Joe Mazumdar of Exploration Insights shares his thoughts on gold, including juniors and producers, as well as drivers for copper.
After hitting an all-time high last summer, this summer has so far been less fruitful for gold.
The yellow metal has dropped fairly steeply in August, falling from above the US$1,800 per ounce mark to trade near the US$1,700 level for a brief period of time. It has since recovered to around US$1,785.
Speaking to the Investing News Network, Joe Mazumdar, editor of Exploration Insights, said when he looks at gold he focuses on the trend in the inflation-adjusted yield of the US 10 year Treasury.
He noted that the inflation-adjusted yield was around -1 percent during last year’s major gold price move, and is now even lower than that, having recently hit -1.19 percent.
“But that really didn’t have that same kind of impact on the gold price. That might be partly about the summer doldrums and people not paying attention and people expecting that the yields are going to go up and inflation is going to drive the (US Federal Reserve) to actually increase rates,” Mazumdar said.
“So despite the fact that yields right now are lower than they were before, when gold was hitting US$2,000, the gold price hasn’t gone up, and part of that’s basically driven by sentiment.”
Looking at gold stocks, Mazumdar noted that producers are in much better shape than they were a decade ago when the gold price was reaching great heights. He believes high-margin miners that can generate significant free cash flow may be worth looking at. In terms of the juniors, while many are out putting money raised last year to work, results overall are delayed due to lab slowdowns.
“Even though we’re seeing a lot more drilling activity, we’re not seeing the assay results,” he said.
Looking over to copper, Mazumdar noted that it’s a metal facing constrained supply and growing demand, which potentially bodes well for its future price activity.
“You could see around early February 2021 where copper basically broke out from the other base metals. And I can see that continuing, not only because of the demand side, but probably more so because of the supply side and the issues in feeding that pipeline,” he said.
Watch the interview above for more from Mazumdar on the gold and copper markets.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.