Title: Gold Drops Every Time Warsh Speaks, Then Buyers Bring It Back | Brien Lundin Show: Kitco NEWS — interviewed by Jeremy Szafron Guest: Brien Lundin — editor and publisher of Gold Newsletter; host of the New Orleans Investment Conference Date: 2026-09-08 URL: https://youtu.be/LFog71sD5lg Length: 49:08 Note: Auto-generated captions, cleaned. Fillers (um / uh / you know / I mean as an interjection) and stutters/false starts removed; wording otherwise verbatim and every (mm:ss) cue left in place. ASR name mangles corrected: "Brian London" -> Brien Lundin; "Jeremy Saver" / "Jeremy Savin" -> Jeremy Szafron; "Kicko News" -> Kitco News; "Kevin Walsh" / "Kevin Ward" -> Kevin Warsh; "Robert Freedelland" -> Robert Friedland; "AS6" / "ASIC" -> AISC (all-in sustaining costs); "Bkina Faso" / "Bkino Faso" -> Burkina Faso; "metal energy" / "metal urgy" -> metallurgy; "alos" -> algos; "tin bagger" -> ten-bagger; "a hair's breath" -> a hair's breadth; "fatal a lot of tuition" -> paid a lot of tuition. One word could not be resolved and is left as the captions rendered it: "the Ignos out there" at 36:13 (context: the big producers / majors). ">>" marks a change of speaker, as in the source captions.
00:00 If he really thinks he can conduct a campaign of rate hikes, then he hasn't done the math and it just cannot be afforded. Welcome back. I'm Jeremy Szafron. Hope you had a great long weekend. Now, a high gold price can fix a spreadsheet, but it can't fix a rock. And at $4,400 an ounce, projects that never work suddenly do.
00:22 Money is going back into companies investors wouldn't touch just 18 months ago. And every management team in this business will tell you their project finally makes sense. So, here's the question. Has the gold price made mining better or has it made it harder to tell the difference? And I can't think of anyone better placed to answer that than our next guest. Stick with us.
00:42 All right. Brien Lundin, editor of Gold Newsletter and of course host of the New Orleans Investment Conference. For 40 years, he's had to tell the difference between a discovery and a story. Brien, good to see you. Thanks for making the time. >> Great to be with you as always, Jeremy. Thank you so much. >> Let's start where I opened there in the intro because I think it's the whole conversation.
01:04 The price fixes the spreadsheet. It doesn't fix the deposit. So what does $4,400 gold actually solve? And what does it never touch? >> Yeah, it solves a lot of things. It gives room for mistakes, potential mistakes. It elevates profit margins. This bull market we're in is unique.
01:28 Every bull market has a lot of similarities. History rhymes, but it doesn't repeat in precisely the same fashion. And this one has a lot of unique characteristics that have important implications. You alluded to one of them. All of the optionality plays. The companies that had large resources that weren't economic at then gold prices are now not only economic but in some cases wildly economic.
01:57 And the idea of investing in these optionality plays way back when was that as the gold price rose they would multiply in price as that value all of a sudden crystallized on the balance sheet. We've seen some big gains. Some of the really large and well-known optionality plays have gone up three, four, some cases five times in value from their lows.
02:21 But those lows were oversold lows, we really have not seen the kind of ten-bagger returns that were hoped for in the old days, when those were optionality plays. I think that's coming. I think the other aspect of this market, the fact that the miners, the producers, the big producers are making so much money that they are net with no debt.
02:49 So they have no debt on a net basis, on a general basis. So they're building cash reserves now. And they can only dividend so much money out. They can only buy so much stock. At some point they're going to have to rebuild the pipeline. So, I think that's going to be the next big phase of this bull market when we see the majors start to do that, start to buy those big projects.
03:11 And I think that's really when these previous optionality plays are really going to have their day in this bull market. >> Yeah, that's interesting. And for anyone new to this, obviously an optionality play is a deposit. Nobody could mine profitably at those lower prices as you mentioned. Now, you hold it as a bet.
03:28 The price kind of comes to you, I suppose. Why hasn't the market paid for all of them right now? >> Well, the first 18 months of this bull market, it was only gold participating, not silver, not mining stocks because the drivers of this market were the central banks and they don't buy silver, they don't buy mining stocks.
