'They tend to go in tandem, gold goes first, silver goes second': Burrows

Key Concepts

• Precious Metals Bull Market: A prolonged period of rising prices for gold and silver.
• Parabolic Move: A rapid and unsustainable price increase, often indicative of a potential correction.
• Short Squeeze: A situation where a heavily shorted asset experiences a rapid price increase, forcing short sellers to cover their positions, further driving up the price.
• Senior vs. Junior Producers: Senior producers are established, larger mining companies, while junior producers are smaller, more speculative companies.
• Cyclical Stocks: Stocks whose performance is closely tied to the economic cycle.
• US Dollar Strength/Weakness: The value of the US dollar relative to other currencies, impacting international investment flows.
• Repatriation of Capital: The return of funds to a home country.
• Material Sector: Companies involved in the production of raw materials like metals and minerals.
• Sticky Bond Yields: Long-term bond yields remaining relatively stable despite changes in short-term rates, potentially signaling inflation expectations.

Precious Metals & Market Outlook – David Burroughs (Barometer Capital Management)

Precious Metals Performance & Future Projections

David Burroughs, CEO and CIO of Barometer Capital Management, discussed the recent surge in precious metal prices, particularly gold approaching $5,100 USD per ounce and silver’s significant gains. He noted that the rally in both metals began almost two years ago, but is now receiving increased media attention. Historically, precious metals bull markets have lasted eight to nine years, especially when they outperform indices like the S&P 500.

However, Burroughs cautioned that silver’s price movement is becoming “a little bit parabolic” and “gappy,” indicating a potential short squeeze. He highlighted that silver is currently trading around 300% above its 200-week moving average, exceeding the 230-240% peak seen during the 1970s bull market. This suggests the market is stretched and a 25-30% correction is possible. Despite this, he believes the long-term outlook for both gold and silver remains positive, with a bull market likely to have “two or three legs.” He emphasized that relatively few investors are currently positioned in precious metals.

Gold vs. Silver Correction Potential

Burroughs anticipates that gold will likely correct alongside silver, as they typically move in tandem, with gold leading. He believes the speculation surrounding silver is higher, leading to a more pronounced short squeeze. He recommends focusing on “senior producers” (established mining companies) and potentially taking profits on “junior producers” (smaller, more speculative companies) due to the higher risk of a 40-50% pullback in the latter during a reversal. He stated, “If the seniors pull back 25 or 30, you know, the the juniors could pull back 40 or 50, you know, and and I'm not sure many people have a stomach for that.”

Earnings Analysis: Metro Inc.

Regarding recent earnings reports, Burroughs discussed Metro Inc.’s loss and attributed it to a “challenging environment” for 2025. He noted that Metro is less consistent than Loblaws and operates within a consumer staples sector that hasn’t been a market leader. He explained that the market is currently rotating towards “economically sensitive sectors” (cyclical stocks), leaving defensive sectors like consumer staples with limited tailwinds.

The US Dollar & International Investment Flows

Burroughs identified the US dollar as the “biggest story” in the market. He explained that for the past 15 years, international investors have consistently bought dollars and US assets (Treasury bonds and stocks) due to the dollar’s strength. However, the dollar is now weakening against major currencies, breaking through support levels. This shift is prompting investors to reconsider their US exposure and potentially “repatriate some to home markets.” He noted that international stocks are cheaper and less owned than US stocks, presenting a significant opportunity. He stated, “after 15 years of doing that, they're probably maximum long US stocks.”

Investment Recommendations: International Stocks & Materials Sector

Based on these trends, Burroughs recommends focusing on international stocks, anticipating they will outperform US stocks for the next several years. He highlighted the material sector as particularly attractive, given elevated inflation risk, as evidenced by “sticky” long-term bond yields and declining short-term rates. He specifically recommended Riotinto (RIO), a diversified commodities producer with a history of paying special dividends, benefiting from rising prices of copper, nickel, gold, and silver. He believes these companies will experience strong dividend growth due to their robust international assets.

Logical Connections & Synthesis

The discussion logically connects the performance of precious metals to broader macroeconomic trends, particularly the weakening US dollar and the resulting shift in international investment flows. The analysis moves from specific observations about silver’s parabolic move to a broader assessment of the potential for correction in both gold and silver, then expands to the performance of specific companies (Metro) and ultimately culminates in a strategic recommendation to invest in international stocks and the materials sector.

Burroughs’ central argument is that a significant structural shift is underway, driven by the changing value of the US dollar and the relative attractiveness of international markets. He advocates for proactive positioning to capitalize on these changes, emphasizing the potential for outperformance in international stocks and commodity-related companies. The key takeaway is that while short-term corrections are possible, the long-term outlook for precious metals and international markets remains positive, driven by fundamental economic forces.