Gold news

 [Music] I'm Charlotte McLoud with investing news.com and here today with me is tapy Costa partner and portfolio manager at ccit Capital thank you so much for being here great to have you thanks for having me looking forward to this conversation I hope it's going to be a good one we're we're catching up from back in November is the last time we spoke so definitely a lot has happened since then and at the time you had told us looking at Gold that a price rise was inevitable and I think certainly now we

see that playing out in 2024 with the price having gone to record highs so that's where I wanted to begin and just ask you if gold's price increase has played out in the way that you expected I think it's actually been more than I expected personally I kind of uh surprised how much of an appreciation we've seen and how much uh of a movement we've had so far and how we had this level of change Without Really causing positioning from investors to be extreme so you know if you look at the future

markets or GLD which is the most popular ETF for gold you're not really seeing the tick up of assets or in other words uh that the Western societies are really overwhelmingly bullish in the matter in fact you know if you read the newspapers we barely see people talking about gold still so the sentiment hasn't really changed and also position hasn't really changed which makes me think that not only central banks are the one accum the ones accumulating the metal but also that this movement appears to be much

more sustainable than most people think because you know we usually when we have a big move up in any asset or inclination as a Trader not as an investor is to be a bit a little bit Le of of those of those movements and start actually fading some of those Trends uh but I I think this is a real uh price appreciation and I really think this is the beginning of a secular bull market for the battle that is yet to drive other things so we've had a a period of consolidation here recently um you know

we're consolidating at about 2300 or so we're bouncing between 23 sometimes 2250 all the way up to 24 but ultimately I think we go much higher and as we see that happening uh it will should also Drive uh inflows towards the mining industry which is to me the the big opportunity here outside of the metals that are linked to Gold that should also benefit tremendously like silver and other precious metals and even based metals like copper that are starting to have a large movement as well okay interesting and so for you

this is still mainly a central bank lend price increase when it comes to Gold we're still waiting for those other elements to really come into the market yes and it's also um very interesting from a standpoint of looking at the industry of of mining as you can see uh we starting to see some of m&a activity which is usually a sign of uh of the beginning of a bull market in the space and that's that's key here because um to me it sounds like the majors are hungry and are hungry for newer assets

and so we're starting to see engagement of some of the Investments we having our own portfolio with the major companies but also announcements of large either Acquisitions or even uh just a merger of of different uh businesses and it's not only in the gold space it's it's also in the copper space and others and so it is very um very um I would say opportunistic to be looking at those at this industry right now and in line with all this if you think about what's been happening over the last few decades it's

sort of fascinating I mean just looking at every single metal because I I think gold is a proxy for inflation let's just use that as a proxy for inflation and if you look at Copper in Gold terms or if you look at zinc prices in Gold terms if you look at oil in Gold terms any commodity is basically at a at a highly depressed price today uh relative to other periods in history and to me this just goes to show we we did see an inflation in in financial assets but not really that true consumer inflation that

we tend to see like we're starting to see now so to me gold is is sort of the the first thing to really move and sort of the first box to check uh in terms of a of a secular Market but where you're really going to likely get those big returns is going to be on things that tend to move with gold and as we see gold moving uh usually you tend to see other metals really leading the way to the upside regardless if it is copper silver Cobalt zinc and so forth and and those are you know I think they're going

to be um uh great places to be deploying Capital here in the near future okay and going back to your comment on m&a so you mentioned usually we see this at the beginning of a bull market in general of course each deal is different but what are your thoughts on the quality of the transactions that we've been seeing so far in gold or or you can go broader if you want to um I would say I'm not sure is so much uh on the quality side but perhaps more the focus has been clearly in in Copper and electrification metals is is

clearly what's what's happening um we're seeing this especially coming from the gold companies which is um not shocking I mean gold companies are very popular uh have are very famous for changing their tune at the wrong time and so you know it doesn't surprise me that we're seeing that in fact this is reflecting on the decline of production globally of gold that we're seeing here um and in fact you know back in the 70s uh we we saw the same phenomenon happening so globally we're seeing production

declines of of gold given this refocus of most of those miners uh into uh copper and I think copper is going to be huge I mean if you look at Copper prices today relative to Gold um you know we're talking prices that we didn't see all the way back to the 1990s and so you know basically copper prices are the same as they were back in the 990s which is crazy I think um so there's definitely opportunities there this AI Revolution along with uh what we're seeing in terms of the uh the demand for

electrical vehicles and also the demand for even um you know electric heating uh all those things so those three buckets AI electric heating and electrical cars are likely to be driving the demand for electricity uh to levels that we haven't seen probably CE the Industrial Revolution and then on top of that you have what's happening with uh um the construction boom not only uh especially coming from the manufacturing side uh which if we looked at the infrastructure bills that we've seen so far they're

insane I mean we're talking three times what we saw back in you know during after the World War II when we try to rebuild economies and so um the majors are going to have to be busy they're going to have to be looking for those uh jurisdictions that they can uh they can be building Minds it is interesting the South American Focus recently as well um South American uh assets tend to be um you know in in in times a very difficult place to invest but in my opinion that is changing uh significantly and and

