General Thoughts on PMs
There has been crowing in some quarters about the awful week Bitcoin has suffered. But look at the 52 week chart and it’s still in 4x territory for those who bravely plunged into its toxic opacity last year.
Gold on the other hand, and silver, have just drifted off over several months. Of course they trade tied to realities of supply and demand, central bank policies, interest rates and currency fluctuations. Gold has been battling headwinds of US dollar resilience (amazing!) and the puny rises in the mighty pool of the 10 year treasury note.
So right across the junior miners/explorers you see sectoral rotation and while PP money can come in it comes in from specialist investors and old plungers who love the game - not the broad retail participation and entry required to really move up valuations. Given how many market participants are now pooled vehicle investors through mutual funds, ETF’s, exchange index funds, the old idea of stock pickers getting excited and piling in with broad distribution is almost quaint.
And the short daily swing traders and manipulation on lightly (by value) traded issues is ridiculous and wholly unregulated. Almost no way an amateur can compete with pro traders and hedgers. Note how the label “day trader” is almost never heard any more? Most either rode off into the sunset while the going was good, or stuck around over the last decade and lost their shirts. All those “formula” trading platforms ... mostly gone too.
So grinders out in the field and the real world, doing the hard work of actually prospecting and exploring, taking the huge risk of drilling, can no longer count on indicators like chip sampling, proximity, visible mineralization in cores, to move their valuations. There was a time when DEC with the same NR’s and the golden triangle proximity to Eskay would have generated lots of froth. Today, while there may be accumulation occurring the fear and loathing over the upcoming FED meeting, and especially the plodding and unconvincing choppy gold and silver trading, keeps the griddle stone cold.
What will it take? First, you gotta have a developing model of ounces per ton in a scenario developing into an economic mine model. Second, the US dollar has to be neutral to devaluing ... which is not a long term hard sell, the economic house is in disorder, but there is a race to the bottom where all fiat is equally ugly. Mostly you probably have to believe that the FED will overshoot on its inflation target and commodity prices both due to constrained supply, but also persistent monetary and wage-growth driven inflation, will start to show steady growth, which will put the fear of God into those who have been dining out on overvalued FAANG and similar stocks. Then the pooled funds and derivatives will start sector rotating into PM’s as well, and finally we will see a return of more plungers and stock pickers when they see significant money being made by early entrants. Ya just gotta be patient. Accumulate a diversified pool of quality prospects with decent management. In many ways this might be almost exactly the sweet spot when you can accumulate in a cool market, even on the back of good preliminary results.
Overcoming the frustration of knowing what should happen, but is stubbornly not happening, that takes patience.
Here endeth the lesson. Let us pray.
cg