Insights: Did Bullard just bury a bullion rally?

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March 6th, 2021

Our friends at Forexlive provided us with some clues on Friday about the Federal Reserve's thinking via their coverage of St. Louis Fed CEO James Bullard. According to the report, the ever loquacious central banker suggested that the Fed did not need to be more dovish. That stands in contrast to the mantra that the Fed was ready to do more, something we have often heard from Jerome Powell over the past few months. If the Bullard narrative is reflective of the broader FOMC, it will be a headwind for gold as investors start to think about the next interest rate hike. 

Investors are forward looking. Like any other asset, that applies to gold. Gold bottomed last decade in the fall of 2015 right before the Fed started to tighten. As it turned out, that was the start of a string of policy errors and gold investors sniffed out the mistake before it began.

Gold investors think well ahead (click for larger)

If the consensus now starts to conclude we have seen peak money printing for the time being, the reasons for holding gold become less compelling. That leaves us with the question about inflation and gold's role. While we expect it will continue to play the role of offering an inflation hedge, bullion and gold stocks have plenty of competition from other inflation-sensitive assets including oil & gas stocks and industrial metals miners.

That said, we believe there remains an opportunity to make some outsized gains in gold miners that can offer the prospect of low-cost production as the gold price is likely to remain high in absolute terms. However, successful stock selection will be critical in order to dodge those operators who cannot contain costs, or even reach commercial production in the case of junior names. Insiders can be a great starting point in finding opportunities in the gold mining industry. In our January 26th, morning report we featured First Mining Gold (FF) and explained how we size things up when it comes to junior gold mining right now.

Low costs are key for gold producers now

Although there will be chances to make good money by picking the right junior gold miners, our preferred way to play core investment theme #3 which is Preparing for a monetary system change is with exposure to industrial miners and crypto-related stocks. In terms of industrial miners, we are not only looking for low-cost producers, but also those that can benefit from increasing China-US-Europe political tension which threatens to disrupt supply chains and drive-up prices.

When it comes to blockchain and cryptocurrency stocks, we are looking beyond the media's newly minted love affair with bitcoin and are searching for those stocks which are helping to reshape the financial system. We see the potential for generational wealth gains now as financial industry change is about to hit the status quo. We will have more to say about individual stock ideas in the INK Chat #innovation-crypto_blockchain channel in the days ahead.

Thank you for your patience

March roared in like a lion for INK as we were hit with two major technical bugs last week. For those that missed the excitement, news releases were not being distributed properly and early in the week we had a rogue data dump of thousands of old Canadian insider alerts. At this point, everything is back to normal and we have our fingers crossed the software gremlins have been defeated.

When these trouble situations occur, we post status updates in the #INKNotice channel of INK Chat. If you have not yet registered for the INK Chat service, please do so today to ensure you are able to get the most up-to-date information should future technical problems arise. If you do not have your invite link, please contact us and we will resend it.

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Despite the technical mayhem, we were able to add a new feature last week for Ultra and INK members. Now, you can be notified of INK Ultra Money videos including new Real Vision productions. Just click on the Notify button beside Real Vision or INK videos and you will be notified of new material. To stop notifications, you can click Stop Notifications.

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Top 3 Gainers Last Week

Company NameStock Symbol1 Week Return %
OvintivOVV19.9
MEG Enegy MEG18.6
Crescent Point EnergyCPG17.8

Top 3 Losers Last Week

Company NameStock Symbol1 Week Return %
Well HealthWELL-14.0
Jaguar MiningJAG-13.3
SunOptaSOY-9.7

Returns are as of the last trading day of the previous week.

Featured Clip

Insider of the Week

Bill Holland

Last year,  CI Financial (CIX) partnered with Galaxy Digital Holdings (GLXY) to launch a closed-end bitcoin fund. That was an astute move as Galaxy has been a trailblazer in the cryptocurrency space and was our second best-performing Morning Report stock in 2020. With regulatory gates now open to bitcoin ETFs, CI Financial also wants to get into the game. The company announced on February 26th that they hope to merge their closed-end fund into the CI Galaxy Bitcoin ETF which is awaiting receipt for its final prospectus. The company has also filed a preliminary prospectus for a CI Galaxy Ethereum ETF. CI Financial's recent moves paired with insider buying suggest that the company is taking steps to thrive during a period of rapid innovation and change hitting the financial industry. The buying has been led by Chairman of the Board William Holland, our insider of the week.

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