There’s a reason gold stocks move so much in a bull market: the market is tiny. The global gold market has a combined capitalization of about U$225 billion – the entire gold business is smaller than a single company in the S&P’s top 30.
That means when generalist capital rotates in, there aren’t a lot of places for it to go. And so a lot of dollars pile into a few places. Where are those places? To start, generalist capital interested in gold goes to gold-backed ETFs and the biggest of the major miners.
That’s clearly underway already. Last week the SPDR Gold Shares ETF, which is the biggest of the gold-backed funds, saw $1.6 billion in inflows, including the biggest one-day haul since the fund started in 2004.
Miners are also moving. In the last month the NYSE Arca Gold Miners Index is up 25%; half of those gains happened since the Fed meeting on June 19th
Gold-backed ETFs and major gold miners remain preferred destinations throughout a gold bull market. But other kinds of companies soon get attention too.
Next in line are mid-tier miners, single asset operators, developers, and optionality plays. Those are all self explanatory aside from the last category.
Optionality plays are companies with large assets that would not make a lot of sense to mine at low gold prices but that make tonnes of sense once gold rises. That move – from not economic to economic – is a game changer for the asset and therefore for the company.
As such these stocks outperform in a rising gold market. They’re called ‘optionality’ plays because they are like buying options – they are a call on a higher gold price.
I’m introducing one such company today. I think the Maven Metals portfolio is already well positioned for a rising gold market, but it lacked a stock chosen specifically for optionality.
In her letter, Resource Maven explains what she is buying and selling, and why. Maven has bought into several of the markets best - performing stocks well ahead of the curve. She regularly identifies exciting new exploration opportunities and manages the inherent risk by selling some into speculative gains. And the mine builder and operator stocks that form the basis of the portfolio give strong, ongoing leverage to the rising prices of gold and silver. She has your precious metal bases covered.
I'm one of your new subscribers (by way of investing.com) and just want to belatedly thank you for the recent sell recommendation that saved me quite a bit of money. (I also follow a few other mining newsletters, and, like so many other financial analysts, they were too hesitant and biased against putting out sell alerts.) And I find your newsletters very nicely done in general.
Thank you so much for this excellent Maven letter. Your market analysis and logic is again exceptional. Your insights, knowledge and feel have given me a wonderful couple of hours. I am now planning my activity. I look forward to seeing you tonight on the Virtual Metals forum, I am pleased that you start first as I am a morning not a night person.
I hope you and your family stay well.