03:52 And we didn't see the share prices, the market caps of these big miners responding as much to the rise in the gold prices as they should have. And really they still have not because we need to get the broader market participation, the generalists into the sector before we see these big producers valued appropriately and the broader market is still enamored of AI and technology and other things.
04:20 But I think that can only last so much longer. I think the generalists are starting to come into the market. We're starting to see some attention paid. You see a lot of analysts, big analysts, big investment banks are very bullish on gold. The central banks have made it respectable.
04:43 So I think it's just a matter of time and it's not that much longer. >> Yeah. And we got to chat about China here briefly too, but before we do, we were talking about it there. Two years ago, you could kind of sort the good projects from the bad by which ones were making money, it almost felt like.
04:58 And at $4,400, there's quite a few making some money. So, what are you looking at now that you didn't have to look at two years ago? >> Well, yeah, they're all making money. And one of the things, as you said, one of the things I'm looking for is for AISC, the all-in cost of production, to actually increase now.
05:19 And that used to be a bad sign, but I want to see AISC, the cost of production, rising along with rising production from the majors. At these gold prices, the margins are thick. They're hefty. Even if the cost of production rise, they're still going to be at levels we've never seen before.
05:43 So the goal, or the mission, of a big producer right now is to run as much gold out the plant as they possibly can at these prices. >> As far as the price of gold, that's not going to have an impact on it because the increases in production will be just incremental. And I don't think we'll see a supply response to these high prices for another four or five years or so down the road because that's how long it takes to get a mine into production.
06:10 >> Yeah. And I guess we could go back also on the macro side to 2022. Under the Biden administration, the US and its allies obviously froze that $300 billion of Russia's central bank reserves. And it felt like overnight every central bank on Earth learned that reserves held in someone else's currency can be kind of switched off.
06:29 Central bank buying has obviously run close to double its previous pace ever since. And it hasn't stopped. Just this morning, we're seeing, according to the People's Bank of China, they bought about 650,000 ounces in August, about 20 tons, the biggest month in almost three years and the 22nd month in a row that they've added.
06:48 Their holdings are now worth 350 billion roughly for what we know. So, they're buying more at $4,400 than they even were at $3,000, Brien. So, is that a price insensitive buyer who simply just has to add something no one can freeze, or is that telling us gold is still cheap here? >> Yeah, that's a price insensitive buyer.
07:09 But I would caution that China has historically been a price sensitive buyer. The western investors since they came in about a year ago into this market have really driven some steep rallies in the gold price and some really painful corrections in the price as well. In other words, brought the volatility to the market that we had been missing for the first 18 months or so of this run.
07:35 China over the last few months and over this correction during the summer holidays or the summer doldrums has been actively buying gold and taking the price that the western speculators have been making. So they're increasing the amount of purchases. I think that's more reflective of the end of this correction and trying to get the best prices that they can because they have historically been opportunistic buyers.
08:02 Central banks in general though I think have been dollar cost averaging because they've been allocating a certain amount of money for each quarter or each month or whatever time period toward building their gold reserves and as the price rises that tonnage naturally falls for that amount and as the price lowers the tonnage naturally rises.
08:25 So I think that as the gold price continues to rise, and we've seen this already, >> that central bank buying has evolved from being a driver of the market to a support below the market and I think that's what we're going to see going forward. The western investors, the traders, the algos are now setting the price for gold over the short term.
08:45 But we've seen that every time those algos come in and drive the price down and for some reason then it pops right back up and those are the longer term traders I think coming in and buying that value. >> So on every pullback the west sells and China comes in and buys.
09:05 Where does that end, right? >> Yeah. >> >> Yeah, that's exactly it. >> Yeah. I got to ask you about copper from this morning because again it's in the headlines. It hit an all-time high of $14,617 a ton on the London Metals Exchange. Second record session in a row on tariff fears.
09:26 Silver is nearly 46% down below its January record, but your sequence has kind of always been gold then silver then copper. Has some of this order broken or is copper telling you something different than the monetary metals? >> Yeah, copper is definitely telling us something different. It is in the base metals.
09:44 It's not one of the monetary metals. The only two monetary metals are in fact gold and silver. And now that we're in more of a traditional market driven by western investors, the western traders, silver has regained its historic role as leading indicator for gold. It usually moves not only more than gold but earlier than gold.
10:05 Mining stocks are the same way. Copper is an entirely different story. All the base metals, the energy metals, the battery metals, the whole broader commodity sector. Each one of those metals, each one of those components of the commodity sector has their own story to tell right now. But virtually all of them are extraordinarily bullish.
