Silver Cycle Just Starting, in Growth Mode Now | Americas Gold and Silver's Paul Huet

Beaver Creek takeaways

On the note of gold, I want to share a few takeaways from this year's Precious Metals Summit in Beaver Creek. The event ran from September 22 to 25, and for me the key message was that it's the long-term drivers, not short-term events, that matter the most for the yellow metal.

Those big-picture elements include elevated central bank gold demand, the ever-increasing debt burden in the US and global geopolitical tensions.

That said, a number of the people I spoke with did say gold's reaction to the Fed’s September rate hike was important. Paul Brink of Franco-Nevada (TSX:FNV,NYSE:FNV) summed it up well:

"We've just seen a very interesting inflection point. Just in recent days, the Fed raised rates, and (what's) very typical for a US financial investor (is) rates up, bonds are more attractive and you see selling in gold. And we saw the reverse — rates went up and gold prices went up. I think it is a really important inflection point that points to the fact that people are now focused on different drivers, and if there was a single thing, it was US debt topping US$40 trillion.

"I think that has really changed the dynamic there, and it's moved to the point of higher rates means the cost of servicing the debt is higher. So it really has changed the dynamic, and so I think we may be in the early days of this run in gold prices."

David Erfle of Junior Miner Junky took it a step further, saying that when the Fed starts hiking rates, that's historically when gold bottoms and begins to turn around:

"The gold price always loves to sell off into the threat of a rate hike. It's telegraphed and talked about and expected, and every single time they start raising rates, that's when gold bottoms and starts to go up again.

"I mean, it happened in late 2015. Janet Yellen was saying, 'We're going to raise rates.' You know, all the Fed heads came out (saying), 'We're going to raise rates.' They raised rates. Remember, the gold price was flirting with going below US$1,000, and everybody thought, 'Oh, gold's going to go below US$1,000, the Fed's going to raise rates.' And what happened? Within the next six months, after the first rate hike, gold went up 30 percent and the miners went up 150 percent for five times leverage."

Click here to see our full playlist from Beaver Creek.