Too Much Bullish Sentiment on Gold
Gold and silver prices came under heavy selling pressure last week after the Federal Reserve released an interest rate policy statement, which ostensibly served as the catalyst for the strong rally in the U.S. dollar index.
But as we’ll discuss in this report, it wasn’t really the interest rate outlook that caused the dollar to rally and gold to decline. Rather, weakness in foreign equity markets and a recent (and rare) currency market intervention in China are the most likely culprits.
As stated in previous reports, the subsequent weakness in most precious and industrial metals is needed to refresh the overall metals market and flush out the weak hands who are evidently over-exposed to the metals (and have thus become prime targets for short sellers).
But as we’ll discuss here, while some additional near-term weakness is likely, the fundamentals underlying a longer-term metals bull market remain intact.
We’ll also examine an interesting uranium company which is undergoing a turnaround and is showing relative strength in an otherwise weak metals market, thus making it an attractive potential buy for when the latest shakeout has ended.
Feature Story: Dollar Strength and Gold’s Elevator Experience
There’s an old saying among veteran bullion traders that goes: “Gold rises slowly up an escalator and falls quickly down an elevator shaft.” That sentiment captures the tendency for the yellow metal to rise steadily during times of a weakening dollar, then drop suddenly—and without halting—whenever the dollar strengthens. And that’s exactly what we’ve seen in the last few weeks.
From a rock-bottom price of around $1,680 an ounce on March 8, the gold futures price rose 14% to $1,920 intraday on June 1, where it peaked. It then folded over and dropped to an intraday low of $1,760 on June 18 for a total decline of 8% to date and a 67% retracement of gold’s March-to-May bull run (for those of you into percentage retracements).
From strictly a technical perspective, whenever the gold price gives back more than half its gains from the previous rally, it’s widely considered as a sign that sellers outnumber buyers in the market. And while a bottom to the latest decline could be imminent (we’ll discuss this possibility a bit later on here), it usually pays to wait for the market to bottom out and firm up again before getting back in. In my experience, trying to catch the proverbial “falling dagger” is a trick best left to day traders and high-risk speculators.
Let’s take a look at what is almost certainly the main catalyst behind gold’s latest show of weakness. It should come as no surprise that the recent strength in the greenback is the primary culprit here. What is surprising, however, is that the recent slump in the U.S. 10-year Treasury Yield Index (TNX), below, hasn’t yet had any sort of mitigating effect on gold’s decline.
For the better part of the past year, Treasury yields have been on the rise while gold has struggled. The gold price slump which started last August and continued until this March was widely attributed to the increased competition from higher-yielding government bonds, which undermined non-yielding gold’s safe-haven status.
Gold’s latest sell-off was sparked by last week’s announcement that a majority of Federal Reserve voting members, in the words of Reuters, “projected at least two quarter-point rate rises for 2023, even as officials in their statement pledged to keep policy supportive for now to encourage a jobs recovery.”
As the financial media never grow tired of reminding us, “Higher interest rates raise the opportunity cost of holding non-yielding bullion.”
But that doesn’t explain why gold and other metals were so hyper-sensitive to the announcement when a.) the proposed hike to the Fed funds rate is still one-and-a-half to two years away, and b.) longer-term Treasury yields actually fell, which should theoretically have given gold a competitive advantage in attracting safe-haven money.
The obvious explanation for the gold market’s frenetic movement last week was in reaction to, not the distant prospect of higher interest rates, but rather to a strengthening dollar. Indeed, the rally in the U.S. dollar index (USD), as well as gold’s weakening price, predated the Fed’s announcement by several days as the inverse correlation between the currency and the metal became reestablished. Clearly then, the catalyst behind gold’s latest bout of selling is the resurgent dollar.
This naturally begs the question, “What is the reason for the dollar’s sudden strength?” The conventional narrative embraced by the financial media is perhaps best embodied in a recent client note by Brad Bechtel, head of FX at Jefferies. He wrote:
“[T]he commodity space is letting the air out of the bubble, the economy is improving at a rapid pace with a lot of momentum, and the pandemic is largely behind us, and that is therefore a yield positive, USD positive narrative.”