10:28 So as investors in this space you're really spoiled to be in an environment where if you just throw a dart at the list of metals and commodities you're likely to hit something that's going to go up significantly. Copper is I think the most compelling of all these stories. You cannot easily innovate around it.
10:49 Most of its applications you absolutely cannot innovate around it. It is needed. It has long, long lead times for a supply response. We're talking 15 even 20 years before a mine can be brought on stream. So the demand curve as well for copper right now with AI and the buildout of the grid system to support AI is giving copper a demand curve that's the steepest I think we've ever seen.
11:20 So yeah, we're at record highs for copper, but it's not going to stop anytime soon. >> Yeah. And to your point, then why isn't that showing up in new mines, right? >> Yeah. And not just in mines, but miners. And we are starting to see a response, but the mines are going to take a while.
11:38 Every large copper deposit on the planet. We just talked about optionality and gold. There are plenty of copper deposits in the planet that were not economic or not sufficiently economic at lower copper prices. We're seeing that turn again, or turn in copper like it did in gold, and that all of those projects or the vast majority of them are now economic.
12:01 But it will take every one of those known deposits to get developed to even make a dent in the supply curve that we see coming up and a lot of those projects will never be developed for one reason or another, permitting issues, the size of the projects, locations, etc. So, it is a supply versus demand dynamic that we are unlikely to see ever again in our investing careers.
12:30 >> Now, I want to try something with you, Brien, because you're uniquely positioned here. You've been doing this a long time. And there were so many people that write me when they find out that you're coming on and say, "Hey, ask him this. Ask him that." I just want to say seven things that used to kill a mining project.
12:48 Stone dead. And for each one just tell me is it still fatal at this price or does the price cover it now, and pull me up on the ones where you think the honest answer is it depends. But a bad grade — there isn't much gold in the rock so you have to move an enormous amount of it to get anything out. >> Yeah, cutoff grades are dropping. A lot of gold for instance in projects has been found, for lack of a better word, just by lowering the cutoff grade and that's appropriate with gold prices at
13:21 these levels and even copper and silver prices at these levels. So yeah, you can lower the cutoff grade in many cases for known deposits even within the existing optimized pit designs and find a lot more resource that previously was waste. Now again that will raise over the long term operating costs for a mine but the margins today can account for that.
13:50 >> So not fatal I guess at this price kind of thing. >> Well you'd have to get to very low cutoff grades before we get fatal at these prices. >> Right. And what about difficult metallurgy, the gold is there but it won't come out without a fight. >> Again, operating margin takes care of a lot of that.
14:13 That affects your opex. If you have to build or provide a roaster and get into complex refractory metallurgy and refractory processing that adds significantly to operating costs and it used to be compensated for by grade. A higher grade project could cover those kinds of costs. Now these kinds of margins, the old ways, the old truths aren't so much anymore and again it does depend on the individual project but price overcomes a lot of problems just as grade used to overcome a lot of
14:53 problems. >> Yeah. And I guess that could be the same with even a brutal strip ratio. You're hauling five tons of waste for every one ton of ore. >> Yeah. That's it. Again, it's all of the factors that go into operating costs. If you can get gold out and sell it at $4,400 an ounce or anywhere $4 to $5,000 an ounce, it makes up for a lot of costs, added costs.
15:19 It makes up for a lot of management mistakes even. >> Yeah. And on that risk, say no water, no power, you're 100 kilometers from a line running generators in a place where water is the whole permit fight. Is it still worth it at these prices for some of those juniors? >> Yeah, again every project is unique and has its own aspects but you can overcome that.
15:44 You can overcome infrastructure issues. About the only thing you can't overcome is permitting issues. That does not necessarily — the high price doesn't necessarily affect that. But anything related to the cost of production and cost of putting in the necessary infrastructure, the capex as well as the opex, your mining margins today make up for a lot of that and a number of those projects that weren't viable before, now they're not only viable but they're very profitable.
16:18 >> Yeah. And I guess on the paper side too, it does feel like some of the management is different this time around, but blown out share structure. 400 million shares out before anyone has built a thing. Still some options here? >> Yeah, that's a negative as well because for a junior mining company if you don't get the leverage, the share price appreciation.
