July 16, 2024

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Gold Stands Firm: The Upside of Junior Mining

The gold market is enduring a turbulent period, as highlighted by portfolio manager and consultant John Fenick during a recent interview. Despite the rough conditions, especially among junior mining companies, Fenick provides a silver lining for investors looking at the long-term prospects.

Feneck points out that despite scepticism, gold has performed well this year, maintaining over $1900 an ounce for a significant period, a historical first. This trend began post the March financial crisis, leading Feneck to suggest a new price floor for gold set by recent economic events, specifically between $1790 to $1800 an ounce. He emphasises the importance of watching technical levels, as they are closely monitored by institutional investors.

The conversation also touches on the potential for gold prices to “slingshot to new highs” next year, with specific triggers like geopolitical tensions in the Middle East acting as catalysts for sharp price movements. Feneck expresses a degree of schadenfreude towards short traders who have been caught off guard by these sudden spikes, underscoring the critical nature of staying abreast of international affairs and their impact on commodity prices.

Regarding liquidity in the junior mining sector, Fenick acknowledges the challenges, pointing to historically low trading volumes on the TSX Venture Exchange. Despite this, he sees opportunity, revealing strategies for accumulation through patient bidding on desired stocks. This technique, he argues, has contributed significantly to the performance of their holdings over the past eight years.

Fenick further discusses the potential in overlooked projects and companies, citing examples like Cartier Resources and Copper Lake as stocks with promising futures, despite their current undervaluation. He argues that now is an opportune time to set up for expected rallies next year, especially given the seasonal strength usually seen in the first quarter.

The interview also delves into the realms of other commodities, notably copper and nickel, essential for the energy transition and battery metals. Feneck notes the unexpected stagnation in copper prices despite high demand forecasts, suggesting a buying opportunity. He also criticises the lack of appreciation for nickel, which he finds bewildering given its projected demand surge.

In closing, Feneck expresses optimism for the junior mining sector’s future, recommending that investors do their homework and consider the significant upside potential. He foresees a turnaround catalysed by a squeeze on short sellers and a broader market realisation of the value inherent in junior gold mining stocks.