Show Notes
I was on a panel with veteran geologist Brent Cook earlier in the week and something he said rather struck me. “It’s shaping up to be a brutal summer for mining companies.”Brent Cook
Looking at the chart below, it’s hard to disagree. The Gold Miners Bullish Percent Index has fallen to zero. Not 5 or 10, but zero. That’s lower in the in the crash of 2008 and during the Covid panic. It has only ever reached this level during the darkest days of the great gold bear market of 2011-16, and even then only twice. This chart measures the percentage of gold mining stocks that are on Point & Figure buy signals. If every stock is on a buy signal, the reading is 100. If none are, the reading is zero. A reading of zero does not mean prices cannot fall further, only that not a single stock in the index is in a technical uptrend. Readings like this only occur at moments of extreme pessimism. But what makes today’s reading so unusual is the backdrop. In 2008, everything was crashing. In 2013 and 2015, gold itself was in a vicious bear market. During the Covid panic everything was crashing. Today, gold’s above $4,000; silver’s above $60. The fundamentals for higher prices - central bank buying, irretrievable government spending and, in the case of silver, industrial demand - remain. Yet the mining shares are in the swanny. And these are monthly charts. Such extremes take time to develop. Daily and weekly indicators can hit zero fairly easily. Monthly indicators rarely do. This is an extraordinary breadth washout. Why is it happening? Inflation (in the true meaning of the word) When gold and silver went bananas late last year and early this, mining companies took advantage of the frenzy, as they always do, to raise capital. Bucket loads were raised. Typically in Canada there is a four-month hold after a capital raise. It means that capital raised in January, for example, only came free trading last month and capital raised in February is only coming free trading now. Somebody has to buy all that paper, and, if they don’t, prices fall until somebody does buy it. Add that to the broader decline in the underlying metals prices, especially gold and silver, and you can see why junior mining is having such a rough time of it, and why Brent thinks things are going to get brutal. Too much paper. Not enough people to buy it. The sector simply needs time to digest all that paper. Another leg higher in gold and silver would increase buying, but for now money is flowing in the opposite direction. Such extremes can prove excellent buying opportunities - though if you bought the 2013 dip you had a wait on your hands - but we have all this paper to get through. Many miners are terrible businesses, years from any cashflow. Costs, especially energy, have risen. Dilution is relentless. The bear case is that mining stocks are warning us that gold and silver are headed lower. On the other hand, the economics of mining have changed with gold and silver this high. Producers should make a lot of money. They will need to replenish lost ounces. The value of deposits has changed. Previously uneconomic mines start to look viable. The value of genuine new discoveries is immense. The bull case is that miners are pricing a disaster that doesn’t come. Gold and silver stabilise, the financing overhang eventually clears and the sector re-rates sharply higher. We are near capitulation. With a BPI reading of zero, one thing is certain: the sector is not over-owned. Given that June typically sees the low for the year in gold and silver, I favour the bull case. But the summer is always weak. We might have a while to wait if my ongoing thesis that gold and silver range trade for a year proves true. This is not 2011-16. It’s a mid-cycle correction. The question is not so much whether the sector is hated or not. The chart tells us it is. The question is how much longer investors can stay this pessimistic if gold remains above $4,000 and silver above $60. Lifetime subscription prices
More from The Flying Frisby - money, markets and more
Something a little different this week. On Monday I gave a talk for UK Finance called Making Sense of It All, about the multiple contradictions at work int he economy: rising bond yields yet equity markets grinding higher, huge investment in AI despite limited profit, and the growing squeeze on the materials needed to build AI infrastructure. (Many thanks to Duncan and Rhiannon for inviting me to speak). I’ve taken the deck and put together an online version - the first time I’ve ever attempted such a thing - I hope you will find it useful. The transcript is available above. Until next time, Dominic If you live in a third world country such as the UK, I urge you to own gold or silver. The pound will be further devalued, as will the euro and dollar. The bullion dealer I use and recommend is The Pure Gold Company. They deliver to the UK, the US, Canada and Europe. More here.
