Can you share more about your background and role at Jupiter Asset Management?
I’m lead PM of the Jupiter Gold & Silver Fund. We are a team of three and we all work closely doing meetings, due diligence, portfolio management, and client relationship work. The fund is nine years old and we focus on bullion as a form of cash/portfolio foundations allied with gold and silver mining companies that operate in the Americas and Australia. The fund has a strong weighting towards silver as we like the beta and additional optionality that silver offers over and above gold.
Gold prices are soaring amid US President Trump’s new tariffs. Can you comment on this and the other key forces on the market right now? What should investors be aware of in this volatile climate?
The key force in gold at the moment is futures buying, not physical, and certainly not central banks which are but one component of the physical market which is dwarfed by paper or derivative gold daily turnover. Sure, tariffs at the margin are an explanation for the flood of physical metals into the US, but the price action that started in April last year was catalyzed by a technical breakout that saw CTA/hedge fund money come in and bid gold in the futures market.
The long-only investment world is yet to join the party. The key narrative of the moment is surrounding the stresses in the London spot market which has transitioned from ‘on the spot’ to an up to two month delay for delivery. This reveals the poorly understood truth of the London gold market which is that it is a fractional reserve system very much like the rest of the banking system. The gold market has limited real reserve cover, and this is starting to become obvious. Investors need to carefully consider what vehicles they use for exposure and whether they are either pure credit risk or if they are attached in a financial sense to that levered paper gold market.
With prices reaching all-time highs of late, let’s look at your outlook for gold. What are your forecasts for pricing, supply, and demand as we move further into 2025?
Gold never moves, it just accounts for the cash markets view of your local currency held forwards. This is why central banks have large gold holdings. The gold ‘price’ is an inverted measurement. As such, I have no target save to say that sterling, dollars, and euros will all continue to depreciate versus the true risk-free form of money – gold bullion/coins. I am more positive on silver prices going forwards and see the all-time nominal highs of US$50/oz as a realistic medium term target.
Looking at the junior end of the market, what does it take for a junior gold company to attract investment?
Principally what all mining equities need, big or small, is flow from the wider equity market space. Generalist investors looking for the next big thing will be where the eventual re-rating will come from.These are equities after all, so it’s always about the next marginal new investor. As such I think we need a rotation out of the seemingly never-ending black hole of tech and leveraged tech before we see meaningful new investment into mining equities. This is as true of a major producer as it is a junior. This should happen with a tech deleveraging event as the mining equities are showing excellent and indeed improving on the ground operating performance.
Who is investing in this end of the market and are there any investment patterns you are seeing?
The answer to this is almost no one. The mining equity world is dry as a bone despite record and widening operating margins, and free cash flow metrics. As mentioned above, momentum is everything in equities and this sector is yet to have its moment in the sun. We do feel confident that it is coming, however at some point over the next 12 months or so.
