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David Erfle – Gold In Search Of A Turn Higher, And The Valuation Gap In GDX

David Erfle, Founder and Editor of Junior Mining Junky, joins us to discuss the precious metals and the mining stocks.  We review a few potential areas that could indicate a turn higher in the sector is possible, starting with the way the last day of the quarter traded above key gold price support. Next Dave highlights the low valuation of the GDX in relation to the current gold price, compared to where the gold price was when GDX was last at current price levels.   We move on to the recent divergence in the gold equities and gold to the downward pressure in the general stock markets. We wrap up with what stage of miner Dave feels investors may rotate into first, once capital flows back into this small sector.

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Discussion
52 Comments
    Oct 05, 2021 05:39 PM

    M&A Heats Up in a Deeply Oversold Mining Sector

    David Erfle – Friday October 1st, 2021

    “In a sector where investor confidence is extremely low, mining companies re-kindled efforts to explore alliances and partnerships to bring promising projects online and share the risk between parties during the recently concluded in-person Colorado mining conferences.”

    “On Tuesday, global miners Agnico Eagle Mines Ltd (AEM) and Kirkland Lake Gold (KL) announced that they have agreed on a merger of equals, with the combined company to continue under the former’s name.”

    https://mailchi.mp/3255766875f3/david-erfle-weekly-gold-miner-sector-op-ed-1600106?e=3ac1473fe4

    Reply
      Oct 05, 2021 05:50 PM

      Gold Production From Top Miners To Recover In H2 — report

      Mining.com Editor – October 5, 2021

      “The collective production of the top 10 global gold producers is expected to recover by around 13.5% in H2 2021 compared with H1, should their 2021 production guidance all be met, according to a GlobalData report.”

      “Of the top gold producers, the highest production increase in H1 2021 came from Agnico Eagle due to increased mining and milling rates, as well as higher grades at the Meadowbank complex. The company also saw higher throughput at its Meliadine site.”

      “Meanwhile, the companies that saw the most significant falls in production during H1 were AngloGold Ashanti (a 6.1% loss), Barrick (12.9%) and Newcrest (7.1%). The collective output from these companies declined to 4.4moz in H1 2021 from nearly 5moz in the same period last year.”

      https://www.mining.com/gold-production-from-top-miners-to-recover-in-h2-report/

      Reply
    Oct 05, 2021 05:53 PM

    Senators blast new US mining royalty plan as anti-green, pro-China

    Mining.com Editor | October 5, 2021

    “US mining companies have blasted proposals in Congress that would set royalties for copper, lithium and other minerals extracted from federal land, with executives saying the measures would hurt domestic production of the building blocks for solar panels, electric vehicles and other green technologies.”

    “The president and House Democrats want to make it more difficult to get to these minerals we need. And they seek to eliminate all mining on federal lands,” said Ranking Republican Member John Barrasso (Wyoming) in Tuesday’s hearing.

    https://www.mining.com/house-democrats-anti-mining-legislation-opposed-in-us-senate/

    Reply
    Oct 05, 2021 05:53 PM

    AEM should put in a stink bid for SBB

    Reply
      Oct 05, 2021 05:58 PM

      It is more likely that the new combined AEM / KL will divest some non-core properties first, like we saw Barrick/Rangold and Newmont/Goldcorp do when they did mega-mergers. Then after that, maybe AEM swoops in to scoop up SBB on the cheap.

      I still have a small position in Sabina that I’m leaving out there for that potentiality.

      Reply
    Oct 05, 2021 05:29 PM

    Why Economists Are Talking About Stagflation

    John Detrixhe – Quartz – October 4, 2021

    “Rising energy prices and supply-chain gridlock have resurrected conversations about stagflation—a period when sputtering economic growth and joblessness coincide with rising inflation.”

    “Google searches for the term “stagflation” have spiked amid signs of a global energy crunch: Oil touched $80 a barrel last week, the highest price in three years, as natural gas set records in Europe and an energy crisis in China threatens to puncture growth. Bottlenecks in supply chains, meanwhile, are pushing up prices as factory shutdowns rock the global economy. Financial markets are caught between between stagflation worries and hopes that gross domestic product will pick up speed,” said Alberto Gallo, a portfolio manager at Algebris Investments.

    https://qz.com/2068772/why-economists-are-talking-about-stagflation/

    Reply
      Oct 05, 2021 05:53 PM

      Peter Boockvar: It’s Torture to Be in Gold Right Now, But I Like It

      Stansberry Research (09/27/2021)

      It’s going to be hard for the market to avoid a hiccup as the Fed moves to taper, says Peter Boockvar, Bleakly Advisory Group Chief Investment Officer. “Jay Powell and the Federal Reserve are just doing what doves do,” he says.

