What Happened?

Gold and Silver prices have started moving up over the last few weeks:

(yes you are reading correctly, silver just hit a 12 year high and touched $US 29 /oz)

So what are we planning in the precious metals space?

Is this (finally) the start of the precious metals run we have been predicting for a couple of years?

(we incorrectly predicted it would start back in January 2023... better late than never, right?)

Gold has been making steady moves upwards for four years now...

But it REALLY started running over the last few weeks.

The silver price usually tracks the gold price at a certain ratio...

But silver hasn’t responded to gold's long run up...yet

... until the last couple of weeks.

Silver has fallen way behind gold and we think it will do some rapid catching up over the next few weeks.

You can see in the image of the gold and silver price charts side by side, that gold has been rising steadily since 2020 but silver has not been tracking it like it historically has done in the past.

(look at where the two price charts diverge to the right):

We expect the silver price to start playing catch up (it looks like it has already started, especially yesterday).

Another reason we think silver will run in the near term is that unlike gold, silver also has many industrial uses (aside from being golds little brother as a store of wealth and uses in jewlery.

Silver is especially important in solar panels.

(Source)

And silver supply is “inelastic”, meaning that supply can’t quickly come online to satisfy increased demand.

So are we entering a perfect storm for a silver run?

According to TD securities, Industrial demand for silver is draining silver inventories:

(Source: TD securities: Market Musings Report April 2024 - note: these guys are big silver bulls, layout slightly edited to better fit screen).

Obviously if a proper silver squeeze happens at some point in 2024 or 2025, we want to have a couple of silver stocks in our Portfolio.

We did hold silver hopeful TMZ back in the 2021 during “almost silver squeeze”, and while TMZ had an epic price run during that time, it ultimately went bust - read more about what happened to our Investment in TMZ here.

But like any long time small cap investor we get back on the horse to roll the dice again.

Silver has quietly just traded above the highest point it reached during the #silversqueeze that ALMOST happened a few years ago (remember that?) AND the previous 12 year high it hit in 2020.:

We are encouraged by the fact that silver has passed the highest point from the 2021 almost #silver squeeze with very little media fanfare.

It reminds us of the first few weeks of the uranium price run that started mid last year.

The U price made the biggest moves late in 2023.

It’s currently moving sideways at around US $85 /lb.

Almost 3x up from the US ~$30 it traded at for years.

The U price seems to be taking a breather after a big run up.

This is natural and healthy after the price of something surges (be it a commodity price or a stock price).

If a price spikes up too hard too quickly, the broader market questions whether it is just a “flash in the pan” and may come back down.

If the price stays high for a while or better yet, goes even higher, we expect more investors to believe in the U price rerate and start deploying capital into early stage uranium stocks.

And we are hoping the U price starts another leg up soon.

When the U price first looked like it was going to have a strong period ahead, we added two uranium stocks to our Portfolio (mid last year).

Gold and silver have just started running over the last month.

Silver especially looks like it has a lot of catching up to do.

And we are looking at making two new portfolio additions in precious metals over the next two months.

(specifically in silver, more on why in this note).

Like with Uranium, we expect this run in gold and silver prices to be just the beginning of a long term rerate in prices of the precious metals.

We have been predicting this precious metals run for a while now.

Chinese are buying precious metals, spiralling US debt will mean printing more money, talk of interest rates to come down and the world feeling like it’s on the edge of a bunch of new conflicts drive precious metals prices upwards.

Gold has been moving up steadily for the last four years...

Its has really started moving in the last few weeks.

This week the gold price touched a NEW all time high.

AND the Silver price broke out of its consolidation and is at 12 year highs.

So why exactly are gold and silver prices running?

For a large part of history gold was the medium of exchange between countries.

Everything was priced in gold so however much gold you had determined how wealthy you were.

Nowadays, we use conventional currencies but gold and silver (as precious metals) still have a place in the financial system - often seen by investors as a safe haven asset or a way of protecting wealth.

Gold more so than silver when it comes to protecting wealth...

BUT silver benefits from industrial demand (think solar panels and how they need silver.

For decades silver and gold have moved in tandem - when gold prices went up, shortly after silver would follow suit.

Like clockwork... gold has been edging higher and higher... and higher.

and silver is finally just starting to pop its head out of a long period of consolidation between $13 and $22.

Silver hit US ~$29 an ounce this week - its highest point in TWELVE YEARS.

But why are precious metals prices rising now?

There are many different theories out there, and we think most have some merit - but it's simply a function of supply and demand.

(it is the REASONS for the increased demand OR lack of supply where people have different views).

After a long period of being out of favour, gold and silver are now in high demand.

And because there was no broad based investment in developing new mines, there isn't enough supply to match the current demand from buyers.

Some of the notable theories are:

• China’s central bank (PBOC) buying gold?
• Chinese investors (ie the general population) buying up gold as property and stock markets fall?
• The relationship between gold and US debt - as debt increases gold prices increase?
• Demand for solar panels driving silver prices higher?
• Geopolitical tensions pushing investors into safe havens like gold?
• De-dollarisation theory? Does the world go to gold as a global reserve currency?
• Investors fleeing other assets looking for safety in gold?

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No matter what is causing the buying, we think the share prices of gold and silver small caps haven't caught up just yet...

Like uranium, the market needs to be convinced the commodity price re-rate is real - the quick spike up is good... but it isn't enough to convince the market to start rushing into small caps just yet.

Is silver setting up for a huge run?

We think it might be...

Well known investor Marin Katusa also seems to agree:

(Source)

Traditionally, silver tracks the gold price relatively closely - when gold goes up, silver tends to follow soon after).

The key difference between the two is that silver isn’t just a precious metal.

Silver has industrial uses too...

Silver is a critical input material into solar panels and as demand for solar panels increases, demand for silver does too.

Investment in new solar is increasing and likely to continue increasing through to 2030 and beyond while there is close to no investment in bringing new silver supply online.

In 2023 production was forecast to increase by 2% while industrial demand climbed by over 4%.

At the moment only 27% of silver supply comes from mines that are being mined primarily for silver - so most of the world's silver is produced as a byproduct.

That makes the silver price relatively inelastic which means bringing supply online quickly is hard even when prices rise.

We have been Investing for decades and can say with certainty that its VERY RARE for a silver discovery to get made and developed.

Its also hard to find companies with strong silver projects because capital hasn’t flowed into the sector for over a decade now...

As a result we think there is opportunity in finding silver projects with serious potential that can benefit from a run in the silver price.

And we will be announcing our new Portfolio additions soon.

Hint:

One of them is an upcoming silver IPO, with plans for solar panel silver supply.

And the other is looking to replicate a US$1.1BN precious metals success story...

What we wrote about this week 🧬 🦉 🏹

Kuniko Ltd (ASX:KNI)

Early on in the week KNI put out a maiden resource estimate at its nickel-copper-cobalt project in Norway.

With the EU government recently agreeing to the EU Critical Raw Materials act we think KNI is positioning itself to benefit from increasing demand in local EU based critical minerals projects.

KNI has already managed to attract a cornerstone investment from major EU automaker Stellantis who now owns ~19.4% of KNI.

Read: ⛏️ EU nickel solution in Norway? KNI releases Maiden Resource Estimate

Haranga Resources Ltd (ASX: HAR)

This week HAR put out XRF results from its RC drill program at its uranium project in Senegal.

We are looking forward to the final lab results and hope that they will lead to an increase in HAR’s existing 16.1 Mlb uranium JORC resource.

Read: ⛏️ HAR uranium project about to get bigger? XRF gun results are in

Techgen Metals Ltd (ASX: TG1)

TG1 kicked off its drill program at its WA lithium project.

With a market cap of just $5M we think IF TG1 makes a discovery it could deliver a big re-rate in the company’s share price.

Read: It finally begins...TG1 starts drilling.

Quick Takes 🗣️

KNI: KNI starts drilling, looking for nickel and copper in EU

EMD: EMD launches new centre, scaling up

NTI: NTI - last patient dosed for Phase II/III Autism trial

SGA: SGA’s Graphite Suitable For Use In More High Value Markets

Bite sized summaries of the latest mainstream news in battery metals, biotechs, uranium etc:

🎈 The Future Money: https://future-money.co/

Macro News - What we are reading 📰

Biotech:

Gut health: Medtech Atmo Biosciences shop raise at $55m valuation (afr.com)

Nearly half of cancer drugs granted accelerated approval didn’t end up showing clinical benefit — study – Endpoints News (endpts.com)

Copper:

Copper Rallies Amid Rising Optimism on Chinese Economic Outlook (Bloomberg)

Gold:

Bullish Gold Wagers Swell as Funds Climb Aboard Record Price Run (Bloomberg)

Helium:

TSMC Gets $11.6 Billion in US Grants, Loans for Chip Plants (Bloomberg)

Iron Ore:

Iron ore price nears two-week high on stimulus bets, post-holiday restocking (MINING.COM)

Iron Ore Rebounds Above $100 on Speculation Demand May Pick Up (Bloomberg)

Lithium:

Lithium Prices: Market Faces Hard Truths After Epic Boom and Bust (Bloomberg)

Have a great weekend,

Next Investors