Gold: a pause, not a top
The gold market outpaces the broad market. The current dip is a hiatus, less dramatic than 1975, but driven by the same interest-rate tension.
A couple of weeks back gold dropped under $4,000 per ounce and many savers got worried. My response: sell it to me. When in doubt, blow it out. I'm not worried at all. I care about keeping my buying power in US dollars, and one asset has protected savers from the loss of their currency's value for a long time - gold. I want to hold it.
The Iran war matters less now than continuing high nominal interest rates. Markets believe the new Fed chairman, Warsh, will be a hawk, and I think he will be for as long as he can. But the fiscal reality of the United States is that the political class will lose its nerve, just as it did in 1975. High nominal rates hurt the government's ability to service its debt, hurt the bond market, and squeeze consumers and industry that depend on credit. Congress will eventually pressure the Fed to drop its hawkish stance and cut rates. When that happens, savers worldwide will see that America's political class gave up the strength of the dollar for domestic politics. Not soon, but 6 to 8 months from now, it'll be off to the races.
What breaks gold out of a sideways stretch? The strongest headwind isn't high rates themselves; it's how long policymakers can actually hold them. Fiscal pressure eventually overwhelms monetary discipline. Markets trust central bank messaging until debt-servicing costs become politically impossible to ignore. Savers who follow official guidance instead of the real incentives risk reacting far too late.
The 1975 lesson
In the 1970s, inflation and negative real interest rates pushed gold from a low of $35 to a high of $850. Mid-move, in 1975, Congress let US rates rise, which broke gold from $200 down to $100. The gold stocks did worse. It wasn't only gold that broke: the bond market froze, equities fell, and Congress lost its nerve. Once Congress forced rates down and pushed liquidity into the market, gold ran from $100 to $850 over the next five years. Today looks like the same interest-rate drama, and I expect the same resolution. The 1975 collapse was temporary because political tolerance for tight money broke before inflation was gone. The lesson is how fast governments reverse course once financial stress spreads beyond markets.
Which gold stocks, for which investor
The right pick depends on who's asking. I spend four or five hundred hours a month studying stocks, so I can afford to be aggressive and take risk for value add.
Most investors give one or two hours a month to their stocks. They should own Franco-Nevada, Wheaton Precious, and Agnico Eagle, in that order, then stop. Play with the grandkids, read a book, play tennis or golf. They'll do fine. The market beta - how much the gold market outpaces the broad market - will be enough over the next five years. Buy those three and rest.
Investors willing to do more work and take more risk should look at takeover candidates. Intermediate gold producers like B2Gold and OceanaGold sell at big discounts to their larger peers. Either the discount closes or they get bought - a lower-risk way to play. Single-asset producers are always seen as riskier than multi-asset producers; the single-company discount disappears when a larger company buys them. For more risk, development-stage companies trade below net present value until they prove that value; when a producer buys a non-producer, much of that discount vanishes because the pipeline is assumed. The biggest premiums go to advanced explorers like Rupert, trading at 20% of NAV. If someone buys Rupert for 50% of its worth, you double your money and the buyer still gets the asset at a discount.
The coming wave of mergers
The next two years of M&A will be absolutely wild. The best-informed money in the sector is the sector itself. Individual and institutional investors make mistakes that the industry mostly won't. Value anomalies get arbitraged out by the industry before investors get to them. Rupert was clearly a strategic asset to Agnico for four years before Agnico bought it; investors had plenty of time to act and didn't, so Agnico did.
Two kinds of mergers are coming. Strategic mergers, where a company like Agnico buys assets that boost its position in a district, letting it spread existing producing assets across more ground. And tactical mergers, like Equinox and Orla - no strategic benefit, just combining for size and scale, giving a bigger market cap, higher trading volumes, more index inclusion, and more passive ETF buying. Both will happen in spades. Mining executives rarely buy unless the numbers already work, so acquisition activity itself becomes a valuation signal.
Empty pipelines force the buying
Are major miners now growing only by acquisition rather than exploration? They're starting to loosen exploration budgets. About five years ago they realized their exploration pipeline was empty. It's still empty. Wall Street and Bay Street still remember the huge misallocation of capital from 2000 to 2010, so they hold the industry to a very tight leash.
That has to change. By underinvesting in sustaining capital and new projects, most of the mining industry is drying up its own cash flows four or five years out. In two years the industry will be pushed to be sustainable and to grow. With no pipelines, the only way to grow is to buy. There's no other way - it's too late.
Silver: own the stocks, not the metal
Do I still favor silver stocks over physical silver? Yes. I made a fairly public sale of silver. I didn't sell at the top, but I did fine - any hyperbolic chart, I sell.
When I sold my silver, the silver stocks were already priced for sharply lower silver prices, and they still are. If silver goes up, the stocks probably go up more. If silver trades sideways, the stocks can still rise because they're priced as if silver were cheaper. If silver falls, the stocks fall less than the metal. For a speculator, ranked by suitability, the answer is silver stocks, silver stocks, and silver stocks.
When would I buy physical silver again? When it's hated. If I saw a wall of negative sentiment around silver - people in YouTube comments calling me dumber than dirt for buying it - I'd buy. The last time I bought, social media comments showed people were either bored by silver or, more often, hated it. That's very bullish: it means everyone who wanted to sell has already sold. At $20 silver there was so much hatred that the only thing needed was for the hatred to fade. Nothing else had to happen. It did fade, which is why I sold my silver.
What is hated now
Right now almost nothing is hated - still nothing. But some regions are. If I weren't a US citizen, and I occasionally flirt with giving that up, I'd probably speculate in Iran and invest in Russia. What's hated now is places. Congo is still hated even though it has treated me very well. Most of Africa is hated. South Sudan, Bolivia, and Myanmar are all hated. Some sectors are at least unloved. Extreme pessimism usually signals exhausted selling, not permanent weakness; markets reverse when sellers disappear, not when headlines improve.
Offshore oil and gas exploration - non-shale, non-basin-centric plays - is still hated, especially offshore exploration in countries most people can't pronounce. That's where I'm looking, specifically at offshore oil and gas explorers.
The oil supply shock building quietly
I'm not a geopolitical analyst. Both Iran and Israel treat their own issues as existential. I hope the world can pressure both governments to keep at least a tenuous peace in the Gulf. If cargo stops moving through the straits, we're back in crisis very fast. For now traffic is moving. The roughly 200 cargos stranded north of the straits have mostly moved through, which means as much as 10 million barrels of oil that was badly needed is back in world markets.
The useful thing this crisis showed is how quickly the oil price responds to threats to supply. The next threat won't be a war or something fixed by opening the straits. It will come from systemic underinvestment - lower production caused by deferred sustaining capital. That likely doesn't hit until 2029, but the price reaction we just saw is the reaction we'll see again.
Nothing has changed on this; it's worse. Last December or January we discussed systemic underinvestment running about a billion dollars a day. The problem has grown. Nobody made sustaining capital investments in the Gulf during the war - they'd get blown up and there was no money anyway. On top of the unmade investments, we now have to replace what the war destroyed: two of seven natural gas trains in Qatar, and Kharg Island in Iran, which was effectively destroyed. This won't show up in 2026 or probably 2027. Toward late 2028 and 2029 it bites. You can't make up five years of deferred sustaining capital investment - several trillion dollars - in a single year. It's physically impossible.
Buying oil now, expecting lower prices first
Is now a good entry point for oil stocks? I'm buying them now, and I think they go lower. Free cash flow in the oil sector next quarter should be markedly lower: inflation raises production costs while falling crude prices cut the price producers receive. So I expect oil stocks to drop from here. But sometimes something is cheap enough that the chance it goes lower isn't a reason to wait, if I think I'm right three or four years out. So I'm a buyer.
Five good years, but not 2026
We're entering five very good years for resource investing. I don't expect 2026 to be one of them. This is the year to sharpen your skills and bargain shop. The best time to buy straw hats is in winter, and you're in winter. Figure out what kind of hat you want, your hat size, check four or five stores for the cheapest, and buy a couple. Get ready.
If you can't hold a stock over a long weekend, buy the best - Agnico, Franco, Wheaton. If you're willing to do the work and stomach volatility to make real money, then do the work, and be ready for a long, bumpy, but joyous ride.
