Spotlight Weekly – PDAC

I’ve just returned from the giant Prospectors and Developers Association of Canada (PDAC) conference in Toronto, Ontario

It’s the world’s largest mining conference and old home week for me.

To be honest, I went this year with low expectations. The rumors leading up to the show said it would be low energy. More like a wake than a conference. 

However, something crazy happened in the lead up to the conference this month. The gold price went on a multi-day run. It broke its all-time high price on consecutive days. 

On Sunday, as we waited in the lobby for the doors to open, there was a buzz in the crowd. It was more energy than I’d seen in years. This kind of move in gold happens periodically. But it usually indicates some economic disturbance heading our way.

You see, physical gold is an insurance policy. It’s a way to get out of paper currencies like dollars or euros. Gold is an excellent hedge against economic risks, particularly bank troubles. And that’s what probably sent gold soaring.

Commercial real estate is a problem for some banks, particularly the New York Community Bank (NYCB). NYCB lends money to apartment buildings and offices in New York. A series of issues dramatically reduced the revenue those building generated. Ratings firms downgraded the safety of NYCB’s bonds to “junk”. 

That made it nearly impossible for the company to raise capital. It teetered on the brink of bankruptcy until three high-profile funds: Liberty Strategic Capital, Hudson Bay Capital, and Reverence Capital Partners bailed it out. 

The gold price chart hints that the problem may be wider spread than just NYCB. The bad news is that bank trouble could hurt the overall market. We don’t see signs of that yet. We’ll have to wait and see.

But for now, the gold price has commodity investors looking up. 

For the good,
Matt Badiali