Why Metals War With China Is Just Getting Started...

Goldfix Market Rundown - February 23, 2024

Key Concepts: Critical Minerals Price Floors, Newmont Earnings, Tether Gold Dividends, Market Volatility, Dolly Varden Silver Drill Results, Federal Reserve Policy.

Market Overview (February 23, 2024):

The markets showed mixed signals on February 23rd. 10-year yields were unchanged, the dollar was up six, the S&P 500 was down three, the Nasdaq was down 55, and the VIX was up 41. Precious metals performed strongly: Gold increased by $14 to $2,151, Silver rose $1.67 to $80.21, Platinum gained $29, and Palladium increased by $25. WTI crude oil was down 53 cents, natural gas was flat, soybeans were down 2 cents, corn was up one, and weed was up 2.2. Bitcoin was trading around $67,400.

1. US Critical Minerals Price Floor System

The United States is developing a coordinated price floor system for critical minerals, marking a shift from simply participating in the market to actively managing prices. This initiative aims to reduce dependence on Chinese supply chains, particularly concerning national security. Under Secretary Jacob Hedberg described the system as “sophisticated and central to unlocking private investment,” with discussions ongoing with allied governments.

This policy is envisioned to operate through PAX Silica, a US-led alliance focused on sourcing and refining minerals outside of China. Vince Lansancy likened this to a “G7 OPEC,” suggesting a coordinated effort to control supply and influence pricing, similar to the Organization of the Petroleum Exporting Countries. The goal is to establish a scenario where obtaining certain minerals requires sourcing from the US and its allies. This represents a structural shift towards strategic commodity price management and a potential “weaponization of pricing power.”

2. Newmont Corporation Earnings Report (Q4 & FY 2025)

Newmont Corporation reported a fourth-quarter and full-year 2025 earnings beat, driven by higher realized gold prices and margin expansion across its “tier one asset base.” The company’s earnings exceeded estimates by more than 24%, with revenues also surpassing expectations. All-in sustaining costs (AISC) were lower than anticipated due to ongoing cost-reduction efforts.

However, 2026 guidance indicates a slight decrease in attributable production to around 5.26 million ounces, coupled with higher projected AISC due to asset sequencing, operational variability in Australia, and increased fiscal burdens related to elevated gold prices. Despite this, the earnings beat and cost control measures are considered bullish for the price of gold.

The key question now is how Newmont will deploy its increased profits. Potential options include raising or increasing dividends, initiating share buybacks, acquiring exploration companies, or investing in further drilling to expand gold reserves. Lansancy highlighted Newmont and firms like First Majestic as having effectively managed risks, reduced costs, and demonstrated prudent financial management.

3. Elemental’s Digital Dividend & Tether Gold

Elemental is now offering its clients dividends in gold, specifically Tether Gold. While considered a relatively small development in isolation, Lansancy emphasized the broader implications of Tether offering gold as a dividend. He drew a parallel to the emergence of money markets, suggesting this could revolutionize money markets by allowing individuals to hold dividends in gold, mirroring China’s allowance of gold ownership for its citizens.

He acknowledged the potential issues with blockchain technology but believes it will ultimately create a new type of money market, benefiting “stackers” (gold investors). This represents a westernized, blockchain-based alternative to direct gold ownership.

4. Market Analysis & Volatility

Recent market activity has shown a pattern of afternoon dips followed by recoveries, potentially linked to Federal Reserve data releases. The Fed minutes released on Wednesday surprised the market by openly discussing potential rate hikes, leading to initial sell-offs. However, these dips have been aggressively bought, suggesting the market is interpreting every data point as a potential opportunity, regardless of the data’s direction. If inflation is high, the Fed won't tighten, and if inflation is low, the Fed will ease.

Silver has shown resilience, rebounding from a 35-40% drop and establishing a base above $70. The current volatility is seen as a healthy consolidation after a significant retracement, with the market currently trading in a smaller range.

5. Dolly Varden Silver Drill Results

Dolly Varden Silver recently released drill results from its Home Stake deposit, including intercepts of 4.66 g/ton gold over 48 meters and 52.15 g/ton gold and 306 g/ton silver over 1.01 meters. CEO Shan Kung highlighted the discovery of a “bend” in the ore body, where consistent high-grade mineralization is being found.

The results demonstrate a 200% increase over the gram-meter basis economic geologists look for, confirming significant expansion potential and a very high-grade system. The company has significantly increased its silver control over the past six years, benefiting from higher silver prices.

Notable Quotes:

• “Price floors are largely dismissed as a protectionist thing, but they’re actually an ability for a nation to weaponize its pricing power, which is what we’re going to do.” – Vince Lansancy
• “It's going to be the western version of China allowing people to own gold. It'll be blockchain, which has its own particular set of problems. But if you're a stacker, don't worry about it. It's going to make you money.” – Vince Lansancy
• “The results that we put out were on a gram meter basis like 200 gram meters uh on on a gold basis which is two times what you you want to see. So it's 200% greater than you know economic geologists want to see to say hey this this this is a this is a discovery this is economic.” – Shan Kung, CEO of Dolly Varden Silver

Technical Terms:

• AISC (All-in Sustaining Costs): The total expenses associated with producing an ounce of gold, including operating costs, capital expenditures, and exploration costs.
• Tier One Asset Base: High-quality, long-life, low-cost gold mines.
• PAX Silica: A US-led alliance coordinating non-Chinese sourcing and refining of critical minerals.
• Gram Meter: A unit used in mining to measure the concentration of precious metals over a given distance.
• VIX: The CBOE Volatility Index, a measure of market expectations of near-term volatility conveyed by S&P 500 index option pricing.
• Stablecoin: A cryptocurrency designed to maintain a stable value relative to a reference asset, such as the US dollar or gold.

Logical Connections:

The report connects the geopolitical strategy of securing critical mineral supply chains (US price floor system) to the financial performance of mining companies like Newmont. The discussion of Tether Gold highlights the evolving landscape of digital assets and their potential impact on precious metals investment. Market volatility is presented as a response to economic data and Federal Reserve policy, while Dolly Varden’s drill results demonstrate positive developments within the silver mining sector.

Conclusion:

The Goldfix Market Rundown on February 23, 2024, highlighted a significant shift in US policy towards strategic commodity price management, positive earnings from Newmont, the emergence of gold-backed digital dividends, and continued volatility in the precious metals markets. The key takeaway is that the landscape for critical minerals and precious metals is evolving rapidly, driven by geopolitical factors, technological innovation, and market dynamics. Investors should closely monitor these developments and consider the potential implications for their portfolios.