Sprott Monthly Market Update with Rick Rule: Gold Investor Fatigue Is Going to Lead to a Rally of Epic Proportion for Gold Stocks
Rick agrees that there is capital misallocation on locating and extracting gold from the ground. Precious metals historically have been the most volatile part of the resource market. Reasons for this include the narrative around gold and silver being more interesting than say that of copper and coal. There is an allure to it. Thus there is a flaw in the way investors think. Investors that focus on precious metals likely do themselves a disservice.
Gold itself has been strong this past year in spite of the dollar also being strong. This is unusual and encouraging. Investor fatigue in the gold sector is not the fault of gold it is the investor’s fault as they have unrealistic expectations in regards to time. Gold stocks haven’t kept pace this year probably because they did so well in 2016. Gold may never be good enough to satisfy the wild interest of speculators but indeed good enough for contrarians to make a tidy sum.
Mr. Rule discusses battery metals including nickel and why there are opportunities in the space. He likes cobalt as increased supply is unlikely to reduce the price. There is plenty of available lithium worldwide; however, that demand has increased faster than the processing capacity of the lithium industry.
Rick feels that outside of urban areas electric vehicles are unlikely to reach operating cost parity with gasoline based cars. Electric cars are unlikely to be practical for long-range transport.
Platinum and palladium need to see a global, sustained recovery that increases the number of vehicles sold. Since 2008 the market has been constrained worldwide. Demand could rise if China pushes for cleaner diesel fuel standards something they have discussed but so far failed to do.
Talking Points From This Week’s Episode:
• Rick discusses why cobalt will not decline in price if production increases.
• Nickel is intriguing as half of existing sulfide-nickel mines are uneconomical currently.
• Commodity bear market is playing out with the destruction of productive capacity in many sectors.
• Rick discusses four different events potentially could postpone higher uranium prices.
Rick Rule began his career in the securities business in 1974. He is a leading investor specializing in mining, energy, water, forest products and agriculture. Rick founded California-based Global Resource Investments, Ltd., which grew into a much larger organization with significant affiliated companies. As Director, President, and Chief Executive Officer of Sprott US Holdings, Inc., Mr. Rule leads a highly skilled team of earth science and finance professionals who enjoy a worldwide reputation for resource investment management.