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Thursday, December 7, 2023

Top Stories This Week: Gold Price Gains Again, Expert Outlines Key Support Level

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The gold price was on the move again this week, rising from a low point of about US$1,915 per ounce on Tuesday (March 22) to a high of around US$1,965 on Thursday (March 24).

It was changing hands just below US$1,955 at the time of this writing on Friday (March 25).

I had the chance to speak with David Erfle of Junior Miner Junky, who said he sees support for gold trying to hold at the US$1,900 or US$1,920 level, although he wouldn’t be surprised to see the yellow metal test US$1,850 since it was facing “strong resistance” there before the Russia/Ukraine war prompted it to break higher.

David also spoke about what last week’s interest rate increase from the US Federal Reserve means for gold and gold stocks. He pointed out that when the Fed begins a new hiking cycle, typically we see a gold market bottom.

In this case, the central bank’s plans were telegraphed far in advance, and according to David, gold stocks began to bottom about six months ago. He believes they have now technically put in a bottom, and said companies have begun to show better strength relative to the precious metal’s price.

“The gold stocks have now technically put in a bottom — both the VanEck Gold Miners ETF (ARCA:GDX) and the VanEck Junior Gold Miners ETF (ARCA:GDXJ) have technically put in six month bottoms” — David Erfle, Junior Miner Junky

When asked where he’s focusing right now, David said he has been acquiring later-stage junior gold developers that are at the feasibility stage, or at or close to the financing phase. Many have experienced significant selloffs, but he thinks that looks set to change with financing becoming more accessible, and with market participants realizing that the assets held by these miners have good margins with a more elevated gold price.

“The market is beginning to see that once the gold price gets over US$1,900, US$2,000, a lot of these projects that use a base case of about US$1,600 gold — they’re very high margin” — David Erfle, Junior Miner Junky

The one possible issue he sees with this strategy is if the companies he’s invested in end up being acquired “too soon” — in other words, before they’ve reached their full potential.

As an example, David spoke about Orca Gold (TSXV:ORG,OTC Pink:CANWF), which recently agreed to be acquired by Perseus Mining (TSX:PRU,ASX:PRU,OTC Pink:PMNXF).

“It was taken over for a large premium for myself and my subscribers, and we were happy about it. But it left a lot of that money on the table because … the stock was so undervalued,” he said.

To finish up, I want to touch on oil and gas, which have moved into the spotlight due to the war between Russia and Ukraine. I heard from Adam Rozencwajg of Goehring & Rozencwajg, who said that although the conflict has pushed these commodities into focus, the world was heading for a “full-blown energy crisis” long before it began.

“It’s the catalyst that really forced prices up a lot higher, but we were very, very tight beforehand and we’re going to be very, very tight here after hopefully some of the situations resolve themselves” — Adam Rozencwajg, Goehring & Rozencwajg

This is similar to what some market watchers have said about gold, which saw a price spike as fighting began, but has had other factors supporting it for quite some time.

Speaking about how oil and gas investors may want to approach this situation, Adam said a de-escalation in Russia/Ukraine tensions could lead to a selloff for companies in the space.

He would consider that a buying opportunity, and said he’s looking at high-quality US and Canadian oil and gas stocks. He didn’t share specific names, but the holdings of Goehring & Rozencwajg’s fund can be viewed online.

Want more YouTube content? Check out our YouTube playlist At Home With INN, which features interviews with experts in the resource space. If there’s someone you’d like to see us interview, please send an email to cmcleod@investingnews.com.

And don’t forget to follow us @INN_Resource for real-time updates!

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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