After an extraordinary run which started in 2022 below US$20/oz and ended in January this year at US$122, silver has been working its way downwards. We have had a correction of almost 50%. Today we’re at $58/oz having been as low as $55 in July. We are almost certainly going to go back and retest that low, I would say, and silver is very much in a downtrend. $50 has been a huge line in the sand that goes all the way back to 1980 and for decades silver could not get above that number. Then, late last year, it cut through it like butter. What was resistance becomes support is one of the technical analysts’ guiding mantras, and there is every chance $50 will do just that. However, if there is one thing I have learnt about silver over the years it is that has an unrivalled propensity to let you down, which is I suppose my way of saying it could quite easily go a lot lower. It’s silver after all. However, the fundamentals favour silver. The market remains in deficit. The Silver Institute’s latest World Silver Survey forecasts a 46.3 million ounce deficit in 2026, which would be the sixth consecutive annual deficit. Never mind jewellery and investment demand, silver finds an enormous amount of industrial demand (~60% of annual demand), especially in electronics, because it is such a good conductor of electricity. The sudden increase from solar panel demand a few years back is thought to have triggered the recent run, although manufacturers are reducing the amount of silver used in each panel. Bear markets are a time to build. As an investor, you research the companies you might want to buy - there is no need necessarily to rush out and buy them - start building positions when nobody else wants them, make the purchases on your own terms. There is no need to rush. With that in mind, I am going to tell you about my largest silver position today. I even have an interview with the boss. It was a big winner for readers in the last cycle going from below 30c north of C$3, rising more than 1,000%. With the falls in the silver price it has now come back more than 50%, and I think it is worth taking a look. Its CEO is both young and competent and he is growing the company in an admirable way so that in 3 to 5 years time you are going to see something much bigger.
It’s my pleasure to sit down with with the man who “gold pilled” me back in the day with his book, The Collapse of the Dollar. James Turk, founder of GoldMoney, has spent five decades working in banking, finance and investments, making the case that gold is not an investment or another commodity, but money in its purest form. We discuss why he believes the US can no longer repeat the Volcker rescue of the 1980s, the relationship between sound money and liberty, and why he expects gold eventually to return to the centre of global commerce as technology changes the way money moves. James’ latest book is Money and Liberty and you can find his IEA paper here. This interview was brought to you by The Pure Gold Company If you live in a third world country such as the UK, I urge you to own gold or silver. The pound will be further devalued, as will the euro and dollar. The bullion dealer I use and recommend is The Pure Gold Company. They deliver to the UK, the US, Canada and Europe. More here.
Good Sunday to you, We have a fantastic interview for you today. I sit down with legendary Canadian investor Frank Giustra to discuss gold, government debt and why he believes the world is entering the most dangerous geopolitical period of our lifetime. You can either watch the video or listen as a podcast via Spotify et al.Frank made his fortune in mining and natural resources, before founding Lionsgate Films, the world’s biggest independent film studio. His track record as a businessman and investor is superlative. We discuss why he believes this is no ordinary metals bull market, the accelerating shift by central banks from government debt into physical gold, the risk that another round of quantitative easing could trigger a dollar crisis, and whether gold may ultimately need to be revalued higher, dramaticically higher. We also touch on China, financial repression, critical minerals and why, of everything Frank owns today, gold remains the asset he is most excited about. Money Markets & More is the interview series from Dominic Frisby, exploring money, markets, gold, economics and the ideas shaping the world.🥇 The programme is brought to you by The Pure Gold Company If you live in a third world country such as the UK, I urge you to own gold or silver. The pound will be further devalued, as will the euro and dollar. The bullion dealer I use and recommend is The Pure Gold Company. They deliver to the UK, the US, Canada and Europe. More here.
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