow growth. Equinox just turned on their Greenstone Mine that will help drive them toward their stated goal of becoming a yearly producer of one million ounces.

While gold is at its record highs, copper has been on fire and trading near its record highs. This will juice up the earnings for the copper miners. The copper stocks have been pretty efficient of late as copper has been on a run, several copper stocks have been as well.

The major mining companies are very focused on adding copper projects to their assets. A perfect example is BHP taking a run at Anglo. The main reason is that although Anglo is a diversified miner, what BHP covets is their copper mines. 

So far, the takeover offers by BHP have been rebuffed by Anglo, but what speaks volumes to me is how uninterested BHP is in their non-copper mines with their focus on getting their hands on Anglo’s copper mines. 

This sends a clear message to mining investors. The majors see the writing on the wall concerning how weak the copper supply chain is and how strong demand is, which will cause supply crunches in the not too distant future.

Actions speak louder than words, although majors have not been shy about mentioning they want more copper projects, they are also putting their money where their mouths are. This is an important message for mining investors to pay attention to.

Although silver is still a fair distance from its record highs, it is moving in the right direction after recently jumping above $30 per ounce.

This will be a welcome event for the silver miners. I suspect the silver stocks will join the gold and copper bull market as well.

I focus so intensely on gold, copper and silver because they all share similar supply and demand fundamentals with weak supply and strong demand. These are not short term trends, the broken supply chains have taken decades to create. 

Key reasons it will take decades for miners to fix the weak supply chains is first they need a lot of exploration to find them, which hasn’t happened for much too long. After new deposits are found, then they need to do time and money consuming economic evaluations to assess if they are viable. Once a project passes those tests, then they have to be permitted which takes forever, and funded to build.

It took decades of underinvestment to cause the problem of weak supply chains for many metals and it will take as long, or longer, to fix the problem.

When demand is strong and supply is weak, prices go up and attract more money to go into increasing the supply to meet the demand. Sounds good on paper.

This fails to take into consideration how difficult and costly it is to find mines, assess their economics, permit them and how costly it is to build them. You can’t just go out to the metals factory and turn on the switch to increase production.

The bottom line is that miners need the price of the metals to be high enough to incentivize exploration, economic evaluations and new mine development to take on the risk. 

Metals prices can be very volatile with serious swings to the upside and downside. That is not easy to forecast, therefore not only do they need higher prices to incentivize, they also need those prices to stay high for long periods of time.

Basically, the prices of metals crucial to our modern world functioning, have been too low, for much too long. Which is why the supply chains are so weak, at a crucial juncture when demand is very powerful.

The evidence is clear and easily available for generalist investors to access. Head grades at mines have been dropping for many years, the same can be said for new discoveries. So while gold and copper are at record highs, the miners of those metals are unable to increase production.

The reason I can say this with confidence is because I follow the supply chains from exploration to development and mining extremely closely. The cupboards of exploration and development are bare while miners are working on worn out mines.  

Gold is going through a renaissance as the world is in a Death Spiral of Debt since the 2008 GFC was followed by the Free Money Era. Additionally, the central bankers in the BRICS nations are loading up on gold, while realizing they don’t need to sit on US debt and US dollars. It is much better for them to return to the Gold Standard. 

It won’t be long before the G7 nations have to put themselves back on the Gold Standard. Building their economies on excessive debt and aggressive money printing is not sustainable. 

They need to back their debt and dollars up with something other than IOUs and overly diluted currencies.

The Debt Pendulum has swung much too far in the wrong direction, it needs gold to help swing it back in a more fiscally responsible direction.

If I were the central bankers of the world, and you can rest assured they aren’t calling me for advice, I wouldn’t stop at going back on the Gold Standard.

They should also be adding silver and copper to their strategic reserves. In reality, they should be looking at increasing their strategic reserves of all critical natural resources, at a minimum to a level that gives them enough for their own domestic needs.

Something that I don’t think the central bankers of the world, or investors clearly understand is how important natural resources are for everything in our daily lives.

They will send money to tech companies, crypto currencies and AI stocks at insane valuations. But for too long the miners of the metals needed to make everything work go hats in hands scrounging around for the money needed for exploration and development while trying to supply the world with broken down old mines.

Politicians and consumers say they want alternative energy, electric vehicles, innovative technology, cloud computing, crypto currencies, artificial intelligence and modern power grids in developing and developed economies to make it all run. But, these things don’t happen by magic. They need metals and energy to make them operate.

Mining has been out of style for decades, which has caused under investment in exploration, development, new mines being built and relying on ancient mines that are on their deathbeds. 

There really are only two choices, do people want to keep progressing in a modern world or have a world full of supply crunches for critical resources and broken power grids relying on insufficient energy sources.

We aren’t going to go backwards, so mining will have to become en vogue again. For this to happen, prices of gold, silver, copper and other critical minerals will need to be much higher to incentivize new mine building. Or, turn out the lights, shut down your computers and other devices and park your cars.

Mining is absolutely crucial for our modern world, which is why the bullish trends we are seeing in gold and copper, will bring silver and other metals into the party and drive them all much higher.

We need more exploration success, more projects in development, more new mines being built and less reliance on ancient old mines.

To make all this happen will require higher metals prices.

As well as regulatory bodies that help not hold back companies trying to advance mining projects. Plus, investors that give serious mining companies in exploration and development the money and time they need to move projects ahead. And governments that get real with permitting.

The bottom line is the bottom lines of gold miners and copper miners. They are about to have windfall profits that will catch the generalist investors under exposed. This will drive valuations much higher.

The trend is our friend when it comes to the gold and copper bull markets bringing gold stocks and copper stocks to the party.

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.