      “We are in a stagflationary environment” Boockvar states, based on September PMI data from Europe and the U.S. He explains that the slagflation story can “truly be global” with the fall of Evergrande.

      “Boockvar is remaining bullish on the long-term outlook for precious metals as a form of “financial sadomasochism,” hanging on for an eventual reward.”

      https://youtu.be/Q9-rwEdhNBs

      Reply
        Oct 05, 2021 05:54 PM

        Powell Says Spike In Inflation Lasting Longer Than Expected

        Martin Crutsinger – AP Economics Writer – Sep. 27, 2021

        “But, in remarks prepared for delivery Tuesday, he says that if inflation does not abate, the Fed is ready to use its tools to lower the pressure on prices.”

        https://www.houstonchronicle.com/news/article/Powell-says-spike-in-inflation-lasting-longer-16491692.php

        Reply
          Oct 05, 2021 05:55 PM

          ECB’s Lagarde Keeps Door Open to Higher Inflation

          By Reuters – Sept. 27, 2021

          “Inflation in the euro zone could exceed the European Central Bank’s already raised projections but there are few signs of this already happening,” ECB President Christine Lagarde said on Monday.

          https://money.usnews.com/investing/news/articles/2021-09-27/ecbs-lagarde-keeps-door-open-to-higher-inflation

          Reply
            Oct 05, 2021 05:56 PM

            Professor Who Called Dow 20,000 Says He’s Nervous About Trends In Inflation That Could Spark A Stock Market Correction

            Mark DeCambre – Market Watch – September 29, 2021

            “Jeremy Siegel, professor of finance at the University of Pennsylvania’s Wharton School of Business, on Wednesday said that a fresh surge in inflation is making him nervous and warned that accelerating pricing pressures could compel the Federal Reserve to raise interest rates at a faster clip than currently anticipated, which could deliver a correction to equity benchmarks.”

            The Wharton professor credited with calling Dow 20,000 in 2015 told CNBC during a Wednesday interview that he is “nervous about the trends I see in inflation currently.”

            https://tinyurl.com/dndsxxcc

            Oct 05, 2021 05:58 PM

            There are a lot of really great charts, tweets, and posts embedded in Jesse’s article:

            _________________________________________________________________________________

            ‘Inflation Will Save Us From The Fed’

            Jessie Felder – The Felder Report – (10/02/2021)

            “Ironically, instead of the Federal Reserve saving us from inflation, we believe it will be inflation that saves us from the Federal Reserve.”

            https://mailchi.mp/felder/inflation-will-save-us-from-the-fed?e=baab1fcdca

          Oct 06, 2021 06:21 AM

          Is Powell an idiot? Repeat after me… It is not transitory…

          Reply
            Oct 06, 2021 06:48 AM

            +1 Agreed Dan.

            Oct 06, 2021 06:52 PM

            Powell may be transitory.

    Oct 05, 2021 05:34 PM

    Gold Analysis – It’s Time for Gold to Steal the Show

    Aziz Kenjaev – FX Empire – October 5, 2021

    “The data may suggest that the FED will restrain from their idea of increasing interest rates early next year, however taper uncertainty puts the USD in a weaker position. The market is tired of the sea-saw imposed by the FED. And when this kind of sentiment fills the market, the edge goes to safe-haven assets, mainly Gold.”

    “There are several factors which might weaken the US Dollar this week, one of them is the ongoing negative US trade balance. New US-China trade deal talks are anticipated to remain unchanged with either party willing to back down. ”

    “Strong US Dollar might play a negative role for normalizing the balance sheet and increasing exports. ISM Non-manufacturing PMI in August is expected to be lower than in July. The California oil spill would result in a deduction of oil from the US oil inventories which historically affects the US Dollar index negatively…”

    “Non-farm employment change, initial jobless claims which will be published later this week are key metrics to watch, these data will identify the commitment of markets to the FED. NFPs of course is the main course of the week, Nonfarm employment change will be the second identifier of the next path of the USD and Gold.”

    https://finance.yahoo.com/news/gold-analysis-time-gold-steal-110303420.html

    Reply
      Oct 05, 2021 05:37 PM

      Is Gold At A Turning Point? Bullish sentiment drops to March Lows

      Neils Christensen – Monday October 04, 2021

      “The latest trade data shows that net bullish positioning has been at its lowest point since early March. However, analysts note that the market could be at an inflection point as inflation continues to rise, adding to concerns that slowing economic growth will lead to stagflation. ”

      “With investment flows already reduced, a cleaner positioning slate suggests the weak price action will not turn into a rout. Meanwhile, fears of stagflation are growing ever stronger, which could once again spur interest in precious metals down the road,” said commodity analysts at TD Securities.

      https://www.kitco.com/news/2021-10-04/Is-gold-at-a-turning-point-Bullish-sentiment-drops-to-March-lows.html

      Reply
    Oct 05, 2021 05:03 PM

    (AGI) Alamos Gold: A Dirt-Cheap Valuation For This Organic Growth Story

    Oct. 05, 2021 – T.D. – Seeking Alpha

    – Alamos Gold has slid nearly 40% from its highs, but is one of the few gold miners that has not dropped beneath its March 2021 lows.
    – The company is preparing to release its Q3 2021 earnings results in the next month, and continues to track well against guidance, with 240,000 ounces produced in H1 2021.
    – However, the most exciting news was continued exploration success from Island Gold, with Alamos recently drilling a record intercept of 21.33 meters of 71.21 grams per tonne gold.
    – At barely 12x FY2023 earnings estimates and a P/NAV ratio of ~0.70x, I see Alamos as dirt-cheap, and view this correction as a low-risk buying opportunity.

    https://seekingalpha.com/article/4458547-alamos-gold-a-dirt-cheap-valuation-for-this-organic-growth-story

    Reply
    Oct 05, 2021 05:41 PM

    This technical analysis from Chris Vermeulen is more tilted toward the bearish on Gold, Silver, the PM miners, and the general markets, but potentially more bullish on the US Dollar.

    When he chats with Craig Hemke, he points out that almost every market is at a serious inflection point, ready to make a big directional move, and once these start moving, most of the markets are going to run big. If he’s correct on the bearish stance in the PMs then there may still be more technical pressure in store, but that would be the washout move and a great place to add into that weakness.

    _______________________________________________________________________________

    Chris Vermeulen – “Critical Tipping Point” – Sprott Money Precious Metals Monthly Projections

    Sprott Money – October 2021 w/ Craig Hemke

    https://youtu.be/2aYG-3GkqgQ?t=4

    Reply
      BDC
      Oct 06, 2021 06:33 AM

      He should include Price Quality (vector rather than dollars & cents ‘quantity’).
      Every significant turn is saturated, though not every saturation point is a turn.
      “(Detailed)” may be hidden when insignificant: https://tinyurl.com/2vc9pznu

      Reply
    Oct 05, 2021 05:45 PM

    Great interview once again!

    The guest made some very logical points and great Insight on how the markets are manipulated and in which manner they are. I hope for the guest sake, my sake and all the kereport investors sake that a bottom is very soon in these miners. I think we can all agree it’s been years almost decade since some of these miners have been at these levels. Total devastation and carnage in many portfolios. You never think greed or fraud could ever get to gigantic proportions but here we are and I reckon few loyalist are left in this heavily manipulated miners game.

    Glen

    Reply
      Oct 05, 2021 05:12 PM

      Thanks Glenfidish, and good comments both today, and on yesterday’s blog regarding the potential for a bottom to form in the short to medium term in the PM sector. As covered in the discussion with Dave Erfle above, there are a few encouraging signs that have appeared over the last two weeks from the quarterly close, to the divergence in the PMs from the general stock markets, to the bombed out valuation in the GDX, and the low reading sub 20 on the BPGDM.

      However, Chris Vermeulen lays out the dangerous precipice the PMs are in technically, and that there is still is the potential to go lower for longer, like Doc, Jordan, and Christopher Aaron outlined as probable.

      As someone with a very large portfolio of Gold and Silver stocks, it would be much more profitable to see things bottom soon and head higher; however, I’m prepared for the potential of Silver breaking $21.50 and plunging to $18.50-$19, and for Gold to retest and potential break down through $1675 to the low $1600’s or high $1500s in a worst case scenario.

      In that event, it would be a supreme buying opportunity, but preferably we don’t need to experience that final capitulation play out. We’ll see how it goes…

      Regardless, by 2022, the PMs should reassert themselves to the upside, and I’d anticipate a much more bullish year than 2021 has been, especially in the mining stocks.

      Reply
    Oct 06, 2021 06:35 AM

    A lot of red all over the General Markets.

    Reply
    Oct 06, 2021 06:36 AM

    equity futures are the playground…sell off then retail AM buy the dip….if /ES mini recaptures the price of 4293.75 the confirmed gartley buy pattern remains in play

    Reply
    Oct 06, 2021 06:50 AM

    Ex:
    That return purchase to EMOTF was very timely so far today. Congrats!

    Reply
      Oct 06, 2021 06:57 AM

      Thanks David. Yeah, so far it has worked out well, but I only got the first tranche in, and was hoping to buy more at lower levels. It’s all good, if it runs now, at least I have a small seat at the table.

      Reply
      Oct 06, 2021 06:43 PM

      Something that is somewhat unique with EMOTF is the last couple of minutes of trading. It can be chugging along barely up or down and the last minute or two it can run either way. During its initial run up earlier in the year, it was when most of the moves up occurred. Then sometime in mid summer or so, I think the shorts found it and it wasn’t as predictable. But, it may not happen today..but last couple of minutes could be entertaining

      Reply
      Oct 06, 2021 06:02 PM

      A little move in the last 5 mins and last min, but not too dramatic. High of day was about +15% around open and never got back to it.

      Reply
    Oct 06, 2021 06:01 AM

    Not following as closely as I should….anyone know why Kootenay is halted??? Drill results time???

    Reply
    Oct 06, 2021 06:03 AM

    day/ES…first recapture OUL at 4355 then recapture TAS bullish bottom at 4407…Then the Fall rally is beginning…the last rally?…CRITICAL DAY IMHO…Seasonal lows occur on average for 100 years on OCT.13

    https://tos.mx/aUKZtTr

    Reply
    Oct 06, 2021 06:08 AM

    Did David said that tax loss selling was already in June?

    I am actually looking for rock bottom prices in November

    Reply
      Oct 06, 2021 06:01 AM

      I believe David had said that some had elected to do tax sales this last summer in anticipation of taking advantage of tax sales late in the year. Some of the thinking was the “wash rule” which precluded trading stocks 30 days before and after the loss trade which often put people in an unfavorable situation of wanting to buy back in but blocked because of the wash rule. So get the sales out of the way early so you can buy back in the same stock when prices go down at end of year. If you don’t want the loss sale stock back then the “wash rule” wouldn’t matter. I have found that when I want one back, I usually end up buying something else anyway. I often regret not waiting…never know when our “2 month window” of an up market in miners may happen. (Just my thoughts)

      Reply
        Oct 06, 2021 06:56 AM

        Yes David – that is what Dave Erfle was referring to. For example, I took a ton of tax loss sales in mid July, waited the 30 day wash period, and then added back to the positions I wanted to own for the long haul in mid August. This allowed me to wash out a big chunk of capital gains I was sitting on for the year from Lithium, Uranium, Copper, and PGM stocks, and actually got me a better cost basis in those stocks, since they continued correcting from July into August to even lower levels.

        The overall point was that many investors have already taken their tax losses for the year early, and have or are currently waiting out their wash periods to deploy into more weakness. As a result tax loss selling came much earlier this year and will be more spread out… not as confined to just Nov/Dec like normal.

        Reply
      Oct 06, 2021 06:55 AM

      Could not resist and bought some USA.to

      If and when this pops, sooner rather then later it’s going to have a big move imo.

      The sector is so beat up and rotten with no respect towards the mining shares but we know the thieves are buying all they can before they finally let it run.

      August top could not find one investor bearish or mentioning reversal was coming. The fact I went bullish not to long ago while many continue to believe the bottom is end year or first quarter of next year sets up us nicely for a move soon.

      I favor the now and these are great buying times. We could put in the bottom in one or two more weeks as well.

      Reply
        Oct 06, 2021 06:09 AM

        I sold any leftover USA a few months ago but can’t believe it went down to under a buck, wow! Even if you buy now and it goes lower you are still buying it cheap.

        Reply
          Oct 06, 2021 06:10 PM

          I’ve had a number of solid trades in the PM stocks this year, but USAS Americas Gold and Silver was not one of them. I luckily got out earlier in the year during the blockade nonsense, and avoided that waterfall declined, but got back in during the last 2 months and got smacked on this trade and just sold it for a tax loss today. I’m going to wait 31 days and then buy back in. I do believe Americas Gold and Silver will turn around and run higher, but I still need to wash out capital gains for the year, and will just have to take risk of being out of it for a month.

          Reply
    b
    Oct 06, 2021 06:48 AM

    Polish central bank to buy 100 tons of gold in 2022 to boost nation’s ‘financial security’

    Kitco News

    Reply
    Oct 06, 2021 06:09 AM

    Dan,Calgary, I too am weighted in JAG (JAGGF). I’m too am baffled.
    There is a small break-away gap from Jun, 2020 at 2.50 USD.
    My guess is that is its target low???? But, $2.40 is .786 Fibb. DYOR

    Reply
      Oct 06, 2021 06:48 PM

      correction…$1.50 and 1.40 USD, thanks

      Reply
      Oct 06, 2021 06:38 PM

      Unless it is country risk I don’t see much wrong with it. They started drilling recently but their sales growth forecast is lower than industry average. Everything else is well over average from my source.

      https://stockcharts.com/h-sc/ui?s=JAG.TO

      Reply

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