Bill Cara

Despite the severe decline in the price of Gold and Silver this week, and over seven weeks, nothing’s changed

Prospectors are busy raising capital and, with the latest technologies, are finding potentially lucrative properties. Developers deep in industry experience are building new mines that offer high IRR, and as a consequence of Fed policy, they have access to big money for funding purposes. Smaller producers are on the hunt for acquisitions that would put them into the safer mid-tier class of the industry. The largest producers are seeking to discard non-core assets and replace them with mines that will extend their company asset mine life and lower their AISC.

Regardless of short-term price fluctuations, the Gold & Silver mining industry is abuzz. The underlying reason is simple: earnings, cash flow, and dividends today are easier to come by for a Precious Metals mining company than at any time in the past 9 years.

Because of their different perspective on wealth management, investors like Warren Buffett are replacing speculators. The 200 dollar price drop in the past seven weeks is not going to change that.

Investors understand that 7 or 8 weeks ago, stock prices had entered the sci-fi zone of ten-day three standard deviations of trading activity that with almost total certainty was a blow-off cycle top that would be followed by a substantial pull-back.

So the price and market sentiment is such on this worst trading week in years for me, real investors will soon replace speculators. They will be encouraged by their advisors at companies like Goldman Sachs, Bank of America, Morgan Stanley, and JP Morgan.

This is the time when smart money takes advantage of the unthinking short-term actors.

But, whether it is miners who are ignoring the recent price drop in precious metals or the investors who always move into prices after small speculators blow up their capital and quit, nothing’s changed.

In fact, Citi today says Gold could hit 2100 by year-end.

Despite the huge drop in the Gold price from 2089.20 high in the futures market just seven weeks ago to 1870 this morning, a new report from Citi in their Quarterly Commodity Review is suggesting a +200 leap by year-end to a new high.

They attribute this to possible delays in the voting results after the Nov 3 election. Seems far fetched, but possible. As for me, I believe that post-election, there will be massive spending by govt to help put the COVID-19-damaged economy back on track. That spending ought to substantially weaken the US Dollar, which in turn would lift Precious Metals prices.

I believe that in 1Q2021, the price of Gold will be trading in the 2000-2500 range.

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