Erik Wetterling, Founder and Editor of The Hedgeless Horseman website, joins me to discuss gold’s standout role as a safe haven, amidst the extreme market volatility; and how all of this is translating into muted reactions in gold stocks to their improving economics and the rerating opportunities present at current valuations.
–> Key themes covered in this interview:
- The gold price rose to record highs again today over $3,440, on the back of global uncertainty and a continued selloff in US general equity markets. Almost every market was down today expect for gold, and to a lesser extent, silver.
- We note the odd market action where a number of prominent precious metals producers sold off for a big portion of the day, with their margins continuing to expand, only clawing their way higher towards the end of the trading session.
- Many development projects with gold as primary or contributing input and expanding economics, were also selling off during much of Monday’s trading session, with some recovering in the final hour of trading.
- The importance of market psychology and investor sentiment trends into price moves; noting that some investors may not believe this move higher in metals prices is going to stick or have become too fearful to take actions. Other investors may be concerned by the selling in other markets, and thus they have been pulling profits on one of the few sectors in the green this year.
- A nuanced look at why we aren’t seeing a much bigger increase in merger and acquisition deals across the spectrum of gold companies. We do note the takeover deal announced today though, where Lumina Gold Corp. (TSXV: LUM) (OTCQB: LMGDF) is being acquired by CMOC Singapore Pte. Ltd.
- Reflections on how profitable even the Tier 2 and Tier 3 gold mines are at present, and the amount of M&A that has focused around Tier 2 and Teir 3 gold projects the last few years. Despite the retail obsession with discussing Tier 1 deposits, at the exclusion of everything else, there really are very few assets of this size and scale. There are plenty of opportunities available to investors further down the spectrum of projects that may still have large valuation disconnects.