Resource World Magazine

D E C E M B E R / J A N U A R Y 2 0 2 0 www.resourceworld.com 27 and, in the next three months, rallied about 60% into the September 2019 highs. Still, all bull markets climb a "wall of worry" and this one is no exception, as it tries to buck off all the investors that are not strapped-in Bulls. Since the highs in September, we have given back another second step back as gold has corrected 6% and the gold stock indices about 16% so far. We are hopeful that this current cor- rection, like the earlier 2019 correction, is close to putting in a final low. After looking back over the past year, we must ask ourselves: where do we go from here? Of course, no one knows what the future holds, but I added the accom- panying HUI Gold Bugs Index to illustrate what has happened in the past and what might happen again in the future. I still believe we could be in the early stages of a major bull market in precious metals – like the one that started in 2001 and contin- ued to go up into 2012, albeit a sometimes uncomfortable ride. I have highlighted some charts reflecting that, in previous issues of this magazine. The fundamentals behind such a move are well documented by research analysts and other writers in this space and while it sometimes doesn't seem like it, there are sound reasons to believe precious metals could move dramatically higher. Gold demand by Central Banks has been increasing steadily since the financial crisis in 2008. They have added over 400 tonnes on average per year for the past 10 years and that trend does not appear to be letting up. These increases reflect the current geopolitical climate with trade wars and economic conditions highlighted with the over $17 trillion in negative yielding debt. But gold yields nothing, remaining a bright spot in the world of credit. As we have pointed out in past articles and previously highlighted charts, gold shares themselves are very underval- ued against gold itself. The S&P and gold shares historically as a group, that despite the run up in metal prices, still trade as a group below their net asset values. These facts lead us believe we will see continued consolidation in this sector, through take- overs and mergers. See S&P/TSX Global Gold Index chart. Lastly, major discoveries in this sector have declined significantly since the mid- nineties and even more dramatically in the past 10 years, making well-funded junior exploration companies with a solid team of dedicated professionals a worthwhile an investment. Researching those companies and participating by investing can help fill that gap with exploration success. n John Newell is a portfolio manager at Fieldhouse Capital Management. He has 38 years of experience in the investment industry acting as an officer, director, portfolio man- ager and investment advisor with some of the largest investment firms in Canada. Newell is a specialist in precious metal equities and related commodities and is a registered portfolio manager in Canada (advising rep- resentative). 778-330-3008 John.Newell@ fieldhousecap.com THE FUNDAMENTALS BEHIND A MAJOR BULL MARKET IN PRECIOUS METALS ARE WELL DOCUMENTED BY RESEARCH ANALYSTS AND OTHER WRITERS IN THIS SPACE AND WHILE IT SOMETIMES DOESN'T SEEM LIKE IT, THERE ARE SOUND REASONS TO BELIEVE PRECIOUS METALS COULD MOVE DRAMATICALLY HIGHER. INVESTMENT

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