Some people get all the fun.
While I slave away in the office, Hedley Widdup – chief investment officer of resource fund LSX – has been off adventuring in Western Australia.
Is he out there in the bush, battling snakes and heat and dingo bites?
Not this time. He’s been holed up in Kalgoorlie for the annual Diggers and Dealers mining conference.
This is where the movers and shakers in the industry get together.
The hard part is getting a hotel room in the town! It’s a sell out every year.
And considering the run in gold stocks lately, no doubt it was buzzing.
I asked Hedley to give us a bit of insight about the vibe over there.
He told me…
“Many of the gold producers are talking about process plant expansions – they are looking ahead to being larger producers, and this brings established gold resource positions into strategic gaze – companies that own resources, but aren’t producing, are suddenly potential targets.
“Just check out Warriedar ($WA8) – take over announced a couple of weeks ago.
“This coincides with junior golds having (as a group) performed more strongly than producers in CY 2025.
“The pattern of fund raisings points to some vogue coming back to gold juniors, who are a long way behind!”
Hedley also suggested I share this chart from his quarterly letter.
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| Source: LSX |
This is a visual on how small junior stocks are beginning to rumble.
I started getting exposure to this theme about 18-24 months ago.
But I’m not selling anytime soon.
When I look back on mistakes I’ve made over the years, it’s usually around being too impatient and short term.
I reckon we have a humdinger of a gold bull market on the cards, with a long way to go.
That reminds me…
Did you see this bit of news?
“The U.S. government’s gross national debt has surpassed $37 trillion, a record number that highlights the accelerating debt on America’s balance sheet and increased cost pressures on taxpayers.”
Trump was going to get this down, wasn’t he? That’s what he said, anyway, in his election campaign.
More likely, he just told the crowd what they wanted to hear to get the top job.
I mean, why worry?
Trump bullshit aside, here’s why you and I care.
Gold tends to follow US national debt / money supply.
They’re only going one way…that’s up!
That gives me confidence we’re in a structural gold bull market.
This should keep the gold price trending higher over time. That’s the first, and most important, component of riding a resource bull.
Then we have the state of the gold mining industry.
It’s got big cash flows currently. Excellent.
However, a quirk of the current cycle is how hammered the junior mining space got in the last three years.
It’s only recovering now.
Mining juniors have very long timelines too.
They have to find a deposit…assess it…finance it…build it…and move into production.
It all takes years. But the gains can be huge, if you can back the right project and it goes all the way, with a commodity price tailwind at its back.
It’s all there for gold. Now we just need to see how it plays out. It’s going to take years.
Nothing goes up in a straight line. Surely at some point the market will test gold bull conviction somehow.
We’ll see.
Regardless, the opportunity is too good to pass up, in my book.
It’s also interesting to note that two recent, and separate, reports tell me that China is accumulating oil and nickel for their strategic reserve. Even their imports of iron ore keep holding the line.
Why they are doing this is not clear.
It could be to take advantage of low prices. It could be for military or defence purposes. Or something else. Your guess is as good as mine.
Europe and the USA are spending big on their militaries too. All of it feeds demand for commodities – and makes their strategic value more acute.
Most wars are about resources and land, throughout history. Now is no different.
I’d urge you to follow mining insiders like our own James Cooper as they scour the Aussie market for the most promising junior mining prospects. You can learn more about what’s happening here.
Best Wishes,
Callum Newman,
Australian Small-Cap Investigator and Small-Cap Systems
PS. The best place to start at Fat Tail is with my colleague James Cooper. You can do that here.
***
Murray’s Chart of the Day –
US Dollar Index
Source: Tradingview
[Click to open in a new window]
Now that Trumps tariffs are starting to take shape, the market can start trying to figure out what the long-term ramifications will be.
Inflation data released in the US overnight didn’t hint at a coming inflation tsunami as a result of the tariffs.
But perhaps it’s too early to make a judgment on that front.
Rising prices often leads to less demand, so perhaps consumers will vote with their wallets, by slamming them shut.
The US Dollar Index [TVC:DXY] remains in a precarious state, with the recent spike to 100.00 meeting stiff resistance.
The US Dollar has had its worst start to a year since 1973.
After such a large fall there is always the possibility of a short squeeze that could see the US dollar spike rapidly.
In the chart above I have placed a green box between 101.00-102.00. Above there I think the prospects of the US dollar rising further increases.
But as long as the US dollar remains below there the bearish outlook remains.
The long-term trend is down, and prices remain below the 10-month EMA (Exponential Moving Average).
The low of the whole sell-off since the start of the year is at 96.37.
A failure below that level could see a sharp fall.
How the US dollar behaves in the major buy zone between 92.5-95.5 will be important to watch. If the buyers don’t step in we may see the US dollar surprising to the downside which would see commodities take off like a rocket.
Regards,
Murray Dawes,
Retirement Trader and International Stock Trader
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