Financial Metals Counter Blue Chips’ Decline

‘‘When financial asset returns are close to zero,

the return on gold is 20 percent on average yearly.

Compound that.” — Peter Palmedo 

‘Financial’ metals gold and silver, along with crude oil, are slowly benefiting from hard-asset status.

“It looks like gold is going to test its all-time highs for the fourth time,” Joe Foster, an asset manager and gold strategist at GDX and GDXJ indexing firm VanEck, tells me today-Monday. “Financial and geopolitical risks just keep rising; maybe we get the break-out we’ve all been expecting for so long.”

The rise in gold to $2,014 an ounce, for one, comes with no corresponding drop in the U.S. dollar.

This places most gold prices in other nations’ currencies at all-time highs, or on the verge of new highs.

Takeaways on what could be a landmark final week of October 2023 for physical assets:

• Few if any non-ferrous metals prices benefited Friday in the sudden bullion spark. Neither are platinum or palladium getting a boost. Copper, however, rebounded from a weeks-long decline. See chart links below please.
• Small miners (sub-$200 million market value) are s-l-o-w-l-y seeing greater trading volumes. Also, higher bid and ask levels.

• “PLATINUM’s price is forging ahead after last week’s lag behind gold and silver. The platinum supply deficit grows by the month, what with labor strife in South Africa and fewer Russia avenues to market. Platinum in a geological sense is said to be 10 times “rarer” in the ground than gold is.”
  

•  Reciprocal gold theory (Quantitative asset manager Peter Palmedo) posits that the next BIG gain for financial metals will come as investors shun traditional blue-chip stakes. Dow Jones Industrials Average falling 450 points at last look; S&P/TSX Composite also tumbling; yet tech’s NASDAQ 100 steady. (I am simplifying here. See our The Calandra Report and below please.)
• Shares of large gold producers (Newmont NEM; Barrick GOLD; others) front-ran the rise in gold prices Friday; the shares started the day higher — see chart — and added to the gains when the gold spark to (now) $2,018 started three hours later.

  

We have discussed Peter Palmedo‘s reciprocal gold musings here numerous times. Peter is an Idaho fund manager who takes large stakes in explorers and miners and then seemingly holds for ages. West Vault Mining WVM; Vista Gold VGZ are two among many for his Sun Valley fund. See please: 30 Years Making Case For Patient Gold

“Liquidity is a coward; it disappears at the first sign 
of trouble.” — Late strategist Barton Biggs

Research from Yale-trained economist Biggs and others showed a mean reversion function of the S&P 500 Index and gold. As in, financial assets (née blue chips) will boom and the value of gold (and other monetary metals but primarily gold) will sink— for as many as 10 years. Vice-versa, too.

Personal and research choices for explorer-developer-producers whose mining shares have miles and miles ahead of them before they reach a fair value of their compliant gold, silver, copper, nickel, platinum, etc., in the ground? Copper miner Ivanhoe Mines IVN IVPAF (still our largest and longest holding and little credit for its nickel, platinum, zinc in Africa.

Small-scale? Banyan Gold BYN BYAGF, its shares performing pitifully yet 6 million ounces in Yukon resource; Xtra-Gold Resources XTG XTGRF, whose Ghana project in Kibi is building ounces and building cash from subcontracted alluvial gold sales and Alberta-area energy equities it owns (thus, zero dilution for a decade now); others.

Please see earlier “Redemption” reports from this month for tags and barrel-bottom reasoning re:

— Banyan Gold BYN (its shares seemingly in a prolonged slump);

— Newcore Gold NCAU NCAUF (its shares recovering this week and last);

— C3 Metals CCCM and gold-nickel explorer Orford Mining ORM ORMFF. Orford is in a lithium hunt north of Québec’s James Bay in Nunavik.

Here are the chart and price links for gold, silver, oil, non-ferrous metals such as nickel, lead, zinc.

https://www.marketwatch.com/investing/future/gc00

https://www.marketwatch.com/investing/future/hg00

https://www.marketwatch.com/investing/future/si00

https://www.marketwatch.com/investing/future/gcz23

https://www.marketwatch.com/investing/future/cl.1

https://www.marketwatch.com/investing/index/dxy?mod=home-page

https://www.lme.com/en/Metals/Non-ferrous/LME-Aluminium#Price+graphs

Still in the doghouse: shares of Contango Ore CTGO; Banyan Gold BYN BYAGF; Azimut Exploration AZM AZMTF; i-80 Gold IAUX IAU; Orford Mining ORM ORMFF. Likely tax-loss selling this fourth quarter of 2023.

Holding their own or advancing a notch: Xtra-Gold Resources XTG (albeit little volume); Newcore Gold; Fireweed  Zinc FWZ FWEDF; the uranium-cos; and Canada-Mexico producer-developer Alamos Gold AGI. 

— Thom Calandra (I own shares of Nevada shovel-ready West Vault Mining WVMDF; I own shares of Ivanhoe Mines; I own shares of Xtra-Gold, our second longest holding and profitable for us. I own shares of Alamos Gold, of Banyan, of C3, of Orford and of Newcore. Did I miss something? Ping me, please.)

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Thom Calandra is a writer and an investor. Research and material are meant as editorial opinion. He is not a professional investment adviser. Please do not consider his reporting as a recommendation to buy or sell securities.