I've been a very big you know uh uh proponent of investing in South America in fact we've uh made an acquisition of of one of the largest silver and zinc mines in the world uh the St crystal ball m in Bolivia and I think there's going to be a lot of uh partnership being uh made uh with South American companies given the fact that we are in desperate need for Metals in South America will probably be the one uh part of the world that'll be serving most of about economies moving forward whatever

if it is you know iron or or steel or or gold or silver copper and whatever you you name it uh will probably be uh coming from South America uh like we saw in other other Cycles too and so um you know believe it or not the prior ation of most uh assets have been mostly focused on jurisdiction but not really from a perspective of how soon can you build a mind and I think in South America given the understanding of how mining is a large percentage of their own economies I think that they're going

to be uh much quicker to respond in terms of allowing projects to get into production much quicker yes we have a few stores like the Panama story and some others that have been you know swimming other direction but that's normal no we're not going to see everything go in the right direction but certainly things are moving to me uh in a very effective way and I I think we're going to see great opportunities there as well okay really interesting and I have a couple more questions to ask on gold

but I want to follow the copper path for a moment so copper we always hear it calling Dr copper it's a bell weather for the economy and we've seen copper prices moving in the last couple of months or so so what is copper telling us about the global economy right now I think we're in the process of seeing Dr copper become Dr Green Revolution and green revamping of manufacturing rather but I agree that you know the the the copper price tends to actually lead economic growth and so forth and

certainly what we're seeing recently uh maybe reflects something else maybe reflects uh this shortage of electricity that we may see in the next few years uh which I think is going to be a huge theme uh shortage of electricity mostly driven by uh all those three buckets I I said the electric vehicles and also the electric heating and also AI will be very significant I mean even from a standpoint of natural gas prices which will probably play a role there as well now looking at natural gas prices today

which have been sort of in a glut because of the lack of uh finishing of some of the PIP lines and infrastructure that would require to kind of close the gap of natural gas prices in the US versus global prices and also the l& infrastructure that is still being in process of being built um all those things the convergence of the the prices today in the US versus global markets is is is also uh something that I think it's an opportunity I mean I I don't understand how we're going to see all

these pressure towards uh demand for electricity which by the way if you look at electricity and demand in overall you know it it tends to be very gradual increases in very small very predictable what we're seeing today reminds me in a in a different way maybe maybe from the research that we look at on the on the on Industrial Revolution but also it reminds me very much of the research I did once regarding you know the potential for uh all the fiscal stimulus that we had coming out of the pandemic

especially coming from uh those stimulus checks that you know I remember seeing numbers of savings relative to income that have with never seen before and understanding that that was going to drive demand and I was going to drive inflation and markets were very you know very wrong footed at that time regarding the the this uh this potential for uh for unleashing all the spending from consumers given the fact that they receive money from the government um and I think it's similar in that sense what

we're seeing with electricity here and very likely to see shortages in the next one year so uh you know there are some big voices that been talking about this and uh and so I think that copper is to answer your question I think copper is reflecting more than anything is reflecting those issues and then maybe maybe growth is is is also one part of it but I think that there definitely the fact that we're seeing this huge push towards uh revamping electric grids in a time when uh electric electricity demand

is probably going to Surge uh to levels we haven't seen and there's going to be disruptions in utility companies there going to be um even potential problems with uh with how we you know the crypto mining is adding to the electricity demand there's all sorts of things really that could drive that so one way to play that is also on the natural gas trade which is and we I'm happy to discuss this year but I think it's as a symmetric as it gets and one of probably one of the best opportunities in the

commodity space that I've seen in the last uh few years yeah I would love to hear more about the natural gas angle if you'd like to go into that well I think that first I I made the point about AI uh and how that's likely to drive the demand for electricity that will likely Drive the demand for natural gas I also uh would like to say that this issue with the potential convergence of natural gas prices is mostly a political issue right uh the current Administration is on allowing those

pipelines to be built and therefore we're not seeing um you know the the the change in natural gas prices we should see causing the glut that we're seeing in the US but uh I do think that that's a short-term phenomenon and uh when you look at even in the conver on the contango that it's form in the future's curve of natural gas every time we've seen a contango as much as Extreme as we're seeing now uh it will actually marked a bottom for for natural gas prices and very know significant bottoms

