'Tis the Season
Source: David Coffin & Eric Coffin, HRA Advisories (10/13/10)
"It's a secular bull market for metals and resources."
The topic on many minds was new all time high for gold's price and the eve of new 30 year price highs for silver. One question was in regards to whether gold or silver was the better metal to be in. The answer mirrored our long standing take that silver is the yellow metal's more price volatile cousin—silver may outperform gold but we expect those gains in conjunction with gold gains. Perhaps more topical is when there may be further gains for the precious metals. After a long uptick in a weak market, it makes sense to expect some consolation at some point. This isn't a market in which up can be sustained without rest breaks.
Another question had to do with gains for these metals versus the companies that mine them. Certainly it has been true that the yellow metal has moved faster than most of the senior gold mining companies, but we do think that is changing. As we have said in the past, gold miners have finally reached the point of virtuous accounting in terms of past debt loads and mine planning that used to be about survival. On top of that has been the wave of takeovers that have traders looking for the next one. You have heard this from us before, but we do think it is worth repeating. It's a stay the course message, at least for our favored space.
The increasing concern about the USD and US debt load simply reinforces that message. China has again been getting pressure to let the yuan strengthen, somewhat disingenuously after the yen was sat on by the Bank of Japan, and appears to be heeding the message to some degree. We don't expect a big yuan move relative to the dollar, but the gradual steps towards making China's currency more fully in tune with the global trading picture at least allows better planning for rebuilding elsewhere. The reality is a stronger yuan won't make much immediate difference to trade, but it would help moderate the raw goods market China needs to sustain growth.
That, so you know, isn't ominous sounding for the metals space. It's time to see some greater distinguishing of needs in base metal pricing rather than the shifting around based on economic stats which is still the norm for the most part. There is some evidence of copper charting its own course, which it really needs to do meet demand expectations from mid-decade on. That means the takeovers of copper assets could get as heady as those in the gold sector have been.
On that note, we will move on to updates that are mostly gold based this month. Take note of the seasonal shift they auger.
It's a secular bull market for metals and resources. We've been saying that for nine years. And we've been right. Another thing we've been right about is the growing importance of the Yukon as an exploration destination and, more recently, Area Play. HRA was there early and continues to follow several of the biggest winners in the play and is tracking dozens of others for potential inclusion in HRA.
CLICK HERE to access your FREE Yukon Report from HRA now HRA initiated coverage on 15 companies since early 2009—the average gain to Sept. 3, 2010 is 257%!
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