I am totally comfortable saying that we are in a gold and silver bull market. That’s a big statement for me. I started Resource Maven almost six years ago on the expectation that a bull market was coming. I’ve been watching and waiting for it to really happen ever since. And now it has.
For mining investors the wait has been longer than six years: I started Resource Maven in late 2014 after we’d already endured three years of bear market. It’s been almost a decade since any part of mining was a real bull market.
That is a very long time, long enough to erode portfolios and confidence. I point this out because those long hard years are why you are having trouble believing the gains right now. And they are why a few negative days can cause so much anxiety.
But negative days are part of the process. Why did EverGold drop 20% in a day? Why was almost every stock in my portfolio down yesterday even though gold recovered from a pre-market drop to trade above US$1,810 per oz.? Why did VZLA drop back to $2.10 after trading as high as $2.93? There are details for each answer of course but there’s also a broad answer: profit taking. This is a risky business. EverGold may or may not hit into a discovery this season. Viszla had gained as much as 540% in a month and the trajectory from here depends on the next set of drill results.
The share prices of precious metal explorers and developers make big moves on news and in response to the prices of silver and gold. It adds up to mean that investors take profits when they are offered, at least to some extent.
And so they should…but in context. Here’s how I look at it. I start with the big picture. Are precious metals rising and, if so, how long and strong do I think the rise will be? At the moment, the answers are Yes and a long, strong way. I really think we have a year at the very minimum of strong gold/silver market ahead; we could have several years. What does that mean?
Stocks will keep rising
New opportunities to invest will present
Most of us are likely fully invested so have to sell to buy new ideas
Since point #3 makes it impossible to add new opportunities to the portfolio (point #2), taking some profits becomes part of the game. Moreover, when a stock is up 500% you cannot be faulted for booking some gains, even if you think it’s going higher! We don’t all have endless pools of money to invest and we do face expenses, like my need to buy a new (to me) car recently. And we know gold and silver don’t go straight up, even in a bull market, and so booking some gains after a big run is a sensible tactic.
Such are the broad reasons people sell. And they make perfect sense even if the collective result, like my entire portfolio bleeding red yesterday on what was really a pretty darn good day for gold, doesn’t always feel right. But keep the selling in context.
Don’t be too early to jump ship, because this boat has a long way yet to go. By way of reminder, take a look at the chart below of the Van Eck Junior Gold Miners ETF over the last decade. 3 Yes, the ETF is up 100% since its bear market lows (2015-2016 and then revisited in late 2018).
And yes a double is a lot. But at the peak of the last bull market this ETF traded up to $170. To regain that would be a 220% gain from here.
Again: we’re just getting started. So don’t stress if the sector slides for a day or a week. Remember that it’s part of the process and either
Ignore it if you’re fully positioned
Buy the dip if you still have capital to deploy
Now, it’s important to realize that some stocks offer clear exposure to rising precious metal prices while others wax and wane much more dramatically based on news. In short, that’s the difference between producers and explorers. And that brings me to the next topic of discussion, which is timing your explorer-developer buys and sells.
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.
Your "Maven Letter" has totally blown me away! I was thinking one of your letters would be a 2 or maybe 3 page letter about one or two mining companies. Instead, each one is a detailed report. Bravo to you for such great detail.
BTW - I really enjoy reading your newsletter - very comprehensive and you do an excellent job of integrating a macro perspective into your analysis.