by Lawrence Roulston
companies have seen some gains over the past
quarter, but results have been uneven, to say
the least. Emerging gold producers and companies
with advanced stage gold deposits have generally
turned in favourable performances. Some of the
silver companies also did well. Gold exploration
success is being recognized while base metal and
uranium companies and early stage explorers are
still shunned by most investors.
The gold market remains strong, albeit somewhat
volatile. Many investors bought gold as a safe
haven at the height of the financial crisis.
With “green shoots” pointing to the beginning of
economic recovery, some of those gold ounces are
being sold back as at least a few investors are
getting back into equities.
The safe-haven gold that is being offered back
to the market is finding ready buyers in
investors who look beyond the early stages of
recovery. People now recognize inflation as the
inevitable consequence of trillions of dollars
of stimulus spending. Gold is gaining
recognition as a hedge against the declining
value of currencies, which is the flip side of
inflation. Silver is following gold higher, with
the big silver companies rising in value.
However, the smaller silver companies have not
benefited from the metals price gain.
Some commentators feel that the gains in the
broad markets and in resources have gotten too
far ahead of economic fundamentals. Certainly,
there are still serious concerns with the U.S.
economy. However, in looking at the resource
markets, it is important to consider the global
picture. China is the third largest economy,
still far behind the magnitude of the U.S.
Nevertheless, China is by far the biggest
consumer of metals. The Chinese economy grew at
6.1 % in the first quarter and is expected to
grow at 8% for the year. That is down from the
10%-plus level of earlier years, but a torrid
pace for any large economy.
The copper price, now up 66% from the low of
earlier this year, reflects the on-going
consumption of metals in the global economy.
Base metal juniors are being shunned, as if
investors believe that the world will no longer
Over the past ten days, I participated in
resource investment conferences in Hong Kong and
Vancouver. The contrast in the outlook for
resources in North America compared to Asia was
remarkable. The next issue will include
observations from those two events. For now:
Asia is preparing for economic recovery by
accumulating resources while they are incredibly
One of the big concerns at present with regard
to the junior resource markets is whether we
will experience the dreaded summer doldrums. It
appears likely that there will be some
softening, even if just from the self-fulfilling
nature of the concern. Companies that are fully
valued, or which are merely biding time waiting
for the markets to lift their share prices, may
Companies that are generating shareholder value
by advancing their projects will continue to be
rewarded. Money is coming back into the resource
sector as investors around the world are
beginning to recognize the exceptional values in
the context of a longer term outlook.
At this moment, the most favoured area for
investors remains precious metals, both gold and
silver. Specialty metals, especially those used
in high-tech applications are also gaining
recognition. The uranium price is up 25% from
the low of earlier this year, with little or no
reaction yet in the juniors. In due course, even
the base metal juniors will begin to get some