Major Banks Now LONG Gold - 'Everything is Pointing to Higher Prices'

Key Concepts

• Secular Trend vs. Cyclical Move: The discussion differentiates between a long-term, fundamental shift in gold prices (secular trend) and a shorter-term, market-driven fluctuation (cyclical move).
• De-dollarization: The process by which countries reduce their reliance on the US dollar for international trade and finance, often driven by geopolitical factors.
• BRICS: An acronym for Brazil, Russia, India, China, and South Africa, a group of emerging economies that are increasingly influencing global economic and geopolitical dynamics.
• Basel III: A set of international banking regulations that, in this context, are discussed for their potential impact on how banks hold gold as a Tier 1 asset.
• Tokenization: The process of representing real-world assets, such as gold, as digital tokens on a blockchain.
• District Scale Play: An exploration strategy focused on a large land package with the potential for multiple mineral deposits.
• High-Grade Mineralization: Ore deposits with a significantly high concentration of valuable minerals, in this case, gold.
• Bulk Tonnage Target: A mineral deposit characterized by a large volume of lower-grade ore, as opposed to high-grade, smaller deposits.
• Stack Structures: Geological formations where multiple mineralized zones are layered or stacked, increasing the potential for significant gold discovery.
• RTO (Reverse Takeover): A financial transaction where a private company acquires a public company to become publicly traded.

Summary

This discussion on Commodity Culture features Jesse Day interviewing Trey Waser, CEO of Dryden Gold, an exploration company focused on high-grade gold discoveries. The conversation delves into the current gold market dynamics, the secular trends driving gold prices, and specific developments at Dryden Gold.

Gold Market Dynamics: Secular Trend and Key Drivers

The conversation begins by addressing the recent surge in gold prices, which have reached new all-time highs, outperforming the broader market. While some technical analysts suggest gold is overbought, Waser argues that the current rise is not merely a cyclical commodity move but a secular trend driven by multiple fundamental factors.

Key Drivers of the Secular Trend:

• Central Bank Buying: A traditional driver of gold prices, with central banks consistently increasing their gold reserves.
• Interest Rates: While historically inverse to gold prices, the recent rise in gold occurred even as interest rates were increasing. The discussion anticipates potential Fed rate cuts, influenced by political pressure and potentially flawed labor market data.
• BRICS and De-dollarization: The growing influence of the BRICS nations and the trend of de-dollarization, fueled by geopolitical tensions and trade issues, are seen as significant long-term drivers. Waser emphasizes that this is not a temporary phenomenon and suggests a long-term shift away from dollar dominance.
• Basel III and Bank Involvement: The implementation of Basel III regulations has elevated gold to a Tier 1 asset, allowing banks to hold it as a liquid asset in their reserves. This, coupled with US banks becoming more involved in the gold market (previously known for shorting gold), signals a significant shift in institutional sentiment.
• Tokenization and Blockchain: The increasing adoption of blockchain technology and the tokenization of assets are identified as a powerful secular theme. Waser believes this will fundamentally change how securities and assets are traded, with a significant portion of the 500 million+ global digital asset users potentially moving towards gold-backed digital assets.
• US Debt and Geopolitical Unrest: The spiraling US debt crisis and increasing geopolitical unrest, both internationally and domestically, are cited as contributing factors that drive demand for gold as a safe-haven asset.

Supporting Evidence and Perspectives:

• Bank Price Targets: Waser notes that major banks like Bank of America and Goldman Sachs have significantly raised their gold price targets, with Bank of America now at $4,500 and Goldman Sachs at $5,000. This indicates a strong institutional bullishness.
• Morgan Stanley's Portfolio Shift: Mike Wilson of Morgan Stanley has recommended a shift in portfolio allocation from 60% stocks, 40% bonds to 60% stocks, 20% bonds, and 20% gold. This is a significant departure from traditional investment strategies, highlighting the perceived diminishing role of bonds as a hedge against inflation and the growing appeal of gold.
• Gold's Historical Returns: Over the past 5-10 years, gold has delivered returns of approximately 10-11% annually, outperforming bonds in terms of hedging against dollar purchasing power decline.
• Banks Accepting Gold as Collateral: The recent announcement by some banks to accept gold as collateral for margin accounts is a significant development, allowing hedge funds to maintain gold positions while accessing liquidity.
• Short Squeeze: Waser suggests that a portion of the recent gold price rise may be attributed to a short squeeze in paper gold contracts, indicating that previously short-selling banks are now being "squeezed out."

