BRUCE TATTERS ,CEO, RED CLOUD SECURITIES INC.
Investor sentiment towards the junior resource markets improved dramatically at the beginning of 2023 for a couple of reasons. Firstly, and most significant to several industrial commodities, has been China re-opening after a prolonged lockdown in 2022. Many underestimated the significant weakness in many industrial commodities faced last year from a period of economic stagnation in China due to these COVID lockdowns. With this re-opening, so has the renewal of significant consumption from the largest commodity consuming country on the planet. Secondly, there was significant expectations, shared by this author, that we were nearing the end of North American central bank tightening for this cycle. That expectation brought significant strength in precious metals markets for the beginning of the year. More recently, however, very strong employment data has market expectations of continued central bank tightening at least into mid-year 2023. This has re- strengthened the US$ against other currencies and placed a headwind back on the precious metals space.
To be clear, we do not believe this turn higher in the precious metals has now ended. Rather, we see a pullback and headwinds to last into mid-year, followed by the inevitable rally once the U.S. Federal Reserve finally ends it’s tightening cycle.
Our critical metals commodity markets, no matter which one observing, have held up dramatically better than both overall sentiment and the equity counterparts. Much of this phenomenon points back to the decade of underinvestment and corresponding dearth of new available supply. Bearish overall sentiment has been overwhelmed by the combination of the bullish sheer physical tightness in each of these commodities and the positive implication of a China re-opening. None of this looks has properly considers the inevitable consumption growth surge from the de-carbonization revolution that lies in front of us. Despite the recent near-term strength, it pales in comparison to what lies ahead. As I mentioned previously, it has been decades since the mid-term and longer-term outlook looked this bright. We anticipate that within 1-2 years, we will find ourselves in a metal constrained market for decades.
At Red Cloud, we remain steadfast committed and focused in the mining commodity sectors. We, above all others, believe in the essential need toward growth in supply to these markets. Moreover, we strongly believe the entrepreneurial spirit of the junior explorer, developer, and producer remain the key focus to achieving this goal. We continue to innovate our products and services to better assist this core group. Red Cloud continues to enhance our efforts to build our team, expand our distribution, grow our research presence, and add new services.
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