Sideways stock markets continue, mining stocks continue to get no attention, gold is sliding with more rate hikes now assumed, and school is about to get out for summer. I’ve gotta say: it’s a bit tough to remain motivated these days.
Thankfully, I was reminded of a few reasons to care recently. One is that proactive mining execs use quiet periods like this to incubate new deals. I’m excited that we uncovered one before it finances (expected shortly) and then gets to work on its unnoticed-until-now lithium assets in Quebec, because I think that deal has explosive potential.
I also continue to research stocks because this summer is a buying opportunity, even if I’m tired of buying opportunities. From that lens I’m interested in stocks with discovery potential, new mines showing strength, new teams taking over mismanaged assets, and good projects with big catalysts pending, as all of those have potential either in a weak market or first when the market turns up.
I also talked to two different groups advancing nice looking projects via still-private companies. One must be confident that the metals future is bright to invest today in tiny, private juniors given the absence of investor interest in this space and the stuck-money aspect of owning private companies…but I am confident in that future. The longer we go without investor attention on metals, the longer we go lacking sufficient new discoveries and mine builds to meet future demand. Letting time tick by without moving to address those deficits is solidifying and worsening those shortages: metal supply deficits cannot be quickly rectified when it takes so very long to turn a discovery into a mine. I think the coiled spring analogy works here – the longer we go without attention on metals, the higher metal prices will go when attention does turn.
That bull market will be exciting, profitable, and worth the wait. That said, the wait feels endless. I can’t use this summer as a big buying opportunity because I thought this opportunity would unfold sooner therefore I am largely allocated. However, the realization that gold is going to be boring at least through the summer and quite likely beyond led me to assess the investment theses for my advanced stocks.
Discoveries and mine start-ups can bring attention to a stock in almost any market. Stocks with advanced projects, however, need either a rising metal market or a stock-specific reason to succeed. Since we don’t have a rising gold market, I need notable pending news to justify keeping advanced names in my list.
Selling at a loss (like I am doing today with Newcore) doesn’t free up a lot of cash for other opportunities, but it focuses the portfolio and creates some cash for other ideas when I find them.
As for the macro setup, things have edged towards soft landing in the last two weeks. We got a slew of strong data points this week that reinforced expectations that the Fed will push rates higher. Stocks can’t decide how to react – the bad of more rate hikes counters the good of a strong economy – but gold got the message, giving up half of its springtime gains. And two sideways weeks doesn’t erase an upward trend for the big indices, which are very likely to keep rising for the next while given strong data points and oodles of sideline money belatedly jumping in.
With a few more months of this ahead – rate hikes keeping gold in check and money moving into the stock market but still no certainty on a soft landing – it’s shaping up to be a boring summer for metals investors. So take a break from monitoring all the data – I can do it for you, conveying conclusions – and enjoy the sunshine ahead of a fall market that will send gold or metals (+ gold) higher.
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