Precious metal miners poised for relative breakout
The guest argued that precious metal miners are historically undervalued relative to gold and are on the verge of a massive relative performance breakout.
The argument
Historically, the XAU index averaged 25% of the price of gold, but collapsed to 4% in 2008 and has since consolidated between 5% and 8.5%. The guest expects a breakout of this spread to trigger a rapid doubling of miners' relative value, making them a highly leveraged play on rising metal prices.
The thesis, stress-tested
✓ What validates it
- ✓GDX breaking out of its relative performance range against gold
- ✓Major miners reporting surging cash flows as vertical metal prices impact balance sheets
▸ Risks discussed
- ▸Operational issues at individual mines
- ▸Short-term intermediate pullbacks in gold and silver prices
Hear it yourself
"parts of the world that we call our allies quote unquote. Europe, UK, Japan, all of the debt government debt problems like they've not had before. But particularly, you can't have Japan and then The US be confronted with a government debt problem, a a situation in which investors, whether they're foreign countries, institutions, or individuals, doubt the validity or the safety of the government bond market. I mean, when that happens, the house is on fire. K. You no longer have the alternative. And, you know, the"
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