Silver and the miners lead gold into another breakout

( Kitco, Jan. 31st, 2025) – Geopolitical risks, untenable sovereign debt, and structural transitions in conflicting central bank monetary and fiscal policies has gold priced in all major currencies breaking out to fresh all-time highs as the first month of the year ends Friday.

Following an all-time weekly high close last week, Gold Futures have moved to likely score the highest monthly closing ever later today. With April Gold firmly above $2800, London bullion market players are racing to borrow gold from central banks, following a surge in gold deliveries to the U.S on speculation of potential import tariffs there.

Although incoming President Donald Trump has not mentioned precious metals in his tariff plans, the risk has been enough to boost gold deliveries to the Comex in New York as part of the market has sought to hedge its positions on the U.S. Comex exchange.

Speculators are seeking to benefit from a jump in the price premium of Comex futures over London spot prices. Both gold and silver futures are being priced significantly higher than spot, pushing effective gold lease rates through the roof.

Meanwhile, the first central bank meetings of 2025 suggest this will be a year in which policymakers go their own way as economic paths diverge.

The U.S. Federal Reserve held interest rates steady, while the euro zone and Canada cut this week. The Swiss National Bank has been at the forefront of monetary easing and, in 2024, took its benchmark rate from 1.75% down to 0.5%.

The outlier has been Japan, who’s central bank recently raised interest rates for the first time in six years, ending an unprecedented era of zero percent interest rates.

After demanding that banks globally cut interest rates last week, President Donald Trump was quick to criticize the Fed’s decision, saying the central bank was responsible for the inflation surge in 2022.

“If the Fed had spent less time on [diversity-equity-inclusion], gender ideology, ‘green’ energy, and fake climate change, Inflation would never have been a problem,” he said on his Truth Social Platform.

This week’s bullion breakout is the result of these conflicting monetary policies as Trump threatens the Fed to join other major central banks in lowering interest rates further, combined with an untenable sovereign debt crisis that was discussed at length in this space last week.

According to the Institute of International Finance, total global debt has peaked to 326% of global GDP, adding an additional $12 trillion of debt in the last three quarters of 2024. This figure surpasses what the world experienced amid the pandemic, and is expected to exponentially rise as governments continue to borrow with no intention of repayment.

With Thursday’s announcement of U.S. Q4 GDP increasing at a lower than expected 2.3% rate, we can also add stagflation fears to the bullish gold cocktail after the just released U.S. PCE Index rose 0.3% last month, to mark the biggest gain since last April.

This increase in the Fed’s preferred measure of inflation over the past year moved up to a seven-month high of 2.6% from 2.4% in the prior month.

Along with the expected chaos and volatility associated with another four years of an unpredictable President in Donald Trump’s second term, the gold price has now retreated from the eye of a recent perfect storm and move closer to $3000 per ounce.

This perfect gold storm began with an historic 13-year cup & handle breakout above $2100 at the end of Q1 2024. Bullion is now poised to attack the initial target of the breakout at $3000, following a nearly 10% correction and a healthy 3-month consolidation from an October peak at $2800 that ended this week.

Leading up to Thursday’s gold breakout, both silver and the miners began to lead the gold price higher just ahead of the highly anticipated FOMC policy meeting mid-week.

Both the miners and silver, which had been lagging the gold price over the past 3-months, had already broken out of technically bullish falling wedge patterns ahead of Thursday’s bullion breakout.

With gold making 40 new all-time highs in 2024, it stands to reason that 2025 could be the year silver finally makes its run following 4.5 years of consolidation, mostly below $30, to create a strong base.

A monthly close above key resistance at $33 later today would signal an upside breakout in silver. Follow-through above $35 in February or March would open the door to $40, and a possible test of the all-time high at $50 later this year.

A monthly close later today above key multi-year resistance at $40 in GDX and $50 in GDXJ would promote a return to the October highs at $43 and $54, respectively. This in turn would create a 3-month handle for the 4-year miner ETF cups already in place.

Further out, strong closes above $43 in GDX and $54 in GDXJ with convincing volume would target $60 and $85, respectively, following a potential cup & handle breakout.

The key ingredient missing from this phase of the gold bull market has been Western retail investment demand, especially from the United States, as investors have been distracted by AI and crypto.

To begin the week, AI darling Nvidia (NVDA) experienced a half-trillion dollar-plus equity wipeout, which accounted for over half of the $1 trillion U.S. stock market loss on Monday. The after open market action in NVDA has been negative since October, signaling big money investors have been taking their outsized gains.

Nvidia’s market cap at still over $3 trillion, is about 10% of 2024 U.S. GDP. NVDA’s current valuation equates it to roughly 10% of the value of all American goods and services produced over 12 months.

In fact, the AI behemoth’s single-day loss of over US$500B is also US$100B more than the total market cap of the entire precious metals mining sector.

China’s DeepSeek has rewritten assumptions around the priced for perfection and overcrowded AI trade, which has provided opportunities for diversification.

Gold stocks have quietly been a standout sector this year, with the lackluster volume indicative of retail having yet to come into this beleaguered complex in size.

After just a 13% gain compared to gold’s 27% rise in 2024, the miners’ gains to begin 2025 have also begun to outpace the price of gold, with GDX up 16.25% in January to gold’s +7.75%.

Gold producer earnings season will kick off in earnest on February 20, when top gold miner Newmont Corp (NEM) posts its Q4 Earnings Announcement after the market close.

When this sector bellwether announced in its Q3 financial report in mid-October that all-in sustaining costs for gold rose to $1611/oz from $1426/oz a year ago, the surprise disappointment placed a peak in the mining sector 2-weeks ahead of the gold price stopping at $2802.

GDX proceeded to lose 23% into year-end, while the gold price corrected less than 10%. The miner drubbing in Q4 2024, in relation to much needed and healthy correction in gold, was enough for most investors to give up just in time for the miner bull market to commence in 2025.

With the gold price averaging around $200 higher in Q4, Newmont is already guiding for Q4 2024 costs ($1475/oz) to be $136 below Q3 2024. With many of its higher cost assets in-line to be sold, the company is likely to make its guidance for 2025, and even perhaps exceed it.

It goes without saying that as Newmont’s Q4 goes, so goes the mining sector. And after several other operational disappointments in 2024, this earnings season will be especially important.

With the Q4 gold price averaging around $200 higher than Q3 2024, while costs have mostly stabilized, the precious metals mining sector is poised to deliver a record quarter of free cash-flow generation and raise guidance early in the year.

In fact, the profitability outlook for the mining complex has never been better, and in many ways the sector has never been better positioned than it is with gold trading back at all-time highs. But at the same time, gold stocks have also never been more hated, and more under-owned by investors than they are today.

Considering the above, the beaten down and left for dead in 2024 mining sector is ripe for a 2025 mean reversion. At Junior Miner Junky, my subscribers and I are well prepared to set sail on a sea of opportunity for outsized gains after loading our highly leveraged junior portfolio boat with 20 quality small-cap gold and silver related stocks.

The Junior Miner Junky (JMJ) weekly newsletter is a one-stop shop for precious metals stock speculators. Along with providing detailed macro commentary and technical analysis for subscribers following the real-money JMJ junior portfolio, the letter also issues detailed company reports and occasional flash updates on highly anticipated press releases issued by juniors covered in the newsletter.

Posted by:

Jack Dempsey, President

401 Gold Consultants LLC

jdemp2003@gmail.com