Nick Hodge: Copper is My Top 2026 Pick, but Gold, Silver Run Not Done

Key Concepts

• Precious Metals Bull Market: A sustained period of rising prices for gold and silver.
• Industrial Metals: Metals primarily used in manufacturing and construction, such as copper and nickel.
• Energy Metals: Metals crucial for energy production and storage, like uranium.
• Fiat Currency: Government-issued currency not backed by a physical commodity like gold.
• Counterparty Risk: The risk that the other party in a transaction will default on their contractual obligations.
• Central Bank Buying: The practice of central banks purchasing gold to diversify their reserves.
• Resource Nationalism: Government policies aimed at controlling or limiting foreign ownership of natural resources.
• Battery Passport: A system for tracking the origin and environmental impact of battery components.
• Critical Minerals: Minerals deemed essential for economic and national security, often with supply chain vulnerabilities.
• Fast 41 Permitting: An expedited permitting process in the US for energy and mineral projects.
• Metallurgy: The science and technology of metals.
• Mineralogy: The scientific study of minerals.
• Tailings Reprocessing: Extracting valuable minerals from mine waste.

Sentiment and Market Atmosphere

The New Orleans Investment Conference is experiencing a buoyant atmosphere with increased attendance and a noticeable influx of a younger demographic, which is seen as positive for the precious metals sector. This suggests a growing interest in precious metals, potentially influenced by a broader understanding of economic concepts like fiat currency and counterparty risk, possibly stemming from experiences in the cryptocurrency market. Nick Hodge notes that the crypto market has "train[ed] soldiers for the gold army," implying that crypto investors are now better equipped to understand the value proposition of gold.

Gold and Silver Market Cycle and Price Action

The discussion places the current market in the middle of a precious metals bull market that has been ongoing for a couple of years. Despite a current pullback in gold prices, the underlying fundamentals supporting the bull market, such as continued Asian and central bank buying, and ongoing US debt accumulation, remain strong.

• Gold: While acknowledging a current pullback, Hodge suggests that gold could potentially fall to $3,600 and still remain within a bull market. A break below this level would raise questions about the bull market's continuation.
• Silver: Silver is described as the "erratic stepchild" to gold, with the expectation that it will experience a more violent upward move as the bull market progresses. It is noted that silver "hasn't had its day yet," indicating further upside potential. Short-term support for silver is around $46, and its holding is crucial.
• General Market Observation: The sentiment is that "trees don't grow to the sky," implying that pullbacks and sideways consolidation are healthy for digesting gains and preparing for the next upward move. The expectation is for higher precious metals prices over the next couple of years due to global debt burdens and central bank policies.

Investment Strategy During Pullbacks

Hodge advocates for a strategy of "pruning and planting" during market pullbacks. This involves taking some profits from assets that have performed exceptionally well and redeploying those profits into sectors that have not yet seen significant gains or are poised for future growth.

• Profit Taking: Hodge's firm reduced its exposure to precious metals equities (e.g., GLD, GDXJ, silver ETFs) from 40% to approximately 30% in early October.
• Redeployment: Profits were redeployed into ETFs focused on industrial and base metals, including steel, metallurgical coal, copper, and nickel. This strategy aims to capitalize on ongoing inflation and rotate profits into underperforming sectors.
• Energy Metals: Energy metals, particularly uranium, are also highlighted as a sector with significant potential.

Battery Passports and Supply Chain Transparency

The concept of battery passports remains a key theme, emphasizing the need for greater transparency and tracking in the mining industry, which is described as "antiquated."

• Minehub: This company is presented as a leader in providing tracking solutions for battery components (manganese, lithium, cobalt) and their associated emissions profiles. Minehub's technology extends beyond batteries to track iron ore, copper, and aluminum.
• Partnerships: Minehub has partnered with Codelco (a major copper miner) and wire makers. They also partnered with Abacks, a company that launched a new physical-backed commodity exchange for lithium and gold, with plans to expand to other commodities. Abacks has invested significantly in Minehub, which has seen its shares increase by 300% since the previous discussion.
• Benefits of Transparency: Increased transparency through platforms like Minehub is seen as crucial for reducing the opacity of the mining industry, which hinders access to fast and cheap capital. It removes the "liar" from the equation, as Mark Twain famously described the industry.
• Flywheel Effect: Minehub's model creates a "flywheel effect" where onboarding a major company like Codelco brings in its extensive network of suppliers and partners as potential clients.

Critical Minerals and Government Support

Governments are increasingly providing support for critical minerals, driven by a desire for supply chain security and reduced reliance on foreign processing.

• Fast 41 Permitting: This expedited permitting process is a significant government initiative to accelerate energy and mineral production. Companies like MP Materials and Lithium Americas have benefited from this process, with the US government investing directly in some companies and providing price floors.
• Antimony Example: The case of Midas Gold (now Perpetua) highlights the long lead times for project approvals. This project, which is likely the only US source of antimony, took over a decade to receive permitting, but is now fast-tracked with government support, including funding from the Department of Defense.
• Investment Theme: The government's increased involvement, including capital deployment and red tape reduction, makes critical minerals a "very real investment theme." Stocks in this sector have seen significant gains.
• Identifying Opportunities: Investors are advised to look for companies with projects that can qualify for Fast 41 permitting. However, the exact criteria for obtaining this designation remain somewhat unclear, with success often attributed to proactive engagement with government officials and industry organizations.
• Critical Metals Lists: Investors should focus on metals deemed critical by organizations like the US Geological Society or the Department of Defense.

Identifying Future Commodities

Hodge explains that commodities don't emerge "out of nowhere"; rather, North America has historically outsourced their production, leading to a lack of awareness.

• Historical Outsourcing: The US and Canada exported production of metals like gallium, indium, terbium, dysprosium, yttrium, and antimony, leading to their omission from common lexicons.
• Critical Metals Lists: Consulting the US government's critical metals list is a key strategy. The recent addition of copper to this list signifies its growing importance.
• Rare Earths: While widely discussed, the nuances of rare earths (light vs. heavy) are often overlooked. MP Materials, for example, is not yet producing the heavy rare earths crucial for defense applications. Investors should inquire about a company's focus on these specific types of rare earths.
• Metallurgy and Mineralogy: Understanding the geological and metallurgical aspects of a mineral deposit is crucial. Some companies may promote assets with poor metallurgy or mineralogy, making it difficult to extract the desired metals. Investors should research concepts like clay deposits for lithium and monazite sand deposits for rare earths.

Best Performing Asset Predictions (2026)

Hodge identifies copper and uranium as potential top performers by 2026.

• Copper:
  • Drivers: Grid buildout, AI and data center expansion (requiring significant copper for infrastructure), and a worsening supply-demand imbalance.
  • Price Action: Despite a temporary tariff imposition and subsequent reversal by the Trump administration, copper is expected to see higher prices.
• Uranium: While not elaborated on in detail, uranium is consistently mentioned as a strong contender.

Preferred Investment Avenues

Hodge outlines two primary approaches to investing:

• Macro Letter: This approach involves investing in copper ETFs that hold large producers like BHP and FCX. It also includes investing in individual companies like Ivanhoe, which may offer more granular exposure, even if facing temporary operational challenges.
• Speculative Letter: This focuses on investing in copper explorers and developers in good jurisdictions, particularly those that could supply the Western Hemisphere. The US government's willingness to invest in projects in Canada, Mexico, and South America is noted.

Conclusion and Final Thoughts

Hodge reiterates that critical metals have a significant run ahead of them. He views a trade truce with China as a temporary measure, and the US still faces a long road to achieve even relative independence from Chinese processing dominance. The US government's serious commitment, evidenced by capital deployment and discussions by officials like the Treasury Secretary on rare earths, signals a genuine shift. The critical metals sector is poised for substantial growth as the US prioritizes domestic production and supply chain resilience.