While there are certainly merits to the above argument, I must ultimately disagree with this assessment. For if the dollar’s strength is predicated mainly on a stronger U.S. economy, then the 10-year yield should also be rising, not slumping.
I think the most likely rationale for the USD rally is that recent events overseas have suddenly made the dollar an attractive haven currency for foreign investors. On this score, it should be noted that the other two major safe-haven currencies—the Japanese Yen and the Swiss Franc—are showing varying degrees of weakness and therefore aren’t suitable for safety-conscious investors right now.
Along with the U.S. dollar, U.S. Treasury bonds have also suddenly become attractive to safety-obsessed foreign investors. As reflected in the graph of the iShares 20+ Year Treasury Bond ETF (TLT), longer-term U.S. government bond prices (which move inversely to yields) are now on the upswing. This normally happens when investors have reason to be at least somewhat worried about potential threats to the global financial market or economic outlook.
Typically, gold prices rise in harmony with bond price rallies, but such is not the case at this time. The likely explanation is that the sudden onset of global economic worries resulted in a knee-jerk rotation out of foreign equities and into the U.S. bonds. And indeed, investors have heavily sold stocks across several foreign exchanges in recent days, including in several European countries like England, Germany, France and Italy.
But perhaps nowhere has the relative weakness (versus the U.S. market) been as pronounced as in China. While the stock market indexes for the aforementioned European countries are coming off yearly highs, China’s benchmark Shanghai Composite Index peaked in February and has underperformed most major foreign equity markets (notably lagging Wall Street).
Moreover, China’s yuan currency has lately shown some weakness after strengthening for the better part of the last year.
After the yuan recently strengthened to a 3-year high versus the dollar, the People’s Bank of China became concerned over the competitiveness of Chinese exports and viewed the currency as being too high. So earlier this month, the bank made the rare announcement that the nation’s banks would need to intervene by increasing the ratio of their foreign exchange deposits—the first such time in 14 years. The net result was a weakening of the yuan against the dollar (see yuan ETF chart below).
And while the yuan doesn’t always move inversely to the U.S. dollar, both currencies typically move in opposite directions; hence, yuan weakness often translates into dollar strength—and that’s definitely the case this time.
Long story short, gold is being hampered by the sudden strength of the U.S. dollar in which it is priced. But a final consideration is the investor sentiment backdrop behind the bullion market, which has also lately been unsupportive for higher gold prices.
Consider that gold’s primary sentiment catalyst in recent weeks has been the rising inflation narrative. Led by higher crude oil, rising commodity prices were an increasing concern among consumers and led to a growing fear that a runaway-type inflationary period (of the type the U.S. experienced in the 1970s) might be imminent. Those fears were temporarily dispelled by the recent dollar rally, but not before manifesting in the form of the infamous “magazine cover indicator,” which states that whenever a mainstream worry reaches its peak, it always shows up on the front cover of a magazine. And this tends to happen only when the market has fully discounted that worry (at least from a short-term standpoint).
Here you can see a prime example of the growing inflation fear factor on a magazine cover from earlier this month—right around the time the gold price peaked.
Admittedly, this isn’t a mainstream publication but the sentiment behind it is nonetheless instructive. As I alluded to in an earlier report entitled, “Have We Seen Inflation’s Peak?”, there was simply too much concern over the dreaded “I” word to support its continuation in the short term.
Also worth mentioning is the observation that IG Client bullish sentiment on gold has surprisingly increased in recent days despite the metal’s recent volatility. According to DailyFX.com, bullish sentiment on the yellow metal is an astonishingly high 86%, versus a mere 13% bearish. From a contrarian’s perspective, that’s entirely too high and we’ll likely need to see the bullish sentiment shrink from here before we get the next confirmed short-term gold buy signal.
