John Rubino, [Substack https://rubino.substack.com/ ], joins us for a wide-ranging discussion on the macroeconomic factors driving the hard assets higher, but then we vector in specifically on opportunities in the gold, silver, PM producers, and royalties stocks, and the moves higher on the back of strong earnings reports.

We start off reviewing the big pops higher in the shareprice reactions to many gold and silver producers after reporting their Q2 earnings. Despite the accepted narrative about the efficient markets having already priced in the higher metals PM prices to the producers’ valuations, we still saw the market get an upside surprise from how lucrative the past quarter was, sending many stock prices up higher in the high single-digits or double-digits in percentage terms.   John points out that this is because so many generalists are still not really paying that close of attention to this sector, and thus were caught off-guard by the earnings, and business improvements being made by these producers with growing cashflows.

One of the challenges, while also being a potential opportunity to attract future momentum investors is that generalists have remained distracted the last few months by continuing to pile into the mega-cap tech stocks, like Nvidia, or speculating in the recent mania that pushed Bitcoin and the cryptocurrencies to higher levels. If those generalist sectors seeing the capital flows should start to top out and roll over, then that would open up a larger audience of generalist investors looking to rotate money into other sectors, and the continued revenues in the PM mining stocks would gain wider appeal. 

He also reviews that even though we’ve seen more interest from generalists in accumulating the gold and silver physical-based ETFs, that we still won’t see the larger accompanying influx of momentum traders into the mining stocks until we see more continuous quarters of solid revenue generation; making the sector too hard to ignore.  That pattern of multiple consecutive quarters of earnings growth will inevitably show up on more and more scans for market sectors showing outperformance, and this will attract new entrants into the space.

Even if gold and silver prices were to stay around similar levels and keep channeling sideways, John outlines that we’ll still see the mining stocks improve and strengthen their businesses by using their growing revenues and cash flows to pay down any debt, buy back shares of their stock, increase their dividends, or make accretive acquisitions.

 In addition to gold and silver producers, we review that the precious metals royalty companies have been seeing consecutive quarters of record revenues and cash flows and they have also been continuing their multi-year trend to higher valuations. John discusses the strengths of the royalty and streaming business model, and discusses some of the recent M&A transactions within the sector.

Wrapping up we pivot over into the fundamentals of industrial and investor demand behind the upward pricing trajectory of silver the last couple years, and that it appears to be a trend that will have higher to go.  John highlights how this is such a small sector compared to most other market sectors, and that it won’t take much capital coming into silver or the silver equities to move them up in a significant way.

Click here to follow John’s analysis and articles over at Substack