16:40 There were some great projects over the years where a company came in and they took a small project and they made a large project out of it and they sold it for, you know, started off maybe as a 20 or $30 million company and sold the company for hundreds of millions of dollars. >> And in that process, shareholders didn't make a cent because they issued shares and every one of these companies is a burning match.
17:08 It's a delicate balance. You have to raise money when you can at higher prices if you can and try to find something to serve a whole lot more before the dilution eats away all of your potential gains. >> So that can happen even today. You can dilute a company away and dilute the value away.
17:28 And it's something every mining investor needs to watch carefully. >> Yeah. Well said, Brien. And I guess the one that I wanted too. Which of those that we talked about, it sounds like you kind of answered it there, but which of those can $4,400 gold disguise, but never cure? I guess management. >> Yeah, it can't.
17:48 Management can actually kill a good deposit, but management can also make mistakes that would have been fatal in the old days at $1,500 or $2,000 gold. And they can make those same mistakes today that might cost them $500 or $1,000 an ounce of operating margin, but they're still going to make close to $2,000 an ounce in operating margin, which is pretty darn good.
18:14 >> So, by the same token, one of the differences in this market is that the age-old truism that an explorer should not be a developer, should not be a miner. At these prices, they can actually buy mining expertise. Not a lot of it out there and it's not cheap, but you can buy mining expertise, take your project and bring it into production yourself because the money is out there for capex.
18:42 And even if you make those basic mistakes, you can recover from them, but you also have thousands of dollars of margin per ounce so that you can afford to make a few mistakes until you get things running more smoothly. So that's one of the implications of this market I think that people overlook.
19:02 The natural other buyer for a project is often the company that owns it >> because the money is out there to actually build it and get it into production yourselves. >> Yeah. I got to ask you about capex for a second. Before we do, just to wrap this up, Brien, because you've been doing this a lot longer than a lot of the viewers.
19:27 What still surprises you about this business? >> Well, there's always something new, and it tends to come out of left field. What really sparked this gold bull market was the tanks rolling into Ukraine from Russia. That kind of exploded out of the blue and nobody really expected that until a few weeks beforehand.
19:55 And it didn't seem like they would actually follow through with it but they did. So that was the first domino that fell. So what was the second domino that fell? We saw the west come together and impose very stringent, really unprecedented sanctions on Russia. And even those allies of the US saw that dollar weaponization, saw how powerful it was and realized that someday that gun could actually be turned on themselves.
20:28 And why not get some protection from that? Just hedge that and build up gold reserves. And they started buying gold reserves almost on an urgent basis for about a year before that finally tumbled over into the gold market and created a supply demand situation that saw the price take off for 18 months or so before we really had much western involvement as well.
20:52 >> So a lot of different things about this market that really played to our advantage as investors. We had 18 months or so to buy silver, to buy mining stocks before they really took off and responded and we had the luxury of knowing that a gold bull market was already in place. That major risk factor had been removed and we had these values sitting out there.
21:18 Now, I think today we're seeing the participation from equities and silver obviously, but they still have much much further to run and they still represent what I think is really a generational opportunity. >> Okay. Well, then let's go back to the money and to capex as you talked about because it has come back fast.
21:35 Companies that couldn't even raise a dollar 18 months ago are drilling again. When you look at the raises getting done right now, are these companies going to the market because they've got something worth building or is it because the window's finally open? >> A little bit of both. The junior mining management teams out there have been raised from babes to know the old truism that when the market offers you a check, take it >> because you never know what tomorrow
22:07 holds. So take the money. And some of those management teams are kicking themselves now because they took money at lower price levels and they could easily take it now. Now the window is not quite as blown open as it was earlier this year at the beginning of this year, but it's still not hard for a good company to raise money.
22:28 And really good companies can raise whatever they want. A lot of those companies have projects that were viable, were really good, were exciting prospects. And I'm talking about the exploration companies here. And they had to sit on them for a few years and do that boring geological work, the sampling, the geophysical surveys, etc.
22:51 So, they knew a lot about these deposits and all of a sudden now they have the money to drill them. And over the last two summer drilling seasons, we've gotten results that I feel were the best I've ever seen in my career, generally speaking. So there were good projects that deserved to be drilled and weren't able to be drilled for a long time and now they are and now this season we're seeing follow-up on a lot of discoveries that were made last year.
23:18 So there's a lot of opportunity I think in the exploration end of the business. >> Everything across up and down the food chain, the producers, the developers have moved except really for the explorers. So even the majors have a lot of opportunity but right now the explorers I think offer tremendous upside because they are going to be the last to move. >> Interesting.