What to Do Now
We recently exited our trading position in the iShares Gold Trust (IAU), our primary tracking vehicle for gold. I recommend holding off on initiating any new long positions in the gold ETF until we have confirmation that the U.S. dollar index has peaked and the gold price has bottomed. As mentioned above, we should also ideally see a diminution of bullish sentiment on gold (and an increase in gold short interest) before the next confirmed buy signal. Accordingly, let’s keep our powder dry as we wait for the next entry opportunity in the yellow metal.
New Recommendations/ Updates: Silver and Copper Still Weak, Steel Consolidates
Silver Slammed in Dollar-Driven Sell-Off
Despite showing relative strength versus gold recently, silver suffered as much weakness as gold last week, falling 8% from its May peak to last week’s closing low of $25.95 per ounce (basis July futures).
As with gold, the strengthening U.S. currency was the primary culprit behind the white metal’s weakness. This wasn’t surprising given that gold’s sister metal often moves in sympathy with the gold price. What was somewhat surprising is that silver suffered roughly the same percentage decline as gold despite having a better (short-term) fundamental backdrop as well as a better psychological backdrop.
Investor sentiment for silver, while unquestionably net bullish, was decidedly less so than it was for gold last week. Heading into the sell-off, “only” 71% of IG Clients were bullish on silver (versus 82% for gold). As of June 18, however, the bullish sentiment for silver has risen to 77% (versus 86% for gold).
As I affirmed in the above gold commentary, I don’t like seeing bullish retail trader sentiment increase for the metals during a market correction. Ideally, traders should become more bearish as prices fall, not the other way around. From a contrarian standpoint, the rising enthusiasm for silver despite the sell-off suggest that retail participants are “buying the dip” right now, which could prove to be a short-term mistake.
Yes, there are times when even the retail crowd ends up correctly timing a market bottom. But in the majority of cases, when the crowd starts buying after the market has declined, they are usually premature in their bullishness. For this reason, I’m going to avoid making any buy recommendations in the silver ETFs right now until we see definite technical evidence that the market has been fully cleared of selling pressure and is ripe for another extended rally.
Fundamentally, however, nothing has changed to alter silver’s positive longer-term outlook. Indeed, a growing number of industry experts believe silver could go as high as $50 if the White House’s renewable energy plan is fully implemented. This would have the effect of increasing silver demand for use in electric vehicles (EV), solar panels and other alt-energy applications in which the metal is widely utilized.
Additional anticipated uses for silver in the foreseeable future include the continued 5G wireless network rollout and the accelerating demand for bullion coins (for both speculative and long-term investment purposes), as previously discussed. For these reasons, I expect that silver’s recent woes will prove to be but temporary setbacks in the face of a bull market that should be able to regain traction at some point this summer.
Returning to the short-term technical outlook, despite an overabundance of bullish sentiment, there’s no denying that the silver market is fast becoming “oversold” based on a number of indicators (my favorite of which is the 20-day price oscillator). An oversold market condition can only continue for so long before short interest begins to increase, in turn paving the way for a short-covering rally.
And in the iShares Silver Trust (SLV), my silver trading vehicle of choice, there’s a conspicuous downside gap visible in the daily chart. An old saying among traders is that “gaps are always filled,” and while this is technically true, it can sometimes take several weeks for downside gaps to be filled. More than anything, though, a price gap typically results when traders overreact to a news headline—as happened last week.
My observation is that purely emotion-driven price declines are reversed fairly quickly. So, if I’m correct that last week’s silver market slam was primarily a news-driven event (and not fundamental in nature), then we should see silver hitting bottom in the next few days. Assuming this happens, we could soon have another trading opportunity in silver. Stay tuned.
What to Do Now
Wheaton Precious Metals (WPM) is a world-class precious metal streaming company, featuring a high-quality portfolio of long-life, low-cost assets. (Streaming companies make an upfront payment, plus a fixed payment per ounce of metal—often 20% of spot price—giving them the right to a percentage of a mine’s future production and allowing them to leverage rising metal prices.) As the world’s largest silver streaming company, with 14 silver purchase agreements, as well as gold and palladium agreements, Wheaton focuses mainly on high-quality, high-margin operations with a goal of returning a minimum of 30% of cash flow to its shareholders, with the remainder used to grow the company. Aside from precious metals, one of the main drivers behind Wheaton’s stock price right now is the company’s growing exposure to the valuable cobalt market (cobalt prices are up 45% from a year ago). Investors can nibble on weakness down to around 42.50 (near the 50-day line). BUY A HALF ON WEAKNESS
Copper Market Bottom Could Be Imminent
Copper has fared worse than gold and silver, falling 14% from its May peak of $4.75 per pound as of June 18.
