From The Maven Letter: 3 April 2024
Gold is marching higher. At close the price reached $2300 per oz.
It’s a very impressive chart.
As I wrote at length last week, this move is coming entirely from Asia. The People’s Bank of China (PBoC) is buying gold hand over fist. Meanwhile, putting money into gold as a store of wealth is resurging in China, especially among people 25 to 35 years old.
Here’s how the article in The Straits Times starts:
BEIJING – With China’s deflation at its worst in 15 years, a volatile stock market and bank interest rates too low for her liking, 18-year-old Tina Hong is placing her financial security in gold beans.
Weighing as little as one gram each, the beans – and other forms of gold jewellery – are increasingly viewed as the safest investment bet for young Chinese in an era of economic uncertainty. It is part of a larger consumer trend for all things gold – from bullion to beans and bracelets – that has gripped the mainland.
“It’s basically impossible to lose money from buying gold,” reasoned Ms Hong,
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From Silver Stock Investor: March 2024
I like to call silver the “Rodney Dangerfield” of precious metals: it just doesn’t get the respect gold does.
Why is that? Well first, gold is more valuable than silver for the same weight. In other words, it’s more concentrated wealth. That’s made gold the asset of kings and queens, and a top choice for jewelry.
But in part because of its lower per unit weight value, silver has been more practical as everyday money. It’s considered to have been responsible for a higher value of transactions throughout history. In other words, silver’s been daily money for about 5,000 years. Not even gold can say that.
What we do know is that silver follows gold, with a lag. But when it starts to catch up, it tends to outpace its more valuable cousin. This chart shows the last four main silver bull markets. We can clearly silver rise at the same time as gold, then catch up and generate even larger returns by the end of the bull.
Gold has been in a high consolidation range since 2020, and has been mostly above the $2,000 level
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From The Maven Letter: 27 March 2024
An article by Jan Nieuwenhuijs, published late last week, has taken the gold investor world by storm. Everyone is talking about China Has Taken Over Gold Price Control From The West. Many have asked me what I think.
Before diving into his article, let me state that I have a lot of respect for Jan. I’ve never met him but he started writing about gold about the same time I started Resource Maven. He initially focused on China and he figured things out about that opaque gold market that no one had figured out before.
He now writes about all things gold for many outlets and I often read his articles. And he continues to be his own person, which is to say that he often contradicts common gold bug thinking.
When I first read his latest argument, I was skeptical. It seemed too easy. But the deeper I dove, the more likely his argument became for me.
His argument is that dramatic increases in Chinese gold buying, by both the People’s Bank of China (PBoC) and retail Chinese, are the force that has driven the gold price in
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From The Maven Letter: 20 March 2024
The Fed had its meeting. The result was as predictable as rain in Vancouver: no change in rates and a dot plot that still suggests three cuts this year but a statement that says no cuts will actually occur until the committee has more confidence inflation has been tamed. The statement also raised the Fed’s inflation forecast for year end to 2.6% (from 2.4% previously) and increased the GDP growth forecast to 2.1% at year end (from a 1.4% estimate a few months ago).
So…it was a non event, with forecasts that highlighted good growth and persistent inflation. A non event is fine in many ways – central bank surprises are rarely good! – but it somehow still prompted gold to jump to new heights in dramatic fashion.
If gold jumps higher without good fundamental reason, is it a bull market?
I’m honestly asking that. Because my first response to the non event Fed statement and press conference was to wonder two things:
- Will three cuts be enough of a rate drop to get investors interested in gold?
- Will three cuts happen? The Fed just strengthened its economic forecast (better
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From The Maven Letter: 13 March 2024
Why did gold suddenly shoot higher? Good question. It’s not because western investors are buying gold ETFs. In fact, as of a few days ago they were still selling those, creating this rather amazing chart (thanks to Brien Lundin for it) showing the gold price rising and gold held in GLD falling.
Yet gold moved. I think it happened because gold-interested investors decided three pieces of news supported the idea that rate cuts are coming.
In the JOLTS report we saw another drop in the quits rate, putting quits lower than they were pre-COVID. People are hanging onto their jobs, which reduces labor market friction and eases wage inflation.
The jobs report showed decent job growth for February but revised January’s blockbuster 353,000 gain to 229,000 (the start of the year was not all that hot) and showed unemployment bouncing from 3.7% to 3.9%. That’s still a fine number…but it’s a notable rise.
Then Jerome Powell, in his testimony to Congress, reiterated that he still views policy as restrictive and that the FOMC is “not far” from having the confidence to
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From The Maven Letter: 28 February 2024
The spot price of uranium dropped 10% over the last two weeks…and some investors freaked out.
