Rare Gold Stock Opportunity, Platinum Profits, & Mining Insights with Portfolio Manager Sam Broom

Key Concepts

• Bottom-up Investing: Focusing on individual company fundamentals rather than broad macroeconomic trends.
• Leverage & Derivatives: The use of borrowed capital and financial instruments to amplify returns (and risks) in financial markets.
• Flash Crash: A rapid and significant decline in asset prices over a short period, often triggered by automated trading and liquidity issues.
• NAV (Net Asset Value): The per-share value of an investment fund, calculated as the total assets minus liabilities.
• Capex (Capital Expenditure): Funds used by a company to acquire, upgrade, and maintain physical assets.
• PGEs (Platinum Group Elements): A group of six metallic elements – platinum, palladium, rhodium, ruthenium, iridium, and osmium – used in various industrial applications.
• Volatility: The degree of variation of a trading price series over time.
• Bull Market Sentiment: The overall attitude of investors towards a specific security or market.

Market Volatility & Recent Crash (Friday’s Event)

The discussion began with an analysis of the significant market crash experienced on a recent Friday. Sam Broom acknowledged the unexpected magnitude of the decline, noting it hadn’t been widely predicted despite expectations of a correction. He attributed the crash to a confluence of factors: abrupt halts of inflows into commodity funds in China (specifically citing a UBS silver fund trading at a 60% premium to NAV, indicating excessive speculation), and the surprising nomination of Kevin Walsh to the Federal Reserve, perceived as a more hawkish figure. This combination impacted an already overleveraged market.

Broom highlighted the increasing role of financial derivatives and leverage in modern markets, referencing Mike Green’s work on inherent “no bid risk” due to ETF complexes and leveraged ETFs. He anticipates more “flash crashes” in various markets, not just commodities, as a result of these structural changes. He emphasized the importance of maintaining composure and knowing one’s investments during such events, suggesting that significant drops can present buying opportunities for quality assets. Diversification, including exposure to energy, was also recommended as a buffer against volatility.

2025 Client Psychology & Bull Market Dynamics

Broom observed a surprisingly cautious sentiment among his clients in 2025, despite a strong year for portfolios. Unlike previous bull markets (2020, 2021, 2016), there was a lack of euphoria and excessive leverage-seeking behavior. Clients were more focused on protecting gains than aggressively pursuing further returns.

This cautiousness was reflected in a lack of excessive capital expenditure (capex) within the commodity industry. Companies were prioritizing profitability, debt reduction, and shareholder returns over large-scale, potentially risky growth projects. Broom views this as a positive sign, indicating a healthy bull market phase. He believes the market is transitioning from the third to the fourth inning, where broader interest begins to emerge.

Identifying the Top of a Gold Cycle

Broom believes identifying the top of a gold cycle is complex, primarily due to the limited impact of supply-side factors on gold prices. Demand, particularly from central banks, is the dominant driver. He suggests that monitoring central bank activity is crucial. He anticipates continued gold accumulation by central banks due to geopolitical factors and a shift away from a US-centric global order.

However, he also highlighted key indicators of potential overexuberance: excessive capital expenditure by mining companies on questionable projects, management compensation structures incentivizing growth over profitability, and large, illogical mergers and acquisitions. He noted that positive inflows into the GDX (the largest gold mining ETF) would be a significant signal that the cycle hasn’t topped. The fact that GDX experienced outflows despite a strong year for gold was considered unusual and a positive sign.

Investment Strategy: Top-Down vs. Bottom-Up

Broom’s investment approach combines top-down macroeconomic analysis with bottom-up company-specific research. He emphasizes the need for at least a neutral gold price outlook before investing in precious metals mining equities. However, he believes a bottom-up approach focusing on well-managed, small to mid-cap producers with visible growth potential is more effective.

He identified a “sweet spot” in this segment, noting the scarcity of companies meeting these criteria. He prioritizes quality and conviction, advocating for adding to positions in strong companies during market downturns. He currently favors companies with internal growth projects nearing development or construction.

Platinum & Palladium – Opportunities & Risks

Broom discussed his recent success with platinum, having taken a significant position in the physical metal. He acknowledged taking profits as the price increased substantially. He expressed less enthusiasm for palladium, citing increased supply and a substitution effect where platinum is replacing palladium in certain applications. He believes the platinum market is more balanced and presents a potentially attractive opportunity, particularly given the strategic importance of the metal and limited non-Chinese/Russian supply sources. He highlighted the potential for increased investment demand in platinum.

He contrasted the PGE space with silver, noting the greater number of viable silver mining equities available.

Niche Metal Opportunities

Broom identified several niche metals on his radar, including nickel, vanadium, indium, and selenium. He highlighted the potential for significant price movements in these markets due to supply disruptions, strategic importance, and limited liquidity. He specifically mentioned the recent quota cuts in Indonesia impacting nickel and the potential for vanadium to benefit from a recovery in steel demand. He emphasized the importance of specialized knowledge and internal expertise for navigating these less-followed markets.

Energy Sector Exposure

Broom’s exposure to the energy sector is driven by a contrarian approach, focusing on undervalued assets that have been significantly beaten down. He favors US-centric royalty and land companies in the Permian Basin, appreciating their low capital expenditure requirements and strong returns on capital. He also identified opportunities in Latin American energy companies, anticipating a rebound in oil prices and a potential influx of capital into emerging markets.

Biggest Risk in 2026

Broom identified the biggest risk for resource investors in 2026 as emotional trading and overreaction to market volatility. He cautioned against panic selling during downturns and chasing returns during rallies, emphasizing the importance of maintaining a disciplined and long-term investment strategy. He noted the high volatility environment and the potential for continued whipsaws, requiring investors to remain calm and focused on their core holdings.

Conclusion

Sam Broom’s insights emphasize a disciplined, bottom-up investment approach focused on quality companies with strong fundamentals. He advocates for a long-term perspective, diversification, and a cautious approach to market volatility. He believes the current bull market remains relatively healthy, but warns against complacency and the risks associated with excessive speculation. His identification of niche metal opportunities and contrarian energy sector investments highlights the potential for alpha generation in less-followed segments of the resource market.