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Which assets have the most to rise?

We’ve all been happy by the action of the last few days. It’s nice to see miners rising by 3-5% a day.

Now, assuming this is finally the beginning of a new bull leg up –and the false dawns are at last over– we ask, which part of the PM universe has to most to rise?

The easiest way to answer this is to see how far each group is below its all-time high. One big reason I am not big on the general stock averages now is that so many of them are at or still near there record highs. Yes, the S&P and Dow are a few percentages down from their August highs, and this may, repeat may, be the start of a correction. After all, they’ve been rising since March of 2009 and we’ve all gotten a lot older since then.

My short answer is the miners have the most to rise. However, many of the royalty companies are at or near their highs, so they may not rise as much.

Let’s look at these royalty companies first:

FNV made a high in July of 2020, and then just barely went above that high in July of this year. From there it fell from $161 down to $127. In the last few sessions, however, it looks like that fall is over. It is now over $139. Still, this is a long way up from the 2011 highs of the miners in general. At that time, FNV was about $50, more or less.

FNV has thus soared so much from the old miner’s highs of 10 years ago that I’m not sure it will be the biggest riser if we are in a new bull move. By all means, still hold it. My guess is that “the last shall be first”, and FNV has clearly not been the last, being 200% higher than it was a decade ago.

On the other hand, RGLD –while it is up tremendously since first recommended all those years ago (can it be nearly 20 years?)– is only up about 10% from the highs of 2011-12:

RGLD is now down about 30% from its highs. But those highs came less than one year ago, and not a decade ago, the way the mining ETF’s of GDX and GDXJ have done. The jump overall of the past few days have tacked on about 7% to it. This is not bad, but remember that FNV has risen about 10% over the same past few days.

Of course, I would keep it: we long ago snatched our original investment stake out of this. But I wouldn’t count on it to soar as much as the PM assets that have truly bombed out.

Now to the newest royalty choice: the smaller Metalla. (For simplicity’s sake, we’ll just use the US-dollar- listed MTA. While nearly double its recommended price, MTA is still, at $7.50, about half its record high of last December:

MTA has soared over 18% (at this writing) since the start of October. This may be too far, too fast. However, of the royalty companies, this one has the most to gain back, in percentage terms.

Finally, though Sandstorm (SAND) is not a newsletter recommendation, I know people like it. It is clearly different from the above three in that its highs were made long ago, in 2012:

And though SAND has risen over the last few days, it is now just where it was one month ago. I don’t know how to approach a forecast for this: since its $2.63 low in December of 2015         –when I think the overall PM market made its lows, even though the rise since then overall hasn’t been as great as I’d like– I’ve noticed one thing about SAND. That is, it’s overall rise with always higher lows was broken early last month. It was only broken by 4%, but still.

I know that MTA has been making lower lows since the highs of last December. But –don’t ask me why– I am more willing to be optimistic on a stock that has been doing terribly, in hopes that it has become ‘bombed out’, than I am with one that has broken its bullish pattern after several good years. This same goes for RGLD, which has had lower lows for months. Maybe it finally has gone low enough?

FNV is still experiencing ever higher lows, and is in good shape: the blue-chip of the PM stock universe.

Now, To the Regular Miners

The largest gold miner is Barrick (GOLD). But it has clearly lagged in the past decade, down 63% from its highs:

GOLD was one of the first miners to recover from its huge drop post-2011.  It bottomed at $6.36 in August/September of 2015. This was even before gold itself bottomed later that year. Of course, at the current nearly $20, and with a nearly 2% annual yield, it has clearly recovered from that 2015 low. But it is still dearly shy of its 2011 record high of $53. It would need to double and then nearly double again to break into new highs. I think this will happen if we are indeed in a new bull leg: it is just a matter of time. And you get paid for waiting: I know 2% is not great, but it is more than you can get at the bank these days.

Newmont Gold (NEM), on the other hand, is more of a mess. It is sobering to realize that 25 years ago NEM was higher than it is today. In March of 1996 it stood at $60; it is now $57.50. And that’s of course not accounting for inflation over the past quarter century.

NEM has a sorry history of making new records only to crash soon after: 1996 to 1998; September 2011 to September 2015. Since the 2015 lows of $17, it made a new record just this past May 17, at $73.50. But in the weeks since then it fell sharply to a low of $53 at the end of September. Are we in for yet another post-record crash from NEM? Yes, it has jumped 8% since then, but so has nearly everything else. The jury –or at least me– is still out on NEM.

We’re keeping it in the portfolio since we long ago reaped original investment on it. But would I recommend it for new money, at least a larger percent? I’m not sure.

It is a big miner of long standing, so it should be poised to gain in any new bull market. But from 2015’s lows to last May it soared 333% (and adding the 4% annual yield, even more).

I own NEM, but I’m going to be watching it closely… in hopes it won’t be up to its old tricks.