Reasons for copper’s weakness include the strong dollar, but also the market’s recent shift in short-term inflation expectations. As we touched on in the June 15 report, the 5-year breakeven inflation rate, which measures what participants expect inflation to be in the next five years, has been slumping since hitting its highest rate in 10 years a couple of months ago.
More pertinently from a fundamental perspective, however, was the announcement by China last week that it would release copper, aluminum and zinc from its national reserves in a bid to increase market supply and take some of the air out of industrial metal prices (which Chinese officials deem to be overinflated).
Nevertheless, the inflationary pressures we’ve been discussing in recent reports are still a major concern for the intermediate-term (6-9 month) outlook and should eventually come to copper’s aid. Continued strong demand for copper in the booming electric vehicles (EV), alternative energy and other industries should also contribute to copper’s longer-term strength.
From a short-term technical viewpoint, I note with interest that last week’s copper price drop occurred on exceptionally high trading volume as reflected in the chart of the Global X Copper Miners ETF (COPX). This type of volume is usually seen around key reversal points, which begs the question, “Is a copper price bottom imminent?”
In the event that the decline continues this week, the benchmark 200-day moving average (below) would be expected to attract institutional buying, so we’ll be keeping an eye on it in the coming days. I’d view a drop down toward the 200-day MA as a nibbling opportunity in COPX for speculators.
What to Do Now
We recently initiated coverage of Taseko Mines (TGB), a copper play which is also as an ideal vehicle for gaining some exposure to the strong molybdenum market. Canada-based Taseko is known mainly for being a mid-tier copper miner that operates the Gibraltar Mine, Canada’s second largest open-pit copper mine. Taseko’s Gibraltar mine boasts proven reserves of 53 million pounds of molybdenum. Long-term-oriented investors can accordingly do some nibbling on pullbacks down to around 1.75 (stop). I regard TGB to be more of a longer-term “buy and hold” type play in contrast to most of our short-to-intermediate-term trading positions, hence the reason for the much bigger downside latitude I’m allowing the stock. BUY A HALF ON WEAKNESS
Steel Price Weakness Likely Temporary
Spot iron ore prices rose 1.1% last week as data showed a record monthly output of crude steel. Top consumer China, meanwhile, stated that it sees more potential for demand growth in the intermediate term.
Data from China’s statistics bureau revealed that the world’s top steel producer posted an output of over 99 million tons of crude steel in May.
At a briefing last week, the state planner said with the development of China’s economy, “demand for crude steel still has room to grow during the 14th Five-Year Plan.”
However, this contrasts with China’s plan to release reserves of other industrial metals, including copper, zinc and aluminum to put a temporary halt to what have been called “meteoric” price increases for the metals.
China’s National Food and Strategic Reserves Administration (its official stockpiling authority) said the move to release reserves would also ensure the supply and price stability of bulk commodities.
Elsewhere, steel analysts interviewed by Bloomberg are skeptical that China’s stated plan to reduce prices through supply cutbacks will be fully implemented. The thinking among many industry experts is that there’s too much steel demand in China’s valuable automobile and building industries right now to justify sustained cutbacks.
Further boosting the intermediate-term steel outlook is the White House’s recent $6 trillion budget proposal for fiscal year 2022 that would expand fiscal spending for roads, water pipes, EV charging stations and other infrastructure that would necessitate higher steel production volumes.
All told, the recent weakness in the steel price is likely a temporary phenomenon that was needed to cool off the overheated market condition. Additional consolidation may be needed in the near term, but I expect that as we head further into the summer months, the strength we saw earlier this spring in steel will eventually reassert itself.
