Dave Erfle – A Technical Outlook In Gold And Opportunities In Certain Types Of Gold Stocks
Dave Erfle, Founder and Editor of the Junior Miner Junky, joins us for a review of the technical setup in gold and a deeper dive into the different subsectors and stages of the gold mining stocks that have his attention moving into 2024.
We start off outlining the lack of news in the PM equities sector, and the mild pullback we’ve seen in the precious metals, and really most market sectors, for the first week of 2024. This is after a several month rally across the board in markets in Q4 of 2023, where a number of new highs were achieved. One of the areas we hone in on is that gold has been holding around and above the key psychological price level of $2000 for the last few months. Holding above $2000 for a longer period of time may be starting to change attitudes and sentiment to this level being more of a floor of support moving forward, versus the ceiling it’s been the last 13 years.
We then shift over the gold stocks where we highlight that with inflation coming down, and costs starting to moderate, while the metals prices have moved higher, that we may be transitioning from the narrative of margin contraction over to one of margin expansion. This leads into a discussion of if the producers that are making good money with current margins may lead to an increase in mergers and acquisitions in the year to come.
Dave then breaks down which types of PM mining stocks he has been positioning in within his portfolio. He has not really been focused on taking the extra risk on explorers because the vast majority of them are not getting rewarded and have pulled back much harder over the last 2 years, and haven’t participated as much in the rallies. He is more focused on the optionality of the developers with solid projects and management teams that have defined value and ounces in the ground, as well as core position of smaller growth-oriented producers.
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“The Junior Explorer Sector” is pretty much all inclusive. We agree that “ all explorers” are not bad. Therefore I assume that we agree that if there is no intervention, some will do very well on merit.
Although there will always be some Zombie and/or “life style” Explorers, that description does not apply to all explorers. During the last several years there have been scientific advancements in technology that have reduced some of the past risks in locating prospective resources. In addition, there has been increased government interest in assisting explorers with developing new projects. We are also seeing some interest in expediting the permit process that has been a hindrance in the past. There have also been increased methods for funding explorers outside the corrupt banking system such as Royalty/Streams, joint ventures, various perform-in models, private placements, people like Eric Sprott with fund support in various forms, equity firms such as Fidelity or hedge fund investment, etc.
However, when the individual Explorers are not in the mainstream of Wall Street interests like ETFs, Index Funds, Bank Investment Funds, and other Managed Money Products… they are easily fair game for Hedge Funds, New York Fed Trading Desks or other Wall Street activity that can affect pricing of blocks of individual stocks by use of algorithms and/or “paper price manipulation” by CME and LBMA activity. These short comings of the “system”, although corrupt and uncorrected, do more damage to the Mining Sector than any single or collection of zombie or life style company since an algo cannot distinguish “quality” among miners but treat them as a pack. This group treatment affects price and artificially affecting price direction is criminal. So the Sector can fail but so can Amazon with the right algos being employed on a daily period. There was a study several years ago where they looked at the JP Morgan Precious metals Trading Desk success for a year or two and determined they never had a day where they lost money. I don’t have a cite, but worth researching. The bottomline is being careful which way the finger of guilt for Explorer performance is directed. The price suppression very well could be a cover of Government, Political and Corporate corruption in their long road of transfer of wealth, destruction of the dollar and criminal theft.