Is US smart money finally buying gold?
Any new developments affecting your KRO 2025 Favorites Collection?
As of January 31, 2025 the KRO 2025 Favorites Index had dropped slightly to be up only 7.0% compared to 7.7% for gold and 4.3% for the TSXV Index as resource juniors suffered collateral damage from the trillion dollar tech sector meltdown on Monday in the wake of news that a Chinese AI startup called DeepSeek had achieved success at a fraction of the computation power used by the Nvidia chip reliant AI giants. The inference that AI could be efficiently deployed across a much broader range of computers not requiring Nvidia's super chips knocked $600 billion off Nvidia's market capitalization. Utilities building power capacity for the anticipated growth of data center needs also got knocked back. But by the end of the week the DeepSeek news was being spun as good news that maybe a handful of Trump knee-bending Magnificent giants will not in fact dominate the AI future and grant the US government the ability to conduct hyper-surveillance on its citizens in the manner now practiced by China and Russia, leaders of the Global East. As far as the need for additional power is concerned, the Microsoft CEO invoked the Jevons Paradox which William Stanley Jevons created in 1865 when he observed that technology efficiency enhancements applied to a "scarce" commodity such as coal has the effect of boosting total demand for the targeted commodity. In any case, none of this affects the future growth of electricity demand to power soaring air-conditioning needs as the planet continues on its fossil-fuel driven warming path and the US energy cost of keeping the Bitcoin mirage from dissipating as nations alienated by the United States pull the plug on domestic Bitcoin mining operations. But as the KRO Favorites Index Daily Performance chart shows, the index has stalled since Trump's inauguration on January 20.
Despite this pressure the resource sector got a boost on Thursday January 30 when news broke that during the past two months the flow of physical gold from the London Bullion Market's vaults to the United States has been so strong that delivery times have jumped from a few days to 4-8 weeks. This has forced the LBMA to ask central banks to lend it gold so that it can maintain liquidity. At one point June Comex gold futures were trading at a $60 premium to spot which is unusually high for such a near term contract. Currently the Comex gold futures curve stretching into 2031 projects gold in a steady uptrend peaking at $3,250 in 2031. The surge in US delivery demand has been attributed to concerns that Trump might impose tariffs on gold imports which would be a disaster for writers of futures contracts who may have to deliver physical gold when the contract expires but none can be acquired for just in time delivery. Putting tariffs on a fungible asset like gold makes no sense because the price of gold is set internationally and US gold producers tend to forward sell much of their gold production though not as far into the future as they used to do during the 1990s when they helped crush the gold price down to $265 per oz. But just because a bad idea has not yet occurred to Trump does not mean it will never happen.
A more plausible explanation is that during the past two months high net worth investors have been quietly loading up on gold even though it is at record levels while the GLD ETF gold holdings have tracked sideways during the past year and during Trump inauguration week even managed to lose 609,000 ounces. It has been something of a mystery who bought gold last year when it gained 26% while gold stocks barely tracked physical gold's gains and the GLD lost 212,084 ounces. The amount of gold acquired by central banks according to official reports do not account for gold's strength, and the Costco gold bars that sell out immediately to doomsday preppers also are too tiny an amount to explain gold's strength. The best explanation is that members of the Global East and South have been soaking up gold through unofficial channels as part of an effort to diversify away from US dollar denominated government debt. The sudden surge in physical buying by US parties not reflected in any retail investor enthusiasm for gold tells us that the smart money has started to hedge against catastrophic outcomes unleashed by Trump's policies. The 70 month gold futures curve based on Comex data and compiled as a chart by the World Gold Council projects a steady rise into the $2900-$2950 range by the start of 2026, and continuing that trend to breach $3,000 by the end of 2027. The uptrend then steepens until 2029 where the gold price has reached $3250 and flattens thereafter.
That the market has started to notice gold's strength can be seen in the price jump of major gold producers like Agnico-Eagle which gained $6.75 on Thursday and is up 20% so far this year compared to 7.7% for gold. Since 2021 Agnico-Eagle has underperformed both the KRO Gold Producer Index and the gold price trend but in 2024 H2 Agnico-Eagle started to catch up and this year it is showing signs of regaining status as a leveraged proxy for gold.
