Louis James: Trump-related Instability is "Bullish for Safe-haven Assets"

Precious Metals
Gold Investing

Louis James, editor of the International Speculator, shares his thoughts on the future of gold and uranium.

Last year ended on a good note for the resource sector, and many market watchers are excited for 2017. At this year’s Vancouver Resource Investment Conference (VRIC), the Investing News Network (INN) caught up with Louis James, editor of the International Speculator, to discuss the future of gold and uranium.
James believes prospects are good for both gold and uranium in 2017, but said that probably “uranium will end the year with bigger gains than gold.”
He also said he is currently focusing his research on a more reliable way to look for companies poised to make gains. He said companies that are ramping up toward production are in a “sweet spot,” and often see share price increases as they approach that point.
Speaking about the impact of Donald Trump’s presidency, he said, “Trump is still a source of instability, which markets don’t like, so this is very bullish for safe-haven assets.”
Watch the video above for the full interview or read the transcript below. You can also click here to check out INN’s other VRIC videos.

INN: One topic that’s come up again and again here at the conference is Donald Trump and what his potential impact on commodities might be. Can you give me your thoughts?
LJ: Normally I like to discount politicians, but in this case I do think this is a very important question, and I do think that we have real data here. Before the election we saw gold prices in particular, but others too, react with Trump in one way, and then after the election in another way. I think a lot of people were willing to give him the benefit of the doubt and say, “well maybe he’ll be better for the economy than we thought.” There was a lot of Trump fear before the election that seemed to go away after the election.
Now we have basically the reality setting in, and that reality is that Donald Trump is still Donald Trump. Whether you like him or dislike him, it doesn’t matter. I’m not pro or against Trump. I’m just saying he’s Donald Trump, and he’s still a source of excitement and headlines and instability, which markets don’t like. So this is very bullish for safe-haven assets in particular. We like precious metals. Again, I’m not for or against Trump. I’m just saying that even if he does the very best things possible for the country it will shake up things. It will upset apple carts. That chaos, that transition period is very good for safe-haven assets.
INN: Whatever the future may bring, right now it seems like many commodities are doing better than they were this time last year. Which do you think has the most potential in 2017?
LJ: I would say it’s tied. The topic I presented on today was the year of the two yellow metals for 2017. I think both gold and uranium have a lot of upside. In terms of raw gains on the metal itself, I probably have to tip my hat to uranium. It is way oversold — even with the recent tick upwards it’s way under cost of production. It’s one of those things where it’s absolutely not an “if” question but a “when” question. Uranium has to go up if people want the lights to keep coming on. There’s no question about that. It’s all about timing. So I’m very bullish on uranium.
I’m near term a bit skittish though. It’s popped up and the equities have gone nuts, but there’s still a situation of oversupply in the uranium market that hasn’t gone away yet. It might with Kazakhstan’s cut in production — hasn’t happened yet. So very, very near term I think there’s reason to be cautious about your uranium equities, but [I am] absolutely bullish on uranium, and if I had to make a prediction I’d probably say that uranium will end 2017 with a bigger gain than gold. But I’m very bullish for both.

INN: On the flip side, is there any commodity right now that you’re just not interested in at all?
LJ: Not really one, but you get some very excited promotions about, “well you know, cobalt is going to be way in a supply crunch,” or titanium or whatever. And these stories are not necessarily untrue, and these metals are needed, but they’re oddball markets. They don’t have a clear, transparent market with an objective or somewhat objective spot price that’s somewhat transparent that you can track on a day-to-day basis. Prices are set by contracts. So they’re difficult markets, they’re dangerous markets. I think there’s money to be made in them, but right now I’m just not interested in these oddball metals.
INN: That sounds fair. Flipping over to companies, in the past you’ve said you like companies with big, high-grade gold deposits. I imagine that’s still true. Are there any you want to talk about?
LJ: It wasn’t just big, high grade, but that’s the easiest place to find high margin, and it’s all about margin in the end. Does the deposit make money? If it’s super high grade but it’s underneath a national park, it’s not going to make any money. I’ve refined my search a little bit. This is new research we’ve just been putting out to our subscribers, and I’ll give you a little sneak preview if you will. And that is that there is a more reliable way to look for gains in this space, and that is the people that are ramping up towards production.
It’s really striking if you think about it — who’s going to build a mine if they don’t know whether they’ll be able to do it or not? Most people wouldn’t gamble like that. If you actually raise the money and start building your mine, you probably think you’re going to be able to do it. And it’s actually somewhat surprising that I haven’t really focused on this before, but it’s a well-known fact in the business, in the industry that share prices tend to rise up as you approach first pour for a gold company, or first production for other metals. Whether or not the mine actually makes money as you approach commercial production, share prices tend to rise — it becomes more real, you have institutional investors lining up who can’t buy an exploration play but can buy a producer. So it’s an interesting sweet spot where you have on the one hand much better odds because you know that most of them actually succeed in building their mines. Of the 49 stories I found, about 90 percent of them actually built the mine. And you know that there are gains there to be had. So that’s an area I’m focusing on right now in my research.

INN: Any other companies you want to mention or even types of business models that you like?
LJ: I still like the prospect generator model. There’s still a warm spot in my heart for the wealth-generating capacity of a prospector that makes a big discovery, and that’s where you get your 10 baggers. A company that’s building a gold mine is not a secret, a market secret. People know it’s there, they’re building a mine. So it’s not likely to be a 10 bagger. In most cases, a discovery will do that for you. So I like discovery, but it’s such a risky business that I still like the prospect generators. It makes sense to put other people’s money to work on our behalf to diffuse the risk, and have a basket of lottery tickets as it were, any one of which might work out. I like that approach a lot.
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Securities Disclosure: I, Priscila Barrera, 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 contributed article. 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.
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