23:43 Bull markets obviously pay everybody for a while. Which part of the sector is getting money right now that it hasn't earned? >> Probably by that definition the explorers because until they find something >> they really haven't proven that something is there.
24:05 I think once they prove a thesis, once they get a good sniff of something, the money comes flowing in. And the market's responsive right now. For so long, good drill results — companies didn't want to drill because even if they got good drill results, it was like they were sticking their head out of a foxhole and just an opportunity to create trading volume that created selling.
24:28 It's really the opposite right now. Good drill results get a market reaction, an appropriate market reaction, get buying because you have that sense of FOMO really coming back into the market, right? >> So yeah, I don't know that any aspect of the market strictly speaking is getting money it doesn't deserve, but the explorers have to put up or shut up and >> largely now they're putting up.
24:54 >> Yeah. Bit of a show me story. Now the part I wasn't expecting. The World Gold Council — everyone assumes the cost problem in mining is fuel and labor. But I found interesting, the World Gold Council says that the biggest contributor to rising costs last quarter was royalties.
25:11 That's the cut governments take on every ounce that comes out of the ground. Gold's up about 70% year on year. Royalties are up 85. So royalties by that definition I guess outrunning, and they've doubled as a share of what it costs to produce an ounce since 2021. 6% then, 12% now. So the state took the upside faster than the price itself went up.
25:31 Are governments quietly taking this bull market from shareholders here? What are your thoughts? >> Yeah. And you mentioned uncomfortably how long I've been in this business, but one of the cycles I've seen over and over in this business is that in good markets, governments renegotiate those deals that they had.
25:52 And they don't like to see the miners making outlandish profits in their eyes. But they don't understand that those miners have taken significant risk to get to that point and deserve to be paid off. But they look at these what they tend to call windfall profits and they say well we need more.
26:14 So it is part and parcel of the mining industry. It's part of the cycle that happens over and over, has happened over and over. And that's why you really want to — I think these days you don't need to go too far out there into riskier regimes and there's enough plays in really solid mining frontiers, regimes and jurisdictions where you don't need to take on that risk.
26:46 In some cases, the project justifies taking a bit more risk. But by and large you can find a lot of great companies in North America, in Mexico now, and in Latin America where the jurisdictions are a lot safer and a bit more secure and have more tenured mining law. >> Yeah.
27:10 I was going to ask you about jurisdictional risk at this time. Are you preferring the North America kind of play on this? Because you look at it, Ghana's sliding scale reportedly hits 12% above 4500, Burkina Faso, Mali, so it seems like that's concentrated in Africa. >> Yeah, I am preferring North America but that's not to say I don't like opportunities around the world again >> it depends on the location, it depends on the projects. In some cases it's actually safer in my view in some jurisdictions around the world. I like
27:46 Kazakhstan right now. One of our biggest winners right now in our portfolio is exploring in Kazakhstan. I think that's a fairly safe jurisdiction with low cost of exploring and low cost of production. There are some issues in Africa generally and specifically Ghana and Burkina Faso.
28:07 None of which are surprised. A good bit of this has been enshrined in mining law for some time. But there are projects there that justify taking that risk >> and again you have to take it on a case-by-case basis. >> Yeah. Well said. Okay. I want to get back to copper for a second because I keep seeing it flash on my screen as well.
28:28 Robert Friedland, who you know, says Silicon Valley hyperscalers are in his words very worried about where metal is going to be coming from. He's fielding what he calls unconventional interest from US big tech in a copper project in the Congo. And the company says that the resource there just grew 30% to 12 million tons of contained copper.
28:47 So technology companies are what now, looking at funding mines and locking up the metal before it comes out of the ground. Does that improve mining finance or does it introduce a buyer who will just overpay because they're frightened of running out? >> Well, I think the latter and I don't think that's necessarily a bad thing.
29:06 I think security of supply overwhelms price. Eventually price will I think exceed what would be outlandish payments today. So if an AI company wants to go upstream and secure supply for copper then they'll probably pay well above market today. I think that times will change and a few years down the road that cost that they pay today will end up being a discount and they realize that and they are forecasting that themselves.
29:41 Sometimes we're our own worst enemy within this market in that we can't separate ourselves and look at it ourselves from a distance. And these technology companies, private equity and the like, they come to realize that the old truism again that a market is despised the most by those who know it the best.
