Gold & Silver Correct for a Day, But Money Is Starting To POUR Into The Mining Stocks

The gold and silver prices finally corrected a bit on Thursday after a furious rally had left them soaring over the past week. And while all of that’s been happening, money has started pouring into the mining stocks, a trend that as we’ll discuss, could still just be getting started.

The gold futures are currently down $25 following a sharp morning sell-off, and then a slight rebound, to $3,873.

Silver took the bigger hit on Thursday in a wildly volatile day of trading, as the futures came within pennies of hitting the $48 level, before dropping over two dollars down to $45.70 in an hour and a half, and then rebounding to $46.56. To say that some stops were triggered today would be an understatement. However it’s amazing to see the silver futures down $1.12 on the day, yet still above $46.

 

There’s a lot of money coming into the gold and silver markets right now, as any time a market starts moving like they have, that’s going to attract attention and new participation, which often leads to volatility like we saw today. I don’t know that there’s much that’s fundamentally changed since yesterday, and it will be interesting to see on next Friday’s COT report if the banks were able to cover much of their rather large short positions.

In terms of the miners, I continue to talk with executives at mining companies that are telling me about how the money is really starting to flow into the stocks now. Companies that were having a hard time raising $1-2 million a year or two ago are now being regularly approached by investing groups asking if they can take a $5-10 million investment.

It would be interesting to see how that would change if there were a sustained sell-off in the sector. Although for the first time, in a way that I don’t think even really occurred in 2011, it feels as if we’re at a point now where if the gold and silver prices did continue to rise, and a month or two from now we’re looking at $4,100 gold and $53 silver, it’s possible that we could see an explosion of new money enter the sector.

Additionally, there are some interesting developments taking place that could potentially add even more fuel to the mining stock rally, specifically on the silver side.

My colleague Vince Lanci mentioned on his morning show last week that the G7 has been considering price floors to promote rare earth production, and here’s what a Reuters article had to say on the matter:

‘A Trump administration official told Reuters on Wednesday that the U.S. is in talks with G7 and EU leaders about broader trade measures to prevent rare earth price dumping that include tariffs, price floors, or other measures.

The sources said officials were considering price floors backed by government subsidies, which the U.S. recently introduced to encourage domestic production.’

 

Whether that government support should come as subsidies, or additional investment like what occurred with MP Materials, will be fascinating to observe.

On July 10th, Reuters reported that ‘MP Materials unveiled a multibillion-dollar deal with the U.S. government on Thursday to boost output of rare earth magnets and help loosen China’s grip on the materials used to build weapons, electric vehicles, and many electronics.’

Then, on August 25, the U.S. added silver to its draft list of critical minerals, and of course silver is also an essential element for weapons, electric vehicles, and electronics.

To be clear, we’re still in the early stages of this development, and it would be premature by any means to say that this is definitively going to happen. Yet just looking at what’s already occurred, it’s also not impossible that there could be government money coming into some of these other metals markets as well.

 

I can’t know for sure if the tweet above is indeed accurate or not, although even Time Magazine recently published an article talking about how ‘nations rallied to stop the 1970s oil crisis,’ and now ‘it’s time to do the same for critical minerals.’ And while I’m not sure that I would generally look to Time Magazine for economic analysis, I do think it’s often representative of what the mainstream is thinking, or what the establishment wants the mainstream to think.

 

With that context, consider the following excerpts from the article:

• Alarm bells are ringing on a vital issue of energy and economic security. Governments must take action if they hope to stave off damaging disruptions in industries ranging from power grids to jet engines.

• The world is facing new and emerging energy security hazards that governments must address. High on this list are the minerals that go into a wide range of technologies in the energy sector and beyond. These minerals are vital for power grids, batteries, and other energy equipment, but they are also needed for AI chips, jet engines, and defense applications. This makes them central not only to energy security but also to broader economic security.

• These minerals are not directly used to run cars, generate electricity, or heat homes, so supply shortages don’t have the same immediate impacts as those for fuels like oil and gas. Yet disruptions to their supply can still cripple key manufacturing industries, with far-reaching consequences for economies and jobs.

• With the support of our member countries and drawing on our decades of experience and expertise with oil security mechanisms, we have built up a new Critical Minerals Security Program to promote coordinated action in the face of supply disruptions.

I think we’re at a pivotal point in the gold and silver markets, especially in terms of the mining stocks. Whether the next substantial move is higher or lower will have a lot to do with how the situation plays out, but if the bullion prices do continue to rally, there’s growing evidence to support that we could see an explosion of money into the stocks in that scenario, and possibly even government money (at least on the silver side).

So while we’re already living through history in the gold, silver, and mining stock markets, it’s very well possible that it’s still just getting started 

Sincerely,
Chris Marcus for Arcadia