Understanding Gold and Silver: What We’ve Learned
Published 02-FEB-2025 16:53 P.M.
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9 minute read
- Commentary: What we have learned about gold and silver - ebook.
- Quick Takes: TRI, GTR, 88E, TTM
- This week in our Portfolios: CAY, KAU, TTM
Something feels different this year with gold and silver prices.
Like something big is brewing...
Precious metals gold and silver both delivered excellent price rises in 2024.
Gold was up 27%.
Silver up 21%.
And it looks like the run is going to continue into 2025.
We are only 31 days into the new year.
Gold is up 7% already so far.
Silver is up 10%.
We have been going deep on the gold and silver markets for a few years now.
We have collated what we’ve learned about gold and silver into this new ebook:
The price of gold or silver doesn’t actually “go up” technically.
The whole point is that gold and silver’s purchasing power stays the same over time (safe haven assets).
They need to be looked at and valued against a specific fiat currency.
It’s just the amount of US dollars or Euros, or Aussie dollars it takes to buy an ounce of precious metal that changes over time.
So if gold and silver’s purchasing power doesn’t actually go up - gold and silver prices “increasing” against a fiat currency represents the value of that fiat currency going DOWN.
And the more fiat currency that is printed by its government, the more of it it takes to buy an ounce of precious metal.
Printing more fiat currency by governments is usually a result of funding wars or to tackle spiralling national debt.
The US dollar has been the global reserve currency since 1944.
The new US President has inherited a US $35 Trillion (and growing) national debt.
The President has acknowledged that the US national debt is an issue that needs to be addressed.
He has bold ideas on tax cuts, tariffs and other programs, but high interest rates and the price of repaying the federal government’s existing debt could limit what he’s able to do.
In the past neither Democrats or Republicans appeared willing to risk unpopular spending cuts within a 4 year election cycle.
Basically gold and silver are a bet on whether the new US administration will be able to get its national debt under control while also delivering on potentially inflationary election promises (tariffs) and that no expensive new wars break out.
(and especially no “black swan” events occurring like another pandemic or a 2008 style global financial crisis)
(Source)
So the recent increase in the gold (and silver) price could be governments, banks, fund managers or everyday investors shifting some of their wealth into gold and silver as insurance, in anticipation of possible debasement in the global reserve currency.
It seems to be happening in Australia already:
(Source)
In certain global conditions, when people's faith in the government backed currency reduces or erodes, then the price of gold and silver goes up.
Throughout history, precious metals have been preferred to fiat currencies in times of global instability, inflation and excessive money printing.
Money printing to fund global conflicts or pay off spiralling government debt.
Like the growing $35 trillion US debt...
Not ideal given the US dollar is the global reserve currency.
And the rising price of gold and silver against the US dollar over the last 12 months is a reflection of the reality that we are likely heading towards this direction:
Inflation and currency debasement affects everyone in an economy.
Right now we suspect the gold and silver price increases are from “early movers” shifting some wealth into gold to protect against potential inflation and global uncertainty.
It would be interesting to see what would happen if (or when) the wider population and investment community starts sharing these concerns too and causes a run on silver and gold.
This is what has caused precious metals “mega-bubbles” at various times in history.
Ray Dalio (Founder of the world's largest hedge fund, Bridgewater Associates) wrote an entire book about the various times in history where excessive debt and currency devaluation precede periods of geopolitical upheaval and economic realignment.
We have referenced it a few times in the past - here is a free 40 minute video Ray Dalio made that details the key points of the book.
(There is also a super concise 5 minute summary video for those of us who can’t spare 40 minutes)
Ray has new book coming out called “How Countries Go Broke”
Here a video of Ray giving a 2 minute summary of what’s in his new book:
For a longer form discussion of the concepts in this new book, check out this discussion between Ray and All-in Podcast’s David Friedberg:
Ray Dalio is very bullish on gold.
Aside from that, the main takeaway from the 1 hour 15 minute interview is that investors with big balance sheets and US tech investors (who would ordinarily never look at an asset like gold) are now starting to show an interest in the old precious, yellow metal.
They also discussed that the US national debt is now above 100% of the US GDP and the US is running deficits of ~7% of GDP per annum.
Relative to other major economies, the US fiscal situation doesn't look great...
Why does the fiscal situation matter?
Because the theory is that increasing deficits require more “money printing” which devalues the USD more and more.
In other news this week, a new Chinese AI Large Language Model (LLM) Deepseek and the subsequent hit to Nvidia’s share price may have rocked the confidence of a few US tech maximalists too.
All of the above are factors we think that are contributing to a perfect storm for the price of gold (and companies with gold projects) all over the world.
All of what we have written about so far is talking about the DEMAND SIDE of the equation...
None of the things we have written about above talk about the supply side issues in the gold sector.
Gold grades all over the world are declining and new discoveries are becoming harder to make...
We have been buying up physical gold and silver for a few years now.
And we are Invested in small cap gold and silver equities (regular readers will know them - SS1, MTH, KAU, TTM, JBY and BPM) that we think will give us the best chance at success in the gold and silver thematic of 2025.
We have collated what we’ve learned about gold and silver into this ebook:
What we wrote about this week 🧬 🦉 🏹
Kaiser Reef (ASX:KAU)
This week our gold producer Kaiser Reef (ASX:KAU) released its quarterly report which shows they should soon start mining never before mined depths of its A1 gold mine in Victoria.
The deeper levels are where more high grade gold has been discovered with KAU’s recent exploration drilling.
Mining of remnant ore has been slowed down in favour of making the final push to mine new ultra high grade gold.
As a result, KAU is now “15m BELOW historic workings” - the company is in and amongst the fresh, never before mined, part of the A1 mine.
Read: ⛏️ KAU: Now comes the good part...
Titan Minerals (ASX:TTM)
$99M capped Titan Minerals (ASX:TTM) has a 3.1 million ounce gold + 22 million ounce silver resource.
Last month TTM raised $20M at 44c per share.
Suddenly there’s THREE drill rigs on site right now beavering away.
TTM is drilling to significantly grow its 3 million ounce resource by the middle of the year - and it now has the funding runway to do it.
Aside from its 3Moz gold project, TTM also owns a copper porphyry project with some big copper drill hits. Last year, TTM finalised a deal with a Gina Rinehart subsidiary where TTM basically gets free carried on US$120M of drilling and development at the project.
More on TTM below.
Read: ⛏️ TTM: We will tackle the gold, Gina - you get to the copper
Canyon Resources (ASX:CAY)
Earlier this week, our Investment Canyon Resources (ASX:CAY) made a big step forward in the development of its bauxite mine.
Its largest shareholder, Eagle Eye Asset Management, has agreed to fully underwrite a loan for ~US$124M.
The US$124M underwritten amount is circa 50% of the CAPEX from CAY’s 2022 Bankable Feasibility Study.
The underwriting is to finance the purchase of 22 locomotives and 550 wagons - this is called ‘rolling stock’ in the train industry.
Eagle Eye holds ~ 41.72% of CAY shares so obviously want to see CAY develop its asset. This week we will covered more on those guys, and the other ASX stock it was involved in, in our note below.
Quick Takes 🗣️
TRI announces positive engagement with FDA
GTR advances scoping study for US uranium project
88E adds to prospective resource at US project
TTM hits high grade gold, more assays to come
Macro News - What we are reading & listening to 📰
Defence:
NATO Plans to Share Classified Military Information With Industry, EU (Bloomberg)
- NATO is sharing classified capability targets with the defense industry to boost production, aligning with Secretary General Mark Rutte’s push for a “wartime mindset.”
- The alliance is also gradually sharing classified military standards with the EU to improve interoperability among member states.
The Coming Critical Minerals Trade War (Goldseek)
- Critical minerals have become a key battleground in the US-China rivalry, with China dominating the supply chain for EV and military applications.
- Trump's return to the presidency threatens US-Canada trade ties with proposed tariffs, further complicating efforts to reduce reliance on China for critical minerals.
Energy:
China’s Surging Power Demand Creates a Climate Conundrum (Bloomberg)
- China's surging electricity demand is slowing its efforts to reduce emissions despite record clean energy adoption.
- Industrial growth and electrification trends are driving power consumption beyond economic growth, increasing coal reliance.
Gold:
Gold price: Trump’s $50trn debt problem has Aussie hedge funds including L1 Capital rushing for gold (AFR)
- Hedge funds are betting that a second term for Trump could drive gold prices higher as US fiscal concerns deepen.
- With US debt skyrocketing and bond market volatility, hedge funds see gold as a safe haven amid economic uncertainty.
Graphite:
Military Uses of Graphite – Richard Mills (Ahead of the Herd)
- The global defense sector's reliance on critical minerals like graphite, aluminum, and rare earths is increasing amid supply chain disruptions and geopolitical tensions.
- With the US and NATO heavily dependent on imports for key minerals, supply shortages could severely impact military capabilities and equipment production.
Lithium:
- A catastrophic fire has broken out at the Mount Holland lithium mine in Western Australia, operated by Covalent Lithium.
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