Despite the pullback in the price of gold and silver, Sprott’s Trey Reik says he believes that doubles and triples are in the cards for gold miners.
But If We Go Back
March 4 (King World News) – Here is a portion of the comments from Sprott’s Trey Reik that were sent to us by Ronald Stoferle at Incrementum: Unfortunately, the reality is that institutional interest in gold equities on a scale of 1 to 100 is probably still around 2.5-5. It’s pretty non-existent. It’s been that way for many many years, and I think it’s getting worse and worse. And I think institutional generalists are more comforted by the fact that they don’t have a gold allocation because of the ongoing performance of the sector.
But if we go back to 2016, between 1st of January and 11th of August, gold was up 28% and silver was up 42%. GDX was up 125% and GDXJ was up 185%.
But there was still no interest in the sector from the institutional side. In the summer of 2016 my wife told me that I seemed a little moody, and she asked why I was not in a better mood since gold stocks were going up, and my response was that they were going up too fast. I told her that it’s not good for us because we are not getting any inflows. People can’t react that fast and now it’s happened so quickly that we are unlikely to see any interest in the sector. She told me that it’s interesting that when gold stocks go down it’s bad for us, and when gold stocks go up it’s bad for us, and she suggested I should maybe reconsider my career choice…
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That’s a similar situation to where we are now in the sense that institutional disinterest with respect to gold stocks has been constantly rewarded over the years. The upward divergence of the S&P from gold equities, which really started in September 2012 with open ended QE, was starting to close a few years back, but then it was short circuited in 2016 with the Trump election.
In terms of specific miners, I was just in Whistler at the CIBC confab and met with 12 companies that I consider to be in the upper echelon in quality and market cap (Agnico Eagle, Pan American Silver etc.) and the majority of high quality gold companies in our portfolio are performing quite well at current gold prices.
Doubles And Triples In The Cards
…In conclusion we are positive to the financial performance of the high quality gold miners. If the gold price goes above $1,360 there’s not a lot of resistance for it to go to $1,500. I think doubles and triples are in the cards for the gold miners, and the part of the market we are looking at is just below those top tier companies, e.g. emerging producers and multi-asset intermediate producers, because we believe that is where the leverage is.
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