​Charts Like This May Me Realize We Are Six Years Into a New Bull Market… Though, Sadly, it is Not Universal Yet

We move now to the smaller individual companies and the ETFs. In no particular order, here is Pan American Silver’s chart (PAAS)

If we can show the chart from 1995, at first glance it looks like a series of highs followed by sharp falls. It did so very well from 2001 to 2008, then fell along with the rest of the stock market, but recovered much sooner, and then made a double high in 2011. From there it fell 80% to the December, 2015 low of under $6.30.

From there it soared to a high of nearly $38 in August of 2020: the exact time we thought the rise in the overall PM universe had gone too far, too fast, and urged people to expect a correction (one that I dearly hope is now over).

That 2015 to 2020 rise was over 200%, counting the 1.6% annual yield. But from that 2020 high, PAAS corrected by over 40%. It reached a low of $22.50 just a week ago. Since then      –over just the past few days– it has risen 13%. Of course, I’m hoping the correction is over.

But at the same time, a chart like PAAS’s gives you perspective that we have come a long way up, in many cases, from the December/2015 to January/2016 lows. Yes, we’ve had a correction since August last year. But it has been a correction within a larger bull market.

And no two bull markets are alike. The one that began in 2001 had over 20 years of bear market to start making up for. So the assets just rose and rose and rose for nearly all of the next decade. At that top, ten years ago, the next four or five years were a monster correction. But still, to my view, a correction within the overall bull market that began with this new century over twenty years ago.

More recently, we’ve had a mini-correction since August, 2020 (though I can understand that people who got in at the top back then would not use the term “mini” for it).

We are, in real terms, about half the 2011 peak value for PAAS now. If silver breaks above $30, we can expect an ultimate double for PAAS, at the very least.

Staying with silver stocks, SSRM is still under book value (0.93). (PAAS is 1.89.)

SSRM is a stock that reached its record way back in October of 2007, just a few weeks before I issued that “everyone out of the stock market” alert. Well, it would have been a good time to get out of this silver stock as well: from the $42.60 top (in 2007 dollars, at that), it plunged to a low of $4.36 in January of 2016, when I think the newest major leg up bull market began again. At the current $16.20, it may be a big jump from early 2016, but it has a long way to go to reach its old 2007 highs: maybe as much as 300% in real terms.

When there is a lot of great action, as there has been over the last couple weeks, I always like to see if any asset is being left behind in an appreciable way. You can’t say that about SSRM, since it has jumped by 14% since October began. And very importantly, while it is still trading below book value, the fact that it sports a 1.3% annual yield is a great sign that SSRM is a going concern. Forecasts can be wrong, but if a company pays out a cash yield, that says a lot. Thus, I think that any purchase of SSRM at current prices will make their owners happy.

The largest single holding of the global silver miner ETF, symbol SIL, is our recent addition of Wheaton (WPM). SIL has nearly 25% of its holding in WPM alone, so by buying SIL you are holding WPM indirectly. However, I choose to single it out for specific recommendation because I (apparently like SIL’s managers) think we could see big things for it.

WPM reached its record high back in those wonderful days of early August, 2020. From there until this past March, it corrected by 35%. But since that low WPM has been making high lows, and in the last ten trading days it is up by over 12%. Certainly, I have high hopes that the lows are in for WPM, and for the stock in general. Remember, it has a yield of 1.5%.

We should end this section with both SIL and silver itself. For SIL, while it has nearly 25% just in WPM, nearly 10% is in PAAS and nearly 5% in SSRM. Thus, if you own these three stocks, you own nearly 40% of SIL. So most of its holdings are of companies you may not own, like Polymetal International (12%), Hecla, First Majestic, Fresnillo, Korea Zinc, and our old friend CDE. And those are just some of the top ten holdings: SIL holds smaller amounts of many other smaller silver miners.

At the current $39, SIL is less than half of its peak in April of 2011, when I heard strangers tell me that silver (at nearly $50) could only go up more. This fact was only one of the reasons for my Alert to lighten up of April 25 of that year.

By the way, when I say “lighten up” it does not mean the same for everyone.  For those who bought at $4, they could just hold. But for those who got in closer to the top, or who were holding leveraged products like futures or options, ‘lighten up’ means to get rid of those, or at least cut way back. The next time I say “lighten up”, I’ll repeat this.

In any case, it is much harder to make clear forecasts for an ETF like SIL, because you can’t be sure what mix the managers will choose in the future.  But it would have to go over 100% in price to match its 2011, especially in real terms.

Silver itself hit a panic low on the last day of September: as low as $21.45 basis futures. As of this writing, it is $23.50, so silver has jumped by 9.3% over the last ten sessions. The current silver to gold ratio is 76.5:1. That’s up –meaning silver has weakened vs gold– from the 64:1 ratio of this past March.

I think that since silver has been much harder hit than gold, and is much farther away from its record highs, that we can expect silver to now start rising faster than gold. I want to see the current ratio go back to 64, and then ideally decline further from there (meaning that the lower the ratio, the more silver is valued compared to gold).

In the back of my mind, I had been waiting for silver to make a panic low before it could recover. Maybe it is wishful thinking, but to me the action of September 30 was that panic low, pushing below silver’s old low of $22. Of course, in the mini “Covid” crash of March, 2020, silver plunged below its 2015 lows of $15, to under $12. But that was an aberration. Still, it has nearly doubled from there. That’s not enough, however. I want to see silver finally break above $30. I still believe that ultimately, it will be far, far, higher. But as it is, it has to more than double to get close to its old highs.

​While gold is up strongly from its 2015 lows of $1050, it is down from its record high of $2063 (basis spot). This high came like so many in early August of 2020. While gold then fell as low as $1678 in March this year, and then as high as $1900 in May, since then it has been in between those extremes. Right now it is, as you probably know, about $1800.

It has been pointed out that on some charts, gold is tracing a ‘cup and handle’ formation. This is a bullish technical sign.

The central point, to me, about gold is how close it is to its record high.  At $1800, it needs only a rise of less than 15% to make a new high. But it may well be that being so close to the old record may limit gold’s upside action, compared to silver and the miners ETFs.

To see a truly still bombed-out sector, right in the midst of a Dow and S&P at near record highs, turn to GDX and GDXJ.

The major gold miners ETF, GDX, made its record highs in 2011 at about $63. It then plunged to a $13.70 low in late 2015, a loss of nearly 80% in less than four years. From there, the major correction was over, and GDX got as high as $43 (a 215% jump from those lows of four to five years before). Still, in real terms far below the 2011 highs. Since August, 2020, GDX has fallen from $43 to the $28.89 low of just a few days ago, on that black day late last month. In the days since then, GDX jumped 14% to its current levels.

Just as I thought that August of 2020 were interim highs, I think that late September of 2021 saw the correction lows. The trading and sentiment a couple of weeks ago had all the aspects of severe bearishness: the kind of atmosphere conducive to having everyone who is going to bail out indeed bail out. When there is no one left to sell, then the buyers take over.

Adjusting for inflation (and if you can’t use gold miners as a mark of inflation what can you use?) GDX would have to more than double from these levels to reach the old 2011 highs. It is only a matter of time. To me, it is a better bet that GDX and GDXJ will double before gold doubles to $3600. (But of course, gold is not subject to the crashing plunges that the miners are.)

So now to the worst ETF of all: the junior miner GDXJ. From a high of $171.88 reached intraday of April 8, 2011 (now almost exactly 10 and a half years ago) GDX then proceeded to plunge to $17.06 on January 26, 2015. That’s a loss of over 90%.

Clearly, GDXJ has recovered from that 2016 low. It got as high as $65.43 on August 8, 2020. Yes, that was a nice 284% jump in just over four years. But still nowhere near the old highs. And then came the correction. It was probably inevitable, since the prior rise from January, 2016 to August, 2020 was nearly 300%.

Since those 2020 highs, GDXJ fell to a low of $37.31. That happened on –surprise!– September 29, or two weeks ago. So GDXJ fell by nearly half over that eleven months.

Again, I hope this was the panic low. In the days since then, GDXJ is up by a large 17.8%. That’s why I say that ‘the last shall be first’: that ETF most hit during the bad times can normally be counted on to rise the most –or among the most– during the good times. And to repeat, I hope and believe that those good times have finally begun. If it goes (rather say ‘when’ it goes) back to its nominal 2011 record high, just in nominal terms it would have to rise by 292% from today’s price. In real terms, it would have to be even higher.

Thus, the more I am convinced that we are finally turning the corner, the more I will want to put into GDXJ. Just as GDXJ dramatically underperformed gold since 2011, I believe it will dramatically outperform it over the next time period. I hate to use that overworked phrase “going forward”; if I have to guess how long the next bull leg up will last, I will only say “the next few years”. The last one lasted from January 2016 to August 2020, or 4 1/2 years. But if I see that things are going up too far, too fast, like I did in August 2020, I will advise tactical lightening up on the leveraged products.

​P.S. I was forgetting to include the newest choice, Equinox (EQX). As of the 14th, it is still under book value, at 0.93.

EQX hit a record high in August, 2020, at $13.13. It hit a low from that this past August at $5.90. On the 14th (today, as I write), it got above $8. Thus, it fulfilled my initial target when we recommended it a few weeks ago.  But while EQX may have jumped over 25% since then, and may have indeed come too far, too fast, I think we can see this best the $13.13 highs of last year. At least, that’s how I am invested.

Again, I can only repeat what I think about the future fortunes for this entire area: it is a mere matter of time.