30:07 So, we're within it and we think certain prices are outrageous because they're outside of our experience and in some cases that experience works against us and we don't realize or fail to realize that the rules of the game have changed tremendously. In a couple of years, today's record prices for copper will look like discounts.
30:29 And we'll be kicking ourselves for not buying at these prices. >> That's what we're in right now. That's the truth and we need to look at the big picture and understand where we are. >> These offtake agreements. I remember hearing similar things with the silver market when some of the solar panel companies and what have you having to create their own supply, especially with the tariff talk.
30:52 Is this just going to increase? >> Yeah, it is. The tariff talk will eventually go away and none of those kinds of gains and in general geopolitical issues, they drive gains in any particular commodity that the price usually reverts back to whatever the trend was beforehand. So the tariff issue I think is a temporary thing.
31:17 With the exception that governments are again also looking for security of supply for critical minerals and metals and that list of critical minerals and metals keeps expanding all the time. So that's where you get really big money coming in that can overwhelm what used to be economics of a project and the ability to raise capital because the government, if it needs a supply of gallium or antimony or something else, it's willing to write a very large check to make sure that its military, the US
31:55 in this case, is willing to do whatever it takes to guarantee that its jets are going to keep flying, its aircraft carriers are going to keep sailing. And again, rightfully so, but that can take an uneconomic project and at least in the short term make it a big winner in this kind of a market.
32:18 >> Interesting. So with gold you find it in hope, but with copper, the buyer's already standing there. And as you've been talking about some of these criticals, gallium and what have you, it feels like the governments want to buy those too. Does that change what you'd pay for a copper deposit or one of these critical mineral miners versus a gold one? >> Well, I don't like to compare one to the other.
32:44 My personal take on investing is I don't look at companies — I don't take a big theme and then drill down into that sector. I look at each case on an individual basis. There's a lot of gold companies. I really like a lot of silver companies, a number of copper and critical metals companies out there that I like, but they have to have something that really pushes them off the fence for me and convinces me that they have the potential to make an awful lot of money for my readers in a fairly short period of time. We've
33:18 been fortunate to find a lot of those. But yeah, the critical metals area, copper in general, the government support and market support are really kind of run hand in hand right now. And again, it's a generational opportunity. It's a target-rich opportunity for people in this sector. >> Now, you remember the margins of the last cycle, Brien, there's part of this I'm curious.
33:44 AAA says that the national average for diesel hit a record last week, 585 a gallon. That matters more than it sounds because obviously a mine runs on diesel. The margins are real though. According to the World Gold Council, the average margin hit a record 3,76 an ounce in the first quarter.
34:01 So just wild, up three, 4% in a year. More than doubled. So the money is absolutely there. Does any of this — and I always get asked this — the diesel price, this record diesel price, what have you, who feels it first? Does that start to hit or does that go away? >> Yeah, it will hit it. It will.
34:21 One of the things that people don't often remember is the fact that from 2008 to 2011, the price of gold from the low to the peak nearly tripled. Yet, the miners in that instance really did not offer much leverage to gold. In some cases, no leverage at all to the gold price because oil at the time went to $140 a barrel.
34:48 So those big yellow trucks, diesel prices went up and so they went up to levels that were extraordinary but also extraordinary relative to the price of gold. What we're seeing now is that we've had some very significant increases in energy prices, particularly diesel, but the gains in gold have overwhelmed those rises in energy cost.
35:12 So yeah, capex is rising — not capex but opex is rising right now as the diesel price goes up but the gold price is still outpacing it and margins are still expanding. >> And could gold go up while mining shares go down too because that same kind of inflation pushing the metal higher is what's eating these companies that dig it out? >> It could, but the margins right now, if you look at the price of diesel relative to where the gold price was in >> that 2008 to 2011 time frame,
35:48 it looks like diesel is up much more. But the gold price has risen so much more and the margins are so much larger than they were then that on a percentage basis the gains in opex costs are still fairly minor than the gains in the underlying metal. So we're not seeing that same kind of a reaction.
36:13 We would have to, I would think, see much much higher diesel prices. And I don't think we are. I think that's all going to resolve itself at some point. >> And the Ignos out there, still cheap? >> Yeah. All of the producers, this is the only time, the first time in my career that I've seen the big producers having the potential to offer similar upside to really a junior exploration play.
36:40 Now, >> if a drill hits a generational deposit or target and has tremