I think you're perfectly right to be cautious about gold miners, and resource companies in general. I've certainly paid the price to know that with a few exceptions (Agnico Eagle Mines for example) they're not very well run and thus not a buy and hold investment. In the short term, they seem due for a pullback. In the medium term I think they may have room to run since a) still negative flows in GDX indicate that there is no retail euphoria about the sector yet and b) surprisingly the recent moves of the majors have been to sell assets (AEM et NEM selling their stakes in Orla Mining, Barrick selling Hemlo) instead of acquiring juniors.
These are the two things that I'm watching for a long-term top: strong retail flows into the asset class and active M&A by the majors. Capex is to be watched as well I agree with you but as you point out I think for now it has more to do with the increasing difficulty to increase reserves. On the other hand, seeing miners using improving cash-flows to increase buybacks would make me more optimistic about a potential multi-year run in the miners. Maybe the lessons from the shale boom will be helpful here. Wait and see.
many gold miners are trading still at single digit EV/FCF multiples, so with gold/silver soaring that ratio will be depressed and look for next Q3 reporting by miners how their FCF explodes and increase dividends and share buybacks which will be a big bonanza coming when LO investors jump on bandwagon at the beg of 2026 when they look for rebalacning of their portfolios and when they screen their Blmb's terminals for cheap EV/FCF stocks, we are just at the starting point for gold miners to go 5x-20x, usually royalty companies move first, then majors, then junior gold producers and when frenzy gets hot retailers jump on most risky ones which is (drum beat): EXPLORERS and when these skyrocket its time to sell (maybe in next 2-3y) for investors who are invested now and cash in on their 5x-20x baggers...
Relative to the price of gold, gold miners, as measured by $BGMI, performed the best in the 2nd half of the 1960s. Part of the reason is that public in the US was not allowed to own gold, and the public were using gold miners as a proxy for physical gold. The price of oil was also very stable in 1960s. However, as the cost of the energy increase sharply in 1970s, gold miners, relative to gold, performed very poorly. From 01/01/1970 to 01/01/1980, one would do much better by holding physical gold than owning a basket of BGMI stocks (assuming one could own gold before Nixon's removal of the link between USD and gold). Take a look at the 2nd and the 4th charts linked here: https://www.longtermtrends.net/mining-stocks-vs-gold-and-silver/
"If gold is being driven by the end of the treasury as a reserve asset (and it does look that way)..."
Russel, I have to disagree with this take.
Consider that for the last couple years, the Fed has effectively "out-hawked" other central banks of the world. How many e.g. Japanese or German investors were buying Treasuries with higher yields than JGBs or Bunds?
If the Fed ignores inflation and yields rise enough, wouldn't that eventually attract investors back to Treasuries?
Gold is also a lot less liquid than Treasuries - at least physical gold is.
It is more to do with the treatment of Russian foreign reserves. If you plan to have a divergent policy to the US, then treasuries are not a safe asset. You could also argue that tariff policy is the same. China is actively selling treasuries for this reason
i first learned about financial repression from russell napier some years ago. i've noticed an increasing number of references to it in the last 6 months. also retail has again been buying gdx, after a long period of selling it even as the price rose sharply. i think the cb's were certainly motivated by the seizure of russian assets, but the u.s. public appears to be increasingly aware of the implications of "running it hot" instead of austerity.
I think you're perfectly right to be cautious about gold miners, and resource companies in general. I've certainly paid the price to know that with a few exceptions (Agnico Eagle Mines for example) they're not very well run and thus not a buy and hold investment. In the short term, they seem due for a pullback. In the medium term I think they may have room to run since a) still negative flows in GDX indicate that there is no retail euphoria about the sector yet and b) surprisingly the recent moves of the majors have been to sell assets (AEM et NEM selling their stakes in Orla Mining, Barrick selling Hemlo) instead of acquiring juniors.
These are the two things that I'm watching for a long-term top: strong retail flows into the asset class and active M&A by the majors. Capex is to be watched as well I agree with you but as you point out I think for now it has more to do with the increasing difficulty to increase reserves. On the other hand, seeing miners using improving cash-flows to increase buybacks would make me more optimistic about a potential multi-year run in the miners. Maybe the lessons from the shale boom will be helpful here. Wait and see.
many gold miners are trading still at single digit EV/FCF multiples, so with gold/silver soaring that ratio will be depressed and look for next Q3 reporting by miners how their FCF explodes and increase dividends and share buybacks which will be a big bonanza coming when LO investors jump on bandwagon at the beg of 2026 when they look for rebalacning of their portfolios and when they screen their Blmb's terminals for cheap EV/FCF stocks, we are just at the starting point for gold miners to go 5x-20x, usually royalty companies move first, then majors, then junior gold producers and when frenzy gets hot retailers jump on most risky ones which is (drum beat): EXPLORERS and when these skyrocket its time to sell (maybe in next 2-3y) for investors who are invested now and cash in on their 5x-20x baggers...
Anything is possible. Just that gold is moving on political trends, which sometimes can change quickly
Relative to the price of gold, gold miners, as measured by $BGMI, performed the best in the 2nd half of the 1960s. Part of the reason is that public in the US was not allowed to own gold, and the public were using gold miners as a proxy for physical gold. The price of oil was also very stable in 1960s. However, as the cost of the energy increase sharply in 1970s, gold miners, relative to gold, performed very poorly. From 01/01/1970 to 01/01/1980, one would do much better by holding physical gold than owning a basket of BGMI stocks (assuming one could own gold before Nixon's removal of the link between USD and gold). Take a look at the 2nd and the 4th charts linked here: https://www.longtermtrends.net/mining-stocks-vs-gold-and-silver/
That makes sense to me. I think energy COULD rally from here, but would need a negative supply surprise from the US to make that happen.
Tracking GDX/GLD August, eyeballing August breakout, here for a good time, not a long time :-)
"If gold is being driven by the end of the treasury as a reserve asset (and it does look that way)..."
Russel, I have to disagree with this take.
Consider that for the last couple years, the Fed has effectively "out-hawked" other central banks of the world. How many e.g. Japanese or German investors were buying Treasuries with higher yields than JGBs or Bunds?
If the Fed ignores inflation and yields rise enough, wouldn't that eventually attract investors back to Treasuries?
Gold is also a lot less liquid than Treasuries - at least physical gold is.
It is more to do with the treatment of Russian foreign reserves. If you plan to have a divergent policy to the US, then treasuries are not a safe asset. You could also argue that tariff policy is the same. China is actively selling treasuries for this reason
i first learned about financial repression from russell napier some years ago. i've noticed an increasing number of references to it in the last 6 months. also retail has again been buying gdx, after a long period of selling it even as the price rose sharply. i think the cb's were certainly motivated by the seizure of russian assets, but the u.s. public appears to be increasingly aware of the implications of "running it hot" instead of austerity.