Compass, episode 11

Our previous episode: https://www.cruxinvestor.com/posts/gold-shines-amid-tariff-tensions-6961

Recording date: 17th April 2025

Gold and gold mining stocks have emerged as standout performers in today's challenging market environment, according to industry experts Samuel Pelaez and Derek Macpherson of Olive Resource Capital. While traditional safe havens like bonds weaken and equities struggle, gold miners have posted impressive gains of 20-80% from recent lows.

"Everything that has happened right — you've got equities that are weak... bonds that are weak... and the dollar is weak," Macpherson noted, explaining the unusual market conditions driving investors toward gold as a reliable store of value.

The experts identified a predictable pattern currently unfolding in the gold market. Historically, investment capital flows sequentially from physical gold to large-cap producers, then to mid-tier producers, development-stage companies, and eventually exploration firms. This pattern, evident in previous gold cycles (2001-2005 and 2009-2011), appears to be repeating, with large-cap producers already seeing substantial gains.

A significant change in market structure could accelerate this trend. The consolidation of mid-tier producers has created a gap in the industry, potentially allowing capital to flow more directly from major producers to development-stage companies. Resource funds that have profited from large-cap positions are now seeking diversification in smaller companies, as evidenced by VanEck's recent position in Troilus Gold.

The next 60 days represent an opportune "sweet spot" for junior mining companies to raise capital. "They've outperformed over the last six weeks... but there's still a sweet spot where you can raise significant amount of money, set them up for the next 12-24 months, and still lots of upside left for the new incoming investors," Pelaez explained.

For exploration companies that have spent years conducting low-cost groundwork like surface sampling and geophysics, this financing window enables advancement to drilling their most promising targets. When properly deployed, this capital can create value that outweighs dilution concerns.

Despite recent gains, both experts emphasized that the gold market cycle has considerable room to run. "This is a very exciting time... Don't blink, don't miss it... the next couple months are going to be tremendously important for this market," Pelaez stated.

For investors, the message is clear: gold appears well-positioned in the current environment of economic uncertainty, with continued momentum expected until greater clarity emerges about the broader economy.

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