Meanwhile, key domestic producer U.S. Steel (X) said last week that it expects to report an adjusted net income of about $880 million, or $3.08 a share (an 8% improvement from its previous guidance), driven by buoyant steel prices and “strong” demand for flat-rolled steel.
The company also said that “strong demand and low steel inventories are empowering today’s ongoing market improvements. These market fundamentals are showing no signs of slowing down and have us increasingly confident of another strong year in 2022.”
What to Do Now
Cleveland-Cliffs (CLF) is one of North America’s largest integrated steel makers and is seeing higher steel demand (and higher steel prices) thanks to global economic recovery and tight supplies. Recently quarterly results provided some insights into why things are rolling for Cleveland-Cliffs, as discussed in previous issues. Since then, Bank of America has reinstated coverage of the company with a “buy” rating and an upside target of 25, referring to it as a free cash flow “machine.” I recommended that investors maintain our recently purchased conservative position in CLF provided the 19 level (our latest stop-loss) isn’t significantly violated on a closing basis. HOLD
I’m placing Vale S.A. (VALE) on our watch list after its recent show of relative strength. With the world economy on the mend, the raw materials essential to steel production are in high demand. Vale is one of the world’s largest iron ore and nickel miners, as well as a diversified producer of other industrial and precious metals. Accounting for the recent strength was management’s announcement of an ambitious plan to reach 400 million tons of iron ore production by next year, which, if realized, would be a 33% increase from 2020’s total production. Given the firm’s first-quarter financial performance, that goal looks to be obtainable. Net operating revenue from China more than doubled to $7 billion as demand for iron ore surged. The company’s iron ore production increased 14% in the quarter, while total ore sales were 15% higher from a year ago. Analysts believe Vale’s production of premium iron ore should help maintain strong demand from China, with its focus on buying the best quality ores. Analysts expect revenue for full-year 2021 to increase 45% while per-share earnings improve 98%. WATCH
Rare Earths: Neodymium-Praseodymium
Rare earths play a pivotal role in the booming market for electric vehicles, and it’s predicted that the rare earth elements market will increase by 40% to $3.8 billion by 2026. And with the EV market widely expected to mushroom between now and then, the companies that mine them will reap substantial benefits (along with those who invest in them).
Among the rare earth minerals, neodymium oxide is the strongest permanent magnet material ever discovered and is widely used in permanent magnets, lasers, microphones and headphones, computer hard disks, electric motors and generators. It’s primarily mined in China, India, the U.S. and Brazil.
Praseodymium oxide is used in alloys with magnesium for the production of high-strength metal for aircraft engines, as well as magnets used in electric motors. Praseodymium compounds are used for coloring glass and enamel, and related compounds improve UV absorption and are used for eye protection glasses used by welders.
Neodymium-praseodymium alloy is accordingly highly valued in several global manufacturing and high-tech applications—including the high-value electric vehicle (EV) market—and analysts forecast that neodymium in particular will lead the rare-earth metals market in terms of value, particularly in China.
MP Materials (MP) is regarded as one of the biggest (if not the biggest) rare earths producers in the Western Hemisphere, currently accounting for around 15% of total global supply and with most of its production taking place at its Mountain Pass, California mining site.
Most of the resulting rare earth concentrates MP produces are eventually sold to China through an intermediary (where those concentrates are processed). However, the company is working towards completing a Stage II optimization project next year that would allow the firm to bypass the middleman by fully processing the materials and selling rare earths straight to end users.
Upon completion, Stage II is expected to produce around 20,000 metric tons of separated rare earth oxides annually, including over 6,000 metric tons per year of neodymium-praseodymium, which in turn will be used primarily to make magnets for the EV market, as well as for wind turbines, drones and robots.
MP Materials also boasts strong balance sheet with cash and equivalents of $1.2 billion (including $672 million in net proceeds raised through a convertible “green bond” offering—the largest in the country, according to MP). Its liquidity position was further increased by $21 million in free cash flow during the quarter.
