It’s been a while since august 2020 when we first started to recommend a handful of companies in the gold, silver business.
The purpose of this brief write up is to serve as an update for the gold and silver bull market in general and to put in to context the positions we recommended and currently still hold.
We need to remember;
Gold and silver bull markets are measured in years and are highly cyclical, but also volatile, its not unusual to have several big dips in the market on its way up, if 120 years of history is anything to go by, then we’ve no reason to think the current cycle should be much different.
And as such we intend to hold our positions for a good while, until either the fundamentals change or the value proposition is no longer there and we want to take profits as we think the future upside potential is limited or has become to risky.
You may remember this chart from our write up titled; The current gold and silver bull market and how to profit, if you do, then you’ll already know we are still in the very early innings of the current bull market, if you don’t remember the chart, then I suggest you go back and read it again.
But basically looking at the overall chart we can see that we are still very much in the “undervalued” stage of the cycle.
Most of our positions have not gone up as much as we would like, (infact some have gone down a little) but that does not mean we should loose faith in our chosen companies, the price dip has more to do with a dip in the broader market than it does the companies in question, the price per ounce of gold for example, has been slow to move anywhere much at all, and when it has moved its been going down, not up!
As can be seen here;
Silver has dropped a little or been mostly flat as well.
This is the main reason our companies in the gold and silver business haven’t done much, but that doesn’t mean that they won’t, so be patient, and if you’ve not managed to buy shares yet, perhaps use the price dip as a buying opportunity, kind of like a discount, it’s clear to see from the first chart, a full cycle from undervalued to overvalued takes years, we’re just getting started!
And some good news I came across recently;
One of the strongest and most compelling elements in the gold and silver market at the moment is the chart below;
73% of gold and silver minors have positive free cash flow, meaning they are profitable businesses, going back as far as 1995 historically, we’ve never seen as good a positive cash flow as now. Partially this has to do with low interest rates resulting in low cost of capital, but it also means that miners have been cutting expenses and increasing profitability at a time when gold and silver prices have been going down! This is very good news! It essentially means 73% of gold and silver minors are in good financial shape going forward.
Let’s keep our heads up and hold on to all our positions in the gold and silver market. The best is yet to come!
As always if anything changes you’ll be first to know, and you can always reach out to us with questions and concerns anytime you want!
Until next time,
Francis Holmes (May2nd 2021)
