On the heels of a rally that sent the price of gold back to $1,300, it appears that big money is setting up to flood into the gold market.
Money Will Flood Into The Gold Market
March 8 (King World News) – Eric King: “Brett, as a CEO in the mining sector, what are you hearing about money flows in the gold market?”
Brett Heath: “What I’m hearing is that earlier this year we finally had capital flows reverse and this is the first time since a brief period in 2016 that we have seen this. Prior to that, the outflows have been consistent since 2012. This may be a leading indicator that the market has in fact finally reversed and the big money is entering the space…
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What’s interesting, given the poor sentiment as it relates to the mining space, is that funds who typically only invest passively through the GDX or GDXJ are now investing in key companies in the sector as a proxy for the mining sector, particularly royalty companies. What I am hearing is that it’s more of a function of size and liquidity. If you look at the liquidity of GDX and GDXJ, it’s similar to the market cap of what all of the royalty companies would add up to.
10 years ago the total size of all the royalty companies that existed was about 1/10th of what it equals today. Back then the group was not large enough to use as a proxy for the mining space but today it is. To give you an idea of the scale, the market cap of the top five royalty companies totals $45 billion.
Gold Will Soar As Big Money Races To Enter The Space
The important takeaway for investors is that even the most concentrated mining funds are severely underweight the sector right now, and when you see the price of gold break $1,400, I think we will almost immediately see $1,500. Meaning, there will be a mad rush to enter the space on that major breakout and it will trigger massive money that has been on the sidelines to enter the space. This will create not only significant moves for the prices of gold and silver, but especially large (leveraged moves) for the high-quality companies that are well-positioned in the gold and silver space. The moves will be violent as big money rushes to enter the space in a matter of months on the heels of that major breakout.” Brett Heath is CEO of the top performing royalty company in the world in the past 12 months, Metalla Royalty & Streaming, symbol MTA in Canada and MTAFF in the US.
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