Erik Wetterling, Founder and Editor of The Hedgeless Horseman website, joins us to review the risk/reward set ups at market extremes, and makes the point that what we do at extremes has the biggest impact on the longer-term performance of our portfolios.  As the saying goes,  “Most of your returns are in a bear market, but you just can’t see it yet.”

We start off discussing the very negative sentiment in the precious metals sector, and the flurry of calls for lower gold prices that we’ve seen up until just the last few days, now that the $1673-$1675 support zone was broken to the downside.  In the middle of this week, when it looked like Great Britain’s economy and pension funds could implode, and the Band of England took emergency action to underpin things, the sentiment in PMs and markets changed suddenly.   Erik points out how wrong-footed so many would have been if they had not be able to swiftly underpin things, and how for those hiding out in cash on the sidelines, they’d have missed out on the resulting moves after that.   With so much global financial distress, we could see a market event change things suddenly, and this underpins the case for gold as a safe haven in one’s portfolio.

With regards to the gold mining stocks, they are businesses within an industry, mining, that is not going away, and thus the quality mining companies are not going to zero or out of business. Erik has been watching Bear Creek Mining (BCM) as a proxy for the sentiment in the PM sector, because with more exposure to silver, and that being a more emotional market, it is a good way to gauge interest in the sector.  BCM is now down to lows not seen since the 2008 financial crisis and 2016 low in the PM mining stocks.  He believes it is important to find companies with quality teams and projects that have the access to capital to survive this low sentiment, so that they can thrive when sentiment improves.  Erik notes that Headwater Gold (HWG) just had a major, Newcrest Mining, partner with them to help fund more exploration at 4 projects, and he sees scenarios like that as attractive.*

*Headwater Gold is a sponsor of The Hedgeless Horseman website, and Erik has shares in this company in his portfolio.

Click here to visit Erik’s site.