today natural gas prices in nominal terms is retesting every seven major bottom we've had since the 90s or mid 80s and so I think why is this time different I don't think it is different I think we're probably going to see a big change in prices caused by that and the other thing you can think about I'm a big bull in oil I'm I'm not here to say I'm not a big bull in oil but if you look at oil to n gas spread which you have to adjust for uh what we call the btu spread so on a BTU basis you got to

put in equivalent basis and when you see that it's today close to or above a or around the eight in that ratio that is the highest level outside of April 2012 that we've seen in history and April 2012 was a major bottom for natural gas oil prices went sideways and N gas basically went from two bucks to another close to six bucks so you know would that surprise me if we see a move like that today no it would have surprised me at all so it reminds me of looking at the oil Market back in April 2020 and

people were saying yeah we'll probably bought them at some point in oil prices but would take some time for us to see that and no it didn't take any time it happened very quickly and we all wish we had our portfolios all loaded in oil at that time and we didn't and then one of the biggest signals that actually show that was Equity performance of that industry meaning what oil prices turned negative during that time we actually saw energy companies going up which was crazy oil companies during the week oil

prices turn negative actually close as one of the best or I think the best sector of that week which is insane and so um that to me was what marked the bottom that gave me high conviction I remember hearing a lot of people saying that the number of companies that would go bankrupt because of all those issues and end up being very very false uh narrative and so I think it's sort of similar today and uh the sentiment is really given up in that guess and I think that right now is the time to be

dipping your toes into it okay and so how how would you be approaching that because I think investors in the resource sector they're pretty familiar with mining companies and the different levels of companies that you can look at they might be a little bit less familiar when it comes to natural gas as well as oil well the interesting phenomenon happening is that if you look at the equity prices they are not Ultra cheap like natural gas itself so there's a Divergence between them and you know

some people try to blame not blame a justify this Divergence saying that what's happening is that those companies are very well hatched while I think that that's partially true if you look at companies that are on Hage you're going to see that that there is also Divergence and some people said well that actually has to do with the margins their margins are really big and you look at their margins their margins have been bigger in the past and it tends to follow natural gas prices so what we're

seeing today is basically Equity prices telling you the natural gas prices are just unsustainable with these levels and Equity prices are leading the way to the upside that's my interpretation of what this Divergence is and so when I look at that um I get really excited about the space but I think that the the opportunity itself is in the commodity so we've been buying September contracts in the Natural Gas and also I think that that's not really the front front month it's actually a little bit out like

September or so that that I think it's it's more attractive um and uh you can see that after the summer months there's a big surge in the future prices which is causing the contango maybe that has to do with Trump getting reelected I think that that's a possibility because Trump getting reelected and usually we tend to see those being more favorable uh uh political narratives towards Energy company so we got to understand that while that might drive production of oil much higher uh it may also lead

to the finishing of some of those pipeline constructions that been you know put aside uh during the biding Administration to keep natural gas prices lower maybe you can call this a conspiracy or maybe that's just a strong opinion from my end uh but I I do think that that that's maybe what it the future markets is pricing in and so if you look at September prices if there is you know potential for natural disasters all sorts of things could happen you know those are all potential positive um

uh you know pressure on the price not positive for society I'm not saying natural gas prices are natural uh disasters are good for society I'm just saying that that's that's a risk that is not really um it's completely really misprice in the in the in the future uh contracts going out uh to September and so I think that that's that's really the the opportunity okay thank you for going into that that was that was really interesting to hear about and I think this is my pathway back back to Gold

because if we could talk about Divergence between the commodity and equities gold certainly I know people are looking at the Gold stocks and they're wondering okay what is going on here and I know that you are bullish there and I want to ask you about when you think they may catch up what you think is going on because I see a lot of people in our audience thinking okay they're they're just getting tired of this that's great sign by the way um I I hope you'll let me know when they start

throwing the the towel but I think a lot of people are which is we're so close from a the historical breakout in the miners we were so close yesterday from a monthly breakout and then we had a big dump in prices the largest dump in the GDX uh ETF that we've seen since 2020 by the way so I think at the the the the mining industry is so close to one of those big move ups that we tend to see in the industry 3 400% moves in the short term and that's really driven by now I was speaking with somebody in a

conference other a few months ago in Switzerland and or maybe a month ago in Switzerland and this person was um a very contrarian investor just to give an example and uh you know claiming that and I was asking this uh him what was you know what would uh what would change your view about the gold space and you know he said well we need a catalyst and I said how in the world is not gold pric is breaking out not a catalyst and it's just like people have lost faith in this industry overall and this was very

similar not to early 2000s but really to the 1970s the 1970s we had this level of um sort of perception that the industry would never come back and the industry you know unless I'm wrong and it's different this time the industry always comes back and so I'm a believer of that this is one of the oldest Industries we have in history and the great thing about that is we can look at data going back centuries from from today and I don't think we've experienced such a know level of undervalue um evaluations

