Gold prices could 'easily reach $2,500 this year' - Jeff Clark on precious metal breakout

Kito mining special coverage of the DOA gold Messa is brought to you by [Music] dinor Gold's great start to 2024 this is Paul Harris for Kito mining at the Deutsche gold mess show in Frankfurt Germany and joining me to talk about this is Jeff Clark editor of the gold advisor.com newsletter Jeff welcome back to Kito great thanks for having me Paul now Jeff we're 18 weeks into 2024 now and what a year it has been so far the gold price has remained firmly above $2,000 BRS the copper price is at $450 per pound gold producers are beginning to show margin expansion and juicy cash flow and m&a is starting to pick up why is everything so positive uh in my opinion Paul if you look back at the dates and when gold this gold run started it was actually on leape day February 29th when all of a sudden the market realized hey the FED May uh lower rates sooner than they said they would um at least sooner than they expected and sure enough the golden price ignited on that day and has really not looked back so it's pulled back a little bit as you and I talk today but that's when it all ignited and I think when that gold price broke through previous all-time highs that forced a lot of short covering some momentum Chasers jumped in and of course you have the backdrop of the vulnerabilities in our system that uh you know support that including Central Bank buying so I think it ALS started then and we really haven't looked back then so uh now the FED said they may have uh you know leave rates higher for longer uh but really the gold price being where it's at uh shows just how strong it is right now well I think uh the world gold Council put a report out uh this week in which uh amongst other things they said this has been one of the strongest starts the year ever um Central Bank buying I think was the highest level since 2016 and other things so it does seem a Confluence a lot of factors coming together very positively at this time Central Bank gold buying has been a net positive for uh almost 15 years now so it's it's it's really a a show of strength that after 15 years of net positive buying that as a group they're they just hitting their strongest level ever so uh this this could be a banner year for Central Bank gold buying that supports the price and my humble opinion that do is not why the gold price is higher I think central bank gold buying actually supports the price though and so that's an important component of this market and it's really a show of strength that they're just reaching their Crescendo now after 15 years of positive net purchases at the start of the year a lot of analysts were forecasting that gold would hit $2,300 us per ounce by the end of the year we're there already sort of 9 or 10 months ahead of plan or ahead of forecast um how much higher can gold go this year and uh I say that bearing in mind that the US Federal Reserve hasn't yet starting pairing back interest rates which presumably as when they do that would be positive for gold too it would be positive for gold it's when the market thinks they're going to lower interest rates that really is going to be the impetus for that uh but go could easily reach 2500 this year I mean we're already we're closing today as un and I talk at around 2,300 so uh 2500 is not really a stretch and you know in Gold bull markets the price goes on surges and Corrections surges and Corrections so we've had a surge we have a little correction now we could have a little bit more correction and then it'll go in another surge that's that's the way the gold price acts and so 2500 is easily Within Reach this year let's be contrarian for a moment Jess the year has started so well what could go wrong for go for the gold price oh lots of things the FED could raise rates that that would be probably the biggest uh short-term indicator that uh uh the gold price could suffer in in the near term but that's a shortterm factor only so in the long run uh the FED isn't going to have uh the big impact on the gold price it's going to be other things whether it be monetary concerns Financial concerns Market concerns there's a lot of vulnerabilities in the system right now uh it could be the lack of a discovery though that could uh hold the gold price back we do it would be nice to see another big discover recovery made this year if not more than one uh so uh there are several factors that could hold it back but uh the factors that could push the price higher uh in my opinion outweigh the factors that could push it lower okay well that's good to know now the gold price may may be riding high but most gold equities are stubbornly refusing to budge much what do you think that is well uh very simply that he has not trickled down into the junior sector yet even some of the majors haven't moved all that much uh some have looked Eggo eagle and what it's done the past couple months but um you know the the money flows into gold first and then it flows into the producers then it'll flow into the developers then it'll flow into the Juniors so uh that's its historical pattern in terms of money flows and so uh It's Not Unusual to see that the Juniors have not moved yet uh that underscores the opportunity and it does tell you in my opinion that the clock has started so you have a window of time to make sure you have the exposure you want in the Juniors uh before the money trickles into that sector cuz once it does then you'll be trying to jump on a moving train when things move they tend to move pretty quickly they do especially in this Factor yet in this industry yes one thing that can generate excitement in the space is m&a merges and Acquisitions um we've seen those starting to occur perhaps with increasing velocity um of the deals we've seen so far there been any that really stand out that you particularly liked there any that been particularly surprising to you uh you know in my view there's been there's been some m&a uh but we're at the very beginning of this cycle um so I you know there's been a lack of exploration a lack of development a lack of discoveries uh so m&a is going to have to happen that I mean there's a chart of week of the lack of exploration the number of ounces that are being discovered versus historical versus what is needed really to maintain the industry and so there's going to be a lot more m&a ahead it's a lot cheaper right now to just buy ounces than it is to try and explore and develop and and permit and and uh put into production so m&a is really at the beginning I do expect it to to not only continue but to pick up steam I think one thing that's uh illustrative or instructive is the fact we're starting to see premiums again or Premier um I imagine it's relatively straightforward to give a premium pricing when stocks have been beaten down so low you know depending on what side of the deal you want it doesn't seem such a big thing yeah to give a let's say a 50% premium on a 20 cent stock yeah right right well the average premium historically is about 35% um uh they've certainly been higher and sometimes they're lower uh but it is easier to get the bigger premium right now uh the worry is that they buy out a stock that you're down 50% on and they they only give you a 35% premium so I'm hoping we get a a lift in the sector before that happens uh but but that that's coming that train is is starting to heat up now so uh it's coming isn't that compensated for somewhat by the fact that a lot of the deals have been all stock deals so presumably a smaller company is exchanging or shareholders in a smaller company is exchanging stock for shares in a bigger company that hopefully will have a a much higher and quicker trajectory towards a higher pricing yeah and as an investor you can choose to sell those shares when the deal closes if you want and capture the premium that way or you can ride the producer higher depends on what your strategy is and as an investor you can do either one uh whether you keep the shares uh no longer depends on the company that was bought out but depends on the bigger company obviously as a whole and what they're going to do and what their trajectory is what their strategy is and that sort of thing okay is there a particular m&a transaction that you would like to see happen if you could uh have your wish um my wish would be all the ones in my portfolio get bought out of course um the interesting thing is though there are a number of companies out there we own some of them uh that already have resources and they're trying to not just prove up those resources into a higher category but to find more ounces and so those companies I think once the money starts to trickle down and the producers are more profitable given the higher gold price that's another impetus that could really uh speed up the m&a process they're more profitable now they can they can buy more now um but I think they they might reach down to those companies first that either have a a big resource that they're going to want or one that could be a lot bigger that they're going to want but the targets initially in my opinion are going to be those that already have ounces and they don't have 500,000 ounces but they have you know 2 million 3 million for me in a 5 minute o so those are going to be the first targets I think we saw a couple of transactions like that this week Jeff let's switch track to Copper uh for a moment there's been a lack of m&a in the copper space there's been a lack of discoveries in the copper space there's a lack of a a project development pipeline in the copper space and overall a lack of exploration even though most analysts forecast there's a a copper deficit Supply deficit coming that depending on who you look at could grow to 5 to 10 million tons per year by the end of the decade yeah does it surprise or shock you the lack of exploration the lack of Interest the copper sector seems to be generating it does the green energy movement is is relatively new generally speaking so a lot of the money has not had a chance to flow down into that electrification is the number one way the green energy is going to be met along with other metals of course but copper is going to be one of those medals that's going to be required in order to for these politicians to get their dream fulf filled uh and so it is surprising uh that underscores the opportunity that myself as an investor has to actually capitalize on this because there's going to have to be more development there's going to have to be more Discovery there's going to have to be more exploration a lot of money has to pour into the sector and you're right every week There's a new chart about the deficit that's coming in Copper um but take the average of those and even if that was only half right that's still a lot of copper that's going to be needed and so the rush into copper really hasn't happened yet and that is something as an investor I like to hear and how are you positioning yourself for that are you looking at the producers the developers the early stage explorers or or mixture of all of the above well somebody can look at a mixture of all the above but I personally like to focus a little bit further down the ladder and in Discovery and uh resource development and that sort of thing so I'm focused a little bit more on Discovery some early stage some post-discovery and some that are developers uh that's where I think I'm going to get the biggest bang for my buck and so that's where I'm focused okay now Jeff uh as we come to a close here how do you think the rest of the year will play out well uh there's what uh 2third of the year uh yet to go and so I I would not be surprised to see uh the copper price stabilized at this level I would not be surprised to see uh gold move uh higher at this point I would not be surprised that silver for silver to follow suit gold we always no gold moves first then silver they've been kind of moving in tandem but silver has a lot of catchup yet to do so I expect to see that gold silver ratio uh fall going into the end of the year um most of my effort though is not worry too much about the medals but more focused on the mining companies themselves who is primed to make the best uh use of higher metal prices as we go along in all those Metals all three of those are going to be in Bull markets and I think we're just at the beginning of the bull market and each of those excellent well Jeff thank you very much for joining us today great thanks for having me Paul and I'm Paul Harris and this is Kito mining Kito mining special coverage of the doche gold Messa is brought to you by Dino

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Length: 13min 16sec (796 seconds)

Published: Thu May 09 2024