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It’s Time to Pile Back Into Gold Stocks [Charts]

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The blessing and curse of being a contrarian is this: an inevitable outcome is recognized well before it comes to fruition. Even though profitable opportunities may be identified well in advance, it can take so long for hallmark events such as capitulation to happen, that it gives ample time to second guess one’s convictions.

We’ve believed, even before the correction that has recently hit U.S. markets, that the bear market for gold was long in the tooth. With asset bubbles all over the place, it has seemed for awhile that gold and silver were the only assets that were reasonably priced. Then yesterday, our friends at Palisade Capital sent us over five charts on why they believe that gold stocks are the most undervalued that they have been in decades.

We tend to agree with that sentiment, which is why in last week’s chart of the week we predicted that gold had already bottomed and that it had nowhere to go but up. (We further predicted that other commodities such as base metals would continue to get routed for the time being, and that U.S. equities would not return to the same levels for awhile.)

In any case, here are the charts:

1. The divergence between the S&P 500 and Bloomberg Commodity Index is at an all-time high.
Bloomberg Commodities Index vs. S&P 500

2. The bear market in the TSX Venture now stands at 1,090+ days.
TSX Venture Bear Market
The TSX Venture, the Canadian home to the majority of the world’s junior mining stocks, is still plagued with plenty of zombie stocks that amount to billions of dollars of negative working capital. The exchange and regulators have also been readily criticized for recent changes that limit access to capital from retail investors. However, in spite of all of this, there are truly some great projects and assets lying in some of the companies that have survived the onslaught. As you’ll see in the next chart, these companies have never been more undervalued.

3. Gold stocks have never been this cheap relative to the price of gold.
HUI to gold price chart
The Gold BUGS Index (HUI), which tracks the world’s largest gold miners, was last this low when gold was only $250/oz.

4. The gold bear market is closing in on being the longest in BGMI history.
Gold bear markets
Using the Barron’s Gold Mining Index (BGMI), this is already the worst bear market for gold miners. However, in just a couple of months, it will also surpass the 1996-2000 bear market as the longest.

5. The ratio between the gold/silver sector to the S&P 500 is unprecedented.
S&P 500 to Gold/Silver market ratio
When pricing the S&P 500 in terms of the Gold/Silver Sector Index (XAU), it has never been this expensive. Put another way: gold and silver has never been this cheap.

Chart credit to: Palisade Research and The Daily Gold

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Mining

White Gold: Mapping U.S. Lithium Mines

In this graphic, Visual Capitalist partnerered with EnergyX to explore the size and location of U.S. lithium mines.

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Teaser graphic of a map that shows the sizes of the top U.S. lithium mines.

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The following content is sponsored by EnergyX

White Gold: Mapping U.S. Lithium Mines

The U.S. doubled imports of lithium-ion batteries for the third consecutive year in 2022, and with EV demand growing yearly, U.S. lithium mines must ramp up production or rely on other nations for their supply of refined lithium.

To determine if the domestic U.S. lithium opportunity can meet demand, we partnered with EnergyX to determine how much lithium sits within U.S. borders. 

U.S. Lithium Projects

The most crucial measure of a lithium mine’s potential is the quantity that can be extracted from the source.

For each lithium resource, the potential volume of lithium carbonate equivalent (LCE) was calculated with a ratio of one metric ton of lithium producing 5.32 metric tons of LCE. Cumulatively, existing U.S. lithium projects contain 94.8 million metric tons of LCE.

RankProject NameLCE, million metric tons (est.)
1McDermitt Caldera21.5
2Thacker Pass19.1
3Tonopah Flats18.0
4TLC Lithium10.7
5Clayton Valley (Century Lithium)6.3
6Zeus Lithium6.3
7Rhyolite Ridge3.4
8Arkansas Smackover (Phase 1A)2.8
9Basin Project2.2
10McGee Deposit2.1
11Arkansas Smackover (South West)1.8
12Clayton Valley (Lithium-X, Pure Energy)0.8
13Big Sandy0.3
14Imperial Valley/Salton Sea0.3

U.S. Lithium Opportunities, By State

U.S. lithium projects mainly exist in western states, with comparatively minor opportunities in central or eastern states.

StateLCE, million metric tons (est.)
Nevada88.2
Arkansas4.6
Arizona2.5
California0.3

Currently, the U.S. is sitting on a wealth of lithium that it is underutilizing. For context, in 2022, the U.S. only produced about 5,000 metric tons of LCE and imported a projected 19,000 metric tons of LCE, showing that the demand for the mineral is healthy.  

The Next Gold Rush?

U.S. lithium companies have the opportunity to become global leaders in lithium production and accelerate the transition to sustainable energy sources. This is particularly important as the demand for lithium is increasing every year.

EnergyX is on a mission to meet U.S. lithium demands using groundbreaking technology that can extract 300% more lithium from a source than traditional methods.

You can take advantage of this opportunity by investing in EnergyX and joining other significant players like GM in becoming a shareholder.

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