Tokenization and the Future of Gold

Waser highlights tokenization as a particularly powerful aspect of his secular thesis. He points to the growth of the stablecoin market, projected to reach $1 trillion by 2030, and the increasing number of unbanked individuals globally (over 500 million) who are adopting digital assets for payments.

Key Points on Tokenization:

• Tether's Role: Tether, with its $150 billion stablecoin market cap, generates significant interest income by investing in US Treasuries. Waser suggests that Tether's future may involve tokenizing gold royalties and streams, and potentially shifting users to its gold-backed stablecoin (XAU).
• Streamax and Yield-Bearing Tokens: Streamax's entry into a letter of intent with Simplify Asset Management to advance regulated ETFs incorporating tokenized assets, starting with yield-bearing tokenized gold, is a notable development. However, Waser expresses some caution regarding the mechanics of leasing gold for tokenization and potential third-party risk.
• Market Size Comparison: The daily trading volume in the gold market is seven times larger than all crypto trading combined. Applying the growing user base of digital assets to this larger market is expected to be a significant catalyst for gold.

Dryden Gold: Exploration and Corporate Developments

The conversation shifts to Dryden Gold, with Waser providing an update on the company's activities and future plans.

Recent and Upcoming Activities:

• Financing: Dryden Gold completed a $7.8 million financing in August.
• 2025 Drill Campaign: The company recently finished its 2025 drill campaign, totaling approximately 15,000 meters.
• 2026 Drill Program: A 23,000-meter program is planned for 2026, set to commence in the fall of 2025.
• Property Size: Dryden Gold holds a large, district-scale property of 70,000 hectares.
• Project Focus:
  • Gold Rock Camp: The primary focus, targeting the Archan Load gold system with historically high grades. This area is being compared to Red Lake due to similar geology and deposit styles.
  • Hinman Project: A lower-grade bulk tonnage target with significant potential.
  • Sheridan Project: Also a bulk tonnage target.

Key Discoveries and Geological Insights:

• Gold Rock Camp Breakthrough: The company has identified stack structures within the Gold Rock target area, a significant development that mirrors discoveries in the Red Lake camp. These structures are yielding very high grades, with one intercept reported as 300 g/t over 3.9 meters.
• Expansion of Veins: What was initially thought to be three veins has now expanded to nine identified structures within a 1-kilometer square area, indicating substantial potential for further discoveries.
• Regional Targets:
  • Sheridan: Initial drilling results are expected soon, with plans for a follow-up program. This is a different deposit style (ultramafic contact zone) and is expected to be a lower-grade bulk tonnage target.
  • Hinman: Channel sampling results are pending, and preliminary indications suggest potential for drilling this fall. This is a granite-diorite with quartz stockwork veinlets, similar to the Goldland deposit but with a much larger footprint.

Shareholder Base and Institutional Investment:

• Strong Shareholder Support: Dryden Gold boasts a strong shareholder base, with approximately 80% institutional and management ownership.
• Major Shareholders: Key shareholders include Sprat Asset Management (Eric Sprat), Centa Gold, Alamos Gold, Delbrook Capital, Peter Schiff's EuroPac Gold Fund, and US Global Fund (Frank Holmes).
• Attracting Institutional Investment: The company is actively marketing in the US to attract more institutional investors and family offices.
• Validation of Project and Team: The strategic investment from Centara and the significant stake held by Alamos Gold are seen as validation of the project and the team.
• Young Geological Team: Dryden Gold prides itself on having one of the youngest geological teams in the industry, with a focus on empowering young geologists, particularly women, to innovate and build.

Future Outlook for Dryden Gold:

• Fully Funded: The company is fully funded to continue drilling well into the next year.
• Warrant Exercise: 38 million warrants are in the money, which, if exercised, would add approximately $13 million to the treasury without further dilution.
• News Flow: A significant amount of news flow is expected from ongoing drilling programs and pending assay results.

Conclusion

The overarching sentiment is that the gold market is experiencing a secular shift, driven by a confluence of geopolitical, economic, and technological factors. This trend is expected to continue for the foreseeable future, with gold prices likely to remain strong. Dryden Gold is positioned to benefit from this environment, with a robust exploration program, a strong shareholder base, and promising early-stage discoveries that suggest significant upside potential. The company's focus on high-grade mineralization and district-scale exploration, coupled with the emerging trends in tokenization and institutional adoption of gold, paints a positive picture for investors in the commodity sector.