Bob Thompson, Senior Vice President & Portfolio Manager of Raymond James sounds off on the confusion plaguing gold miners today.
According to the “mining clock,” a concept used to measure commodity cycles, we are now in the first third of a bull cycle, according to Thompson.
Knowing where we are in the cycle is pivotal for investors.
Gold Miners are a Buy According to Thompson
Speaking at PDAC 2019, Thompson tells Kitco,
“The mining clock is just a simple way to see what’s happening in the market, reverse engineer that, and then tells you where we are in the cycle – are we near the end of the cycle or the beginning of the cycle, and it tells you if we’re in a bull market or a bear market.”
According to Thompson, mining companies go through natural cycles from becoming overleveraged near the end of a bull run to becoming cash-flow positive, which is where we currently are, and the mining clock indicates that now is a good time to buy.
Thompson believes at about 7 o’clock, in the mining clock world, is when junior gold miners begin to IPO. Tied directly to majors becoming cash flow positive and metal prices stabilizing, we have yet to see junior gold miners get a serious bounce.
Finally, Thompson confirms his belief that we are in the 1/3 of a mining bull market. Understandably, few investors participate because of how bad the bear market was. In the 2/3 institutional investors come in. And, finally, in the 3/3 retail investors and speculators come in, which leads to a top and blow off.
Thompson’s website, Miningwealth.ca has an interactive chart of the mining clock explaining its different times.