Looking ahead, analysts expect the company to grow the full-year 2021 top and bottom lines by 77% and 93%, respectively, with continued double-digit earnings and revenue growth in the next two years. It’s a solid story and worth a closer look, in my opinion, if you’re looking to gain some exposure to the rare earths space.
In the latest news, MP was just added to the Russell 3000 Index during its annual rebalancing, giving it some added visibility and prestige among investors.
What to Do Now
After hitting a yearly high at 50 in March, shares of MP fell to 25 in May before finding support at this level. A turnaround attempt is in progress, and the stock has just posted its first weekly close above the widely watched 50-day moving average since March. Investors can purchase a half position in MP on weakness, using a level slightly under 25 as the initial stop-loss on a closing basis. BUY A HALF ON WEAKNESS
Lithium Improves on EV Demand
As the world moves toward “cleaner and greener” sources of energy, as well as the electrification of vehicles and alternative forms of energy storage, lithium will play an increasingly pivotal role. That’s the conclusion of a recent forecast report by data analytics firm Fitch Solutions.
The lithium market is controlled by a relatively small number of producers, but Fitch foresees that more opportunities will open up and expand growth opportunities for new entrants around the world. Fitch predicts that global lithium production will more than triple, from 442,000 tons of lithium-carbonate-equivalent (LCE) last year, to 1.5 million tons by 2030.
The most dominant lithium-producing nations are projected to keep growing in the coming decade, while several new lithium players will emerge during that time. Production growth is projected to increase in Australia, which Fitch says will maintain its top spot as the world’s biggest producer into 2030, based on an expected tripling of production over the next 10 years. Production in Chile, Argentina and China, meanwhile, is also forecast to more than double, and Brazil’s lithium production is expected to grow five-fold.
Driving the acceleration of alternative energy storage, according to Fitch, will be the growing demand for rechargeable lithium-ion batteries for the electric vehicle (EV) market, accounting for around 80% of total lithium demand by 2030, from 40% today. Further, lithium consumption could grow as much as seven times over the next 10 years, based on a projected EV annual sales growth from 3 million today to 21 million units by 2030.
Fitch sees Chinese lithium carbonate 99.5% prices averaging $13,450 per ton in 2021, increasing to an average $15,025 per ton 2022. Chinese lithium hydroxide monohydrate 56.5% prices, meanwhile, are expected to average $11,950 this year and $14,300 next year.
Finally, Fitch expects China to maintain its leadership role as the world’s largest battery maker by a wide margin, accounting for around 80% of installed manufacturing capacity as of 2020. By the same token, countries including Japan, South Korea and the U.S. will also likely increase battery manufacturing in the coming years.
What to Do Now
Investors can buy a conservative position in the Global X Lithium & Batter Tech ETF (LIT) on weakness down to around 63.82 (where the 50-day moving average comes into play). BUY A HALF ON WEAKNESS
Uranium: Another Opportunity Ahead?
As governments around the world push ahead with decarbonization plans, uranium-based nuclear power is becoming increasingly embraced as a key fuel source.
A recent report from Barclays notes that nuclear output isn’t affected by adverse weather conditions, that nuclear waste is less than the waste from retired solar panels, wind turbine blades and lithium-ion batteries, and that nuclear power doesn’t require the storage solutions typical for renewable energy.
All of these factors make uranium an attractive potential investment from a longer-term perspective.
Until last week, uranium was in a relative strength position compared with other metals. From its early 2020 low until now, spot uranium prices are up a respectable 30%. But the average price for uranium stocks is up considerably more.
Indeed, a reflection of the market’s strength is the Global X Uranium ETF (URA), which reflects the price average of several leading uranium mining, extraction and refining stocks. It rose an eye-popping 120% from its October 2020 low to its latest high just two weeks ago.
Since then, however, the uranium ETF has cracked its 50-day moving average for the first time this year. The sell-off in uranium and uranium stocks occurred on the back of recent developments in—where else?—China.
As reported by The Wall Street Journal last week, the sell-off was catalyzed by news that a southeastern Chinese nuclear power plant recently experienced an increase in “noble gases in one of its reactors’ primary circuits, which is part of the reactor’s cooling system.”