I am not freaking out. In fact, I’m using this pullback to buy more uranium exposure. Let me explain why
Uranium doubled in price over the last year because there is not nearly enough supply to meet demand. The market is also being split into two halves, east and west, and that is making the supply gap worse, especially for the west, where production is lower and demand keeps ramping higher.
Canaccord just issued a report called The State of the (Nuclear) Union in the United States, which summarizes all the legislative and financial supports for nuclear underway across the country. Federal legislation has gotten fair coverage already – major support for nuclear fuel and power in the Infrastructure Investment and Jobs Act of 2021 and the Inflation Reduction Act of 2022, for instance – but there has been a lot of pro-nuclear movement on the state level as well. Below I’ve listed some – not all, just some – of those.
- Virginia: new legislation promoting nuclear power, de-risking project permitting, and establishing a Virginia Nuclear Innovation
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From The Silver Stock Investor: February 2024
The Silver Institute recently released its 2024 outlook, prepared by Metals Focus research consultancy, in advance of its World Silver Survey 2024, due out in mid-April.
I think it’s worth reviewing for their thoughts, along with my own, on what’s expected for this year in silver.
Demand
They see silver demand reaching 1.2 billion ounces which, if reached, will be the second-highest level on record, after 2022’s high of 1.27 billion ounces. They expect that will be driven by industrial consumption. They feel that in the near term, precious metals could remain challenged as we wait for U.S. rate cuts and the Chinese economy remains weak. They also believe that the second half of this year will improve significantly as rate cuts begin in the U.S. For the most part I agree with this view.
In their assessment, global demand for silver will rise 1% as industrial, jewelry and silverware demand rise. Industrial fabrication should grow by 4% to a record 690Moz, surpassing last year’s all-time high of 632Moz. As you might have guessed, solar will lead the charge as capacity grows and the move towards higher-efficiency solar cells, which require more silver,
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From The Maven Letter: 7 February 2024
I’ve been talking about uranium a lot – and I’m going to talk about uranium again today because developments just keep feeding the bull thesis for this market.
The big news last week was Kazatomprom revealing just how much less uranium they will produce this year compared to what they were promising to produce just a few months ago. In the middle of January they warned this news was coming…but the details were worse than expected.
The miner cut 2024 guidance by 14.2%, erasing 9.5 million pounds of expected supply. That was perhaps in line with expectations. The worse part came if you paid close attention to what’s driving the miss, which is not only limited access to sulphuric acid but also that the big new mines Kazatomprom is relying on for growth are requiring more acid to produce each pound of uranium.
Acid needs are higher for two reasons: acidifying a new leach mine requires a big initial flush of acid, and these are big mines so that’s a lot of acid, and the geology at these new mines just requires more acid to pull the uranium out of the rock. Since Kazatomprom
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From The Maven Letter: 25 January 2024
I didn’t expect to leave these conferences feeling more bullish. Perhaps the last too many years of weak mining markets have worn me down, but I had very low expectations around finding bullish sentiment.
What’s notable is that I found it from some of the voices I respect the most.
A prime example is that I had a long chat with Ross Beaty. Ross is one of the most successful investors in the mining space in modern times, right alongside folks like Lukas Lundin and Frank Guistra. He is known best for Lumina Copper, which was a vehicle he built in the early 2000s. He picked up five large copper projects free of fatal flaws when the copper market was still very weak and advanced them meaningfully for 4 years or so, demonstrating that each made sense as a mine. All five were acquired in the hot markets of 2007 to 2011, returning over one hundredfold for Beaty and his investors.
He had the same bull thesis for silver as for copper and that led him to found Pan American Silver, with the idea that investors had few options for pure silver
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From The Maven Letter: 17 January 2024
I don’t mean to inundate you with uranium updates…but it would be inappropriate not to discuss the metal that jumped 13% in the last week. I added that jump in green on the chart below because it’s very hard to get a uranium price chart with the most recent week’s data.
It’s important to remind that there is almost no speculative action in the uranium spot price. Several mainstream metals have futures markets and leverage options and the like, all of which create speculative pressure on the price (in whichever direction).
Uranium has none of that. Yellowcake is traded by appointment – literally. All of the buyers and sellers know each other and each deal is negotiated between two parties. The parties then report their deal terms to the two groups that calculate the spot price (UxC and Trade Tech). So the spot price simply represents the price at which transactions are taking place.
Why did the spot price jump so much in the last week? Because Kazakhstan, which produces 40 to 45% of the world’s uranium, admitted that it will not produce as many pounds as it guided this year and probably won’t
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