Erik Wetterling – The Alpha-Driven Explorers Have Been More Resilient In This PM Sector Correction

Erik Wetterling, Founder and Editor of The Hedgeless Horseman website, joins me for a candid discussion to review how different stages of the #preciousmetals stocks are responding to the outsized corrections today and at the end of last week in #gold and #silver prices.

We start off noting the deeper pullbacks are occurring in the #producers due to their tighter correlation with PM prices. These stocks had attracted a lot of attention from momentum investors, that often were piling in without much thought as to the specific fundamentals or longer-term investing case for these companies. In contrast, the alpha-driven gold or silver #explorers are much more driven by newsflow, and so the metals prices are less germane. As a result, they’ve actually been more resilient to this sector correction, and were some of the only stocks in the green on a turbulent day in a sea of red. Erik points out though, that they also didn’t have as much upside torque as the metals prices were climbing, because again they are driven by their own micro catalysts and fundamentals. Erik is becoming more animated by the second wave of the Lassonde Curve, where the #developers have the leverage and optionality to rising metals prices, but there remains a large delta in where the ounces in the ground are being valued versus the margins that the producers are making for each ounce of gold or silver they pull out of the ground and process.