Gold Mining Stocks Still Big Winners Amid the Price Pause

You’ll recall that when gold spiked to a record high of $5,500 an ounce and silver blew past $115, we wrote a warning, “this market is giving us vertigo.” The whole precious-metals complex briefly looked like a rodeo with brokerage accounts. Prices had gone too high too fast. It was attracting a lot of new capital chasing momentum.

A surge in retail investors’ leveraging up on margin debt to chase stock prices is never a good sign for long-term investors.

Then during a series of unfortunate events – the underwhelming, ongoing Iran war and ceasefire melodrama, an irrational rally in memory chips stocks as investors flee the Mag 7 hyperscaler, and a bumbling transition of the Fed chair from Jay Powell to Kevin Warsh – gravity exerted its influence on metal prices across the board.

Gold has pulled back toward $4,260 after briefly dipping below $4,000, while silver has been cut nearly in half and now trades around $62–$64.

Miners sold off with the metals, as they always do, because leverage cuts both ways. First Majestic, Pan American, Wheaton and the rest of the complex were marked down as if gold and silver had returned to the old world.

Lucky us. Look what’s actually happened to their balance sheets: Cash flows in the mining sector are at record highs.

Even with gold prices knocked down significantly from their highs, it’s a banner time for free cash flows for miners, thanks to strong year-over-year price growth. (Source: Tavi Costa)

Many miners were profitable with gold around $2,000 and silver near $50. At sustained prices closer to $4,000 gold and $60 silver, the arithmetic changes dramatically.

Producers generate more cash. Royalty companies collect fatter streams. Debt gets paid down. Balance sheets improve. Marginal projects become economic. The whole complex starts minting money without needing another speculative spike.

Meanwhile, the structural deficits remain. Silver demand from solar, electrical systems, data centers and tech hardware continues to press against sluggish mine supply.

Gold still sits at the center of the monetary argument, especially as governments keep stretching deficits and printing money. The M2 measure of cash in the system is at a historic, crisis-level, high and rising.

Globally, central banks continue to sell U.S. Treasurys and buy gold at a record pace.

The metals have corrected. The businesses have strengthened. And the investment thesis is the strongest it’s been in several years. The entire complex is a coiled spring. Tightly wound. The ideal moment for us to grab strong entry prices in our newly minted Grey Swan Resource Investor.

~ Addison