China’s government admitted to the damage to fuel rods at the power plant but insisted there was no radioactivity leak. Moreover, China’s Ministry of Ecology and Environment said the problem was a typical one and not a major concern.
Yet CNN reported that the U.S. government was looking closely into the reported leak at the facility after a spokesperson said a problem with fuel rods was responsible for the gas build-up, which reportedly had to be discharged into the atmosphere. Plus, a French energy firm which assists in operating the Guangdong province plant had also previously reported a “performance issue.”
Even if the nuclear power plant problem is contained, as Chinese officials insist, the fact that the Western press is playing upon fears of a potential nuclear meltdown is weighing heavily on investor sentiment in the uranium space right now. This is the primary reason for last week’s uranium stock decline.
Sentiment-driven price declines tend to be short lived, however, and for that reason I expect that we should have an opportunity to do some buying in the uranium space in the coming weeks and months. One industry player in particular that is showing promise from an intermediate-term standpoint is Denison Mines (DNN), a Canada-based uranium exploration, development and production company.
Denison’s flagship project at Wheeler River, which has two high-grade uranium deposits, Phoenix and Gryphon. Phoenix is believed to possess the lowest production costs of any undeveloped uranium deposit, with all-in sustaining costs of $8.90 per pound (compared with current prices of around $32).and operating costs of just $3.33 per pound.
All-in sustaining costs for Gryphon, meanwhile, are also a below-market $22.82 per pound, with a combined 109 pounds of probable reserves and a 14-year mine life.
Additionally, Denison has just agreed to acquire a 50% stake in the JCU Exploration Company from UEX Corp. after it completes its acquisition of JCU. JCU holds a portfolio of twelve uranium project joint-venture interests in Canada.
The acquisition is expected to allow Denison to not only increase its indirect ownership of its flagship Wheeler River project, but also expand its asset base to include additional important Canadian uranium development projects such as Millennium and Kiggavik.
Denison is admittedly speculative, but assuming the uranium price perks back up again after China radioactivity leak fears diminish, the stock looks to be in a good relative strength position to continue the turnaround that began last year.
What to Do Now
We’ll keep a close watch on Denison Mines (DNN) with an eye toward establishing a small speculative position in the stock once the uranium market rebounds. WATCH
Current Portfolio
| Stock | Price Bought | Date Bought | Price on 6/21/21 | Profit | Rating |
| Barrick Gold (GOLD) | - | - | - | - | Sold |
| Cleveland-Cliffs (CLF) | 20 | 5/11/21 | 19 | -3% | Hold |
| Freeport-McMoRan (FCX) | - | - | - | - | Sold |
| Global X Lithium & Battery ETF (LIT) | 69 | 6/10/21 | 69 | 0% | Buy a Half |
| iShares Gold Trust (IAU) | - | - | - | - | Sold |
| iShares Silver Trust (SLV) | - | - | - | - | Sold |
| MP Materials (MP) | 32 | 6/8/21 | 32 | 5% | Buy a Half |
| Newmont Minint (NEM) | - | - | - | - | Sold |
| Taseko Mines (TGB) | 2.25 | 5/24/21 | 1.95 | -13% | Buy a Half |
| Wheaton Precious Metals (WPM) | 48 | 6/1/21 | 45 | -7% | Buy a Half |
Buy means purchase a position at or around current prices.
Buy a Quarter/Half means allocate less of your portfolio to a position than you normally would (due to risk factors).
Hold means maintain existing position; don’t add to it by buying more, but don’t sell.
Sell means to liquidate the entire (or remaining) position.
Sell a Quarter/Half means take partial profits, either 25% or 50%.
The next Sector Xpress Gold & Metals Advisor issue will be published on July 6, 2021.
Cabot Wealth Network
Publishing independent investment advice since 1970.
President & CEO: Ed Coburn
Chief Investment Strategist: Timothy Lutts
Cabot Heritage Corporation, doing business as Cabot Wealth Network
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