Physical vs paper markets and short covering

Nick Hodge, Co-Owner of Digest Publishing and editor of Foundational Profits and Underground Alpha, joins me for our monthly longer-format discussion on the stew of different macroeconomic factors, continuing to fuel the commodities supercycle in silver, gold, uranium, copper, lithium, and opportunities in their related resource stocks.

We start off discussing record closing prices at the end of last year on the monthly, quarterly, and annual charts for silver, gold, platinum, copper, and overall strength in many other industrial and critical minerals.

It has been challenging for investors to keep track of all the different new developments when one considers the inclusion of even more metals on the official critical minerals list, the Chinese export controls on silver that started in January in addition to all the export controls on other commodities, the recent US intervention in Venezuela for access to heavy crude oil, the upcoming appointment of the new Fed chair that will be more dovish, the upcoming supreme court decision around the legality of tariffs, the arbitrage in many metals between the physical price and paper price on various exchanges, and all of the ongoing macroeconomic factors on inflation, debt, GDP growth, and fiscal policies that were already in place before all these new factors arose.

With regards to the precious metals, Nick states that we are clearly in the middle of a solid bull market, where investors should adopt a “buy the dip” mentality, similar to what we’ve seen for well over a decade in the general us equities in the S&P 500 or Nasdaq.  We review the how the valuations of PM producers and developers have not kept up with surging metals prices, and how they are undervalued on many metrics. We discuss the slow adoption and participation from generalists and institutions into the gold and silver stocks, but that it is gradually starting to happen, and should further accelerate after we see Q4 earnings season reported, starting in a few weeks. He underscores the large pools of money still sitting in other sectors or on the sidelines that have the potential to rotate into this sector as valuation metrics become to compelling to ignore.  Nick states that if 2024 was the year for gold, and 2025 was the year for silver, then 2026 will be the year for precious metals stocks.

Next, we shifted over to the growing investing theme around energy coming into this year and how that plays into the need for more commodities like uranium, oil, natural gas, copper, and lithium.  We really cover a lot of ground here in this portion of discussion, spending a good deal of time laying out the fundamental investing thesis for nuclear power and supply/demand imbalances for more uranium.  We then expand the conversation into some of the drivers that have pushed copper to all-time highs again over the last few weeks, and some of the Cu companies on Nick’s radar.  Wrapping up we get into why he has been highlighting lithium and Li stocks over the last few months as a key contrarian commodity play tying into the growth in energy storage, and why he believes that trend will continue for the balance of this year.

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Investment disclaimer:

This content is for informational and educational purposes only and does not constitute investment advice, an offer, or a solicitation to buy or sell any security. Investing in equities and commodities involves risk, including the possible loss of principal. Do your own research and consult a licensed financial advisor before making any investment decisions. Guests and hosts may own shares in companies mentioned.