Last year the KRO 2020 Gold Producer Index merely tracked the gold trend, a sign that the market either does not believe gold's uptrend has staying power or that it has lost confidence in gold producers as a leveraged proxy for the price gold. During 2017-2018 you can see the market's growing disenchantment with gold producers as the index declined while gold flat-lined. During 2019-2021 the gold producer index closely tracked the gold price trend but at the start of 2022 the producer index diverged negatively from the gold price trend. There was a brief rally in 2023 H1 when it looked like the gold producers would regain their role as a leveraged proxy for gold but that rally failed. Although the producers tracked gold's uptrend into record price territory during 2024 they did so only half-heartedly. This week was important because it seems to signal a reversal of the negative perception about the competence of gold producers and pessimism about the sustainability of gold's uptrend.
While the gold producers made a lot of mistakes during the first half of the past decade when gold first charged toward $2,000 only to settle back to $1,100, they have been much more cautious during the past 5 years and we may have a situation where market perception of perennial incompetence is lagging a new reality. This week may prove to have been a turning point and I will be watching my gold producer index for that moment when the producer index crosses through the gold index. In terms of the gold juniors, if you believe that US smart money is and will keep buying gold, joining the rest of the world to help gold blast through $3,000 as Trump's policies begin to take effect, now is the time to buy advanced shovel ready juniors such as KRO Favorites Vista Gold Corp and West Vault Mining Inc. They are inching up slightly but until the producers are clearly in a stronger uptrend than gold itself, they will lag. But when the inflection happens, they will move like a released slingshot.
This episode of Kaiser Watch includes two graphics which show what the NPV is at gold prices all the way to $4,000 for Vista Gold's Mt Todd project in Australia and West Vault's Hasbrouck project in Nevada. Everybody who reads this should print out these two charts and nail them to the wall. We will never again see such an extraordinary and obvious underpricing of juniors with shovel ready gold projects. When the gold producers start being priced in terms of $2,800 gold and higher as the new long term reality is accepted there will be a slingshot effect with Vista Gold increasing 10-20 times in price and West Vault 5-10 times in price. It is better to own these stocks now than wait for everybody to agree we are in a secular gold bull market.
It will take a while longer for the less advanced ounce or pound in the ground resource juniors to develop broad-based uptrends, and even longer for the exploration focused juniors to attract market attention. However, those exploration juniors which start to deliver positive fundamentals in the form of exploration results will start to pop like kernels of corn in a hot pan. 2025 will be a very lucrative year for investors with access to the KRO 2025 Bottom-Fish Collection which currently has over 100 companies. Access for 2025 is available at USD $450 for a KRO Individual Membership until March 31, 2025. After that full access to KRO will be available only at $200 per month or $2,000 for 12 months while existing members will be grandfathered to renew at $450 for 2026.
The resource juniors have started to attract selective market attention and Thursday was the best value traded day for TSXV resource listings since mid November. The percentage of total TSXV value traded even shot above 50% for resource listings; since Trump won the election the resource listing traded value after spending January-October above 50% has been below 50% as the market seemed to assume Trump's policies would be bad for the resource sector instead of positive as I argue in my MIF presentation In what way is America truly no longer great and why does it matter?. That presentation was done before Trump's inauguration but the subsequent cruelty, vulgarity and monstrosity of Trump's policies remove any doubts I may have had about the important role resource juniors are going to play to help feed an isolated America's resource needs.
The elevation of Canadian resource juniors to the status of "salvation warriors" will not happen overnight. But what did happen overnight on January 17, 2025 was Amarc's announcement of the Aurora copper-gold discovery in British Columbia's Todoggone District. Last week I graduated Amarc Resources Ltd from the Bottom-Fish Collection to the Favorites Collection. This week a neighboring bottom-fish called TDG Gold Corp clinched a key missing piece in the form of a $15.5 million financing, which on January 30 prompted me to graduate it also to the KRO 2025 Favorites Collection. The gold grade of the Aurora discovery is five times better than that of the Kemess copper-gold deposits which is prompting a radical rethink of the Toodoggone District's gold potential within copper porphyry deposits. This rethink will inspire a mini area play within this 100 km by 30 km segment of the so-called Golden Horseshoe in northern British Columbia that hosts so many fabulous deposits. All the relevant ground is already held by majors or juniors, so this is not a staking rush style play. Several of the juniors with key land in the Toodoggone District are in the 2025 Bottom-Fish Collection. I have been highlighting the rethink potential of these bottom-fish in our Bottom-Fish Workshop and KRO members have been soaking up cheap stock. After a year of sustained misery we are starting to have fun and making money. If I am correct about the awakening of a resource junior bull market, which cannot reach "rising tide lifting all boats" status before 2026 because this 14 year bear market has been so prolonged and brutal, 2025 will be a very lucrative year for bottom-fishers as the companies in the Bottom-Fish Collection begin to wake up one by one, like corn kernels in a hot pan, turning into a frenzy of popping kernels in 2026.