Right now, the headlines are clear: wars are raging, inflation is creeping, and central banks are scrambling.
The world’s most seasoned investors are quietly moving their chips to the safest table in the casino.
And gold is winning hand after hand.
Geopolitical Quakes Fuel the Gold Rush…
Conflict in Israel and Ukraine has sent shockwaves through markets. Nervous investors are fleeing from volatile assets, looking for something—anything—that won’t lose value overnight.
At the same time, the U.S. Federal Reserve and European Central Bank are signaling monetary policy shifts, with interest rate cuts weakening confidence in traditional currencies.
The result? Gold, priced in U.S. dollars, has shattered records, hitting an astonishing 35 all-time highs this year.
Record high weekly, monthly and quarterly closes printed on Sept. 30, 2024.
Gold is doing what it does best: providing certainty in a world full of chaos. But this time, the story goes deeper than that.
The Perfect Storm for Gold
It’s not just about fear anymore.
Central banks aren’t just watching from the sidelines—they’re buying. And buying big.
Around the world, these institutions are snapping up gold, tightening supply and driving demand higher.
Meanwhile, ETFs are quietly rebalancing their portfolios, not dumping gold but consolidating it.
As you can see, the actual dollar amount held by investors is over $10B higher than the previous record set back in 2020 during the pandemic.
The message is clear: gold isn’t going anywhere—it’s entrenched.
Gold Miner ETFs – A Thing of the Past
Despite the big move in gold bullion, miner ETFs are taking it on the chin.
The two heavyweights, GDX and GDXJ, are showing the kind of underperformance that would make any investor cringe.
Dollar volume traded through these ETFs is half of what it was at the peak, with fund flows stagnating or even heading into negative territory.
- Yes, you heard that right: While gold hits new highs, the funds that are supposed to capture the upside are getting sold off.
It’s counterintuitive, but here’s where it gets interesting…
You’ll see in the chart below, volumes were regularly $40B+ per month. But now, volumes are lucky to hit $20B, while gold is hitting all time highs.
On the surface, it looks like miner ETFs are a broken asset class.
Fund Flows into the GDX and GDXJ have been stagnant for years.
And if you can believe it, fund flows into the GDX & GDXJ are negative on the year!
- KEY POINT: While gold is at all-time highs, there has been net selling of gold miner ETFs.
But here’s the twist—money isn’t fleeing the sector; it’s finding a new home.
Gold Miners: Broken or Just Shifting?
But if you dig deeper, you’ll see something different—money isn’t leaving the gold mining space; it’s moving to the big boys.
Large-cap gold stocks are seeing more volume and outperformance, not just versus the miner ETFs, but even against gold itself.
The reason? Large-cap miners have what ETFs don’t: cash flow, liquidity, and the leverage to make big moves.
- These companies are sitting on piles of capital, ready to scoop up smaller, undervalued competitors in safe, mining-friendly jurisdictions.
We’re already seeing acquisitions happen, and it’s only the beginning.
For the gold bugs and miner enthusiasts this is a good sign that volumes have been increasing.
And this has translated to outperformance of the large caps versus gold bullion and the GDX which is supposed to track large cap miners.
Follow the Money: Large Caps Are the Payoff Bet Right Now
It should come as no surprise that the large caps are beginning to outperform in this part of the gold bull market cycle.
If you want to know where the smart money is going, just look at the large caps.
They’re outperforming because they offer something no ETF can—a way to tap into rising gold prices, with the added kicker of significant liquidity and cash flow via the NYSE or Nasdaq.
A Buyout Frenzy?
I expect large-cap miners to keep acquiring undervalued companies, especially those in safe, mining-friendly regions.
With a focus on locking in growth assets, this rotation of expensive to cheap capital will be key in the next bull market.
As global uncertainties—like U.S. elections, Middle East tensions, and China’s economic instability—loom, the buyout spree is just getting started.
Subscribers and I are fresh off a nice win in Filo Mining Corp which is being acquired by BHP and Lundin Mining.
In my latest October report to subscribers just days ago, I outlined 2 new ideas that I think could be acquisition targets in this cycle.
Click here to get the 2 company names in Katusa’s Resource Opportunities.
Regards,
Marin Katusa
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