Trump, Gold, and the Rise of Project Generators: Navigating the New Market Reality

Source: Brian Leni 12/05/2024

Brian Leni of Junior Stock Review shares his thoughts on where he believes the market is headed under a Trump presidency.

The past is usually a prologue to the future. If you were to ask a banker about an individual’s ability to attain a mortgage, they would immediately ask for the prior two years of earnings and credit score.

Probability suggests that a person’s last two years of earnings and their credit score have a high probability of dictating their future financial success and ability to pay their bills.

Remember that it’s just a probability, though, not a sure thing — there are outliers.

In terms of Trump’s win, the market gave a resounding thumbs up and optimism towards the future. Essentially, things are going to change for the better. With the renewed sense of optimism, the gold price was sent into a tailspin. The fear factor built into the price evaporated quite quickly.

As such, the leveraged equities followed in a dramatic fashion. As a seasoned resource sector investor, this is nothing new. In fact, besides the optimism surrounding Trump’s win, I think it could be argued that a deeper correction was needed.

Healthy markets don’t go straight up.

So, what’s my point?

The market’s optimism is understandable, but I think it will be short-lived. The reality is that the U.S. is in a dire situation that requires HUGE spending cuts and, unfortunately, some fat to be trimmed in the general market. Spending cuts have never really been part of any politicians’ game plans — Democratic or Republican party.

Trump’s last four years in power were not ones of fiscal conservatism. He didn’t refrain from spending and he disrupted markets with his obsession with tariffs. In my view, his past is a prologue to the upcoming four years.

Trump will likely calm U.S. military action across the globe; he will undoubtedly start economic or cold wars instead. The thing is, the world economy has changed — even compared to four years ago.

It’s a different playing field.

The BRICS+ or Global South are on the rise and are a realistic threat to the U.S. economy’s hegemony. Throughout history, we’ve seen that global economic power fluctuates between East and West cyclically. From what I can see, it’s unavoidable.

Ultimately, I think the market’s optimism will be brought back to Earth given what’s likely ahead, and the gold price will retain its fear premium. In the meantime, the gold price is still strong, above US$2500/oz. I don’t see that changing.

While the U.S. is a big part of the gold price equation, it certainly isn’t the basis to buy gold or not to buy gold. For the past few years, Central Banks around the world have been buying gold for two reasons;

First, they want to own or transact in money that isn’t simultaneously someone else’s liability.

By buying, owning, and transacting in USD, Euros, or Renminbi, a central bank assumes the liabilities and economic policy of the currency country.

In the USD case, mounting debt is a real issue.

By buying gold, which is a recognized Tier #1 asset, you are holding money that doesn’t come with the baggage. This is a big deal and a reason I’m confident Central Banks are far from being done buying it.

Secondly, given the U.S. sanctions on Russia after the commencement of the Ukraine/Russia conflict, I think most other countries realized they could be next, especially with a President like Trump, whose modus operandi appears to be tied to threatening tariffs on all of those countries that don’t bow to his wishes.

This is a potential issue. It’s not a sanction per se but a threat to the normal flow of business.

Lastly, when it comes to government spending, U.S. or any other country in this world, there are far too few that are fiscally responsible with the money that they spend. Most politicians pay their way out of problems, which are never solved, just shifted more to the future. I don’t see this changing.

In my view, the gold price has a much higher ceiling to achieve before this fourth turning sorts itself out.

I remain very bullish on gold moving forward and see every reason to continue to add to existing positions or buy new ones. The question is, what to buy?

Let me tell you about project generators and why I think they represent such a great opportunity moving forward.

Project Generation

Mineral exploration is sexy. The best stories within the mining business are all based around exploration – the hunt and discovery of the next big deposit.

The issue that arises very quickly is the risk involved with exploration. There are just too many ways for investors to lose money, outside of the fact that economic deposits are really hard to find.

So, how do you gain the huge upside of discovery while protecting your downside risk?

In my view, it’s by speculating in project generation companies.

As their name suggests, project generators use their technical acumen to put together high-potential projects and joint venture them to senior mining companies or other juniors.

The thing is, not all project generators are created equal. There are just some management teams that stand out from the rest.

In my next article, I will cover a project generator that I think is on the cusp of garnering more market attention, given its intrinsic value and 2025 catalysts.

Stay tuned for that.

Until next time.

If you would like to hear more from Brian Leni, please see Junior Stock Review. You can get 20% off when signing up for the newsletter by using the coupon code: STREETWISE.

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Source: https://www.streetwisereports.com/article/2024/12/05/trump-gold-and-the-rise-of-project-generators-navigating-the-new-market-reality.html