across this space uh like we're facing currently and it there's a lot of opportunities here for activist investors because those um those inefficiencies that we're seeing from companies being run by the wrong people or assets that are not you know um receiving the right amount of love in terms of how to um how to drill those those places or how to develop those assets and that's just quite normal of of an industry that has not received any Capital whatsoever and and been neglected for so many uh decades and so

uh in the early 2000 we had the minor to gold ratio actually not go up massively it kind of went sideways during that cycle uh which means that the miners didn't really um you know in the paper didn't really outperform hugely the gold price itself although uh it was a great time to be invested in the mining space now I would strongly argue that this time we're going to see the mining industry massively outperform gold prices because usually uh the conventional wisdom is wrong and I've never seen an industry

that is more hated than the gold space I even even the Cannabis industry recently got some love from the government which in the front of the The Wall Street Journal today they uh had good news and and the whole industry is is getting U some upside here recently um I don't know of a single industry that is more hated than the gold miners I'm not talking about silver not uranium not copper gold miners they are the most hated industry in the whole market and I think that's a huge opportunity I was sitting in a in a

in a dinner not too long ago and this geologist posed the question what's the moral reason to buy and to mine gold and when a geologist who studied his whole life I just said what what gender he is but uh he studyed his whole life this whole Space is asking questions like that that means to me that that has to be somebody just completely throwing in the towel I mean people don't understand that this is the most useful metal in history and therefore it's so useful that is used as a currency then people just don't

understand the whole thesis behind hard assets and then when I look at the correlation of assets especially coming from 6040 portfolios and you see that how much those traditional allocations are so focused in buying technology and and hedging that position with fixed income and then I look at the correlation of those two instruments and it's at all-time highs what does that mean that means you're taking massive risk in those two allocations because they're not haging each other they're

basically moving the same direction higher interest rates lower share prices um lower interest rates higher share prices that's not the environment we lived in the last two to three decades this is an environment we lived in inflationary eras and so I really really caution people uh that continue to you know really uh uh fight this this this recent Trend that we're seeing because I think this recent Trend will last many maybe maybe even a decade or so by the way this is not a new normal this is

what what has been a new normal was the last two to three decades back prior to the the 80s or so um we've always seen a strong correlation between 10-year yields uh or treasuries and and and and I should say the equity markets it's just recently that that correlation flipped to negative which allowed people to own a big chunk of equities and then hch deposition with fix income what if in 10 years from now those traditional portfolios to start taking three four five% positions in hard assets that's

pretty you know conservative in my view what I'm saying or what if the 60% allocation in equities that is majority technology just turns into you know 20% 10% technology and a lot more in boring businesses like mining uh and infrastructure developments and emerging markets and all sort I think it's highly likely so that rotation out of those very you know overweight uh s classes into things that have been uh long now undervalue uh will probably take place in the next decade as it usually does

and so it makes me very bullish about the whole space and gold miners will probably play play a very big role into this okay very good it's really helpful to hear your your strong convictions there so I don't I don't want to keep you too long but I'll put it back to you before I let you go and just ask if you had any final thoughts youd leave investors with um look my final thought is that I feel like investors most times try to um wait for prices to change until they change their opinion and this is the

weirdest thing we see in this industry is the fact that you know you go to grocery stores and things get cheaper people make a line and start buying it in the markets it's the opposite it's like people wait for prices to go higher so they start chasing that product I mean this is the most backward looking way of investing I've seen in my career but that's happening that happens throughout history and uh and maybe to a degree that we've never seen in the mining industry so what I would say is

you know I I view this is you I don't think the case has changed for gold in fact I think it's only strengthened if the stren if the gold case is strong that means the copper case is strong that means the silver case is very strong and that means the mining industry case is very strong now if you look at the prices and the valuations we're paying for those those companies and those businesses at ultra low levels that I I can't I mean I don't even know why we even talk about technology

companies because the opportunity really is there I mean that's really where everybody should spending 90% of their time so that's where I spent 90% of my time but I think maybe will become obvious in five 10 years from now and uh or or maybe not maybe I'm very wrong and and uh and um I'm you know but I I I have very high conviction in this thesis and I will stay you know even if prices don't go much higher gold prices don't go much higher from for the next five to 10 years I would assume that there's

even an activist case to be made in this industry because there's so many inefficiencies that you can improve assets drastically given how cheap they are to be purchased today so boy you know it's time to get busy and not to be uh you know concerned about why are miners not moving versus versus gold that's my two cents okay okay I think that's a very good spot to wrap it up thank you so much for coming on today to go over what's happening in gold and the resource Market more broadly this was

great thanks for having me of course and once again I'm Charlotte McLoud with investing news.com and this is tapy Costo with cres good capital thank you for watching if you like this video make sure you subscribe to our Channel we'd also love to hear your thoughts so leave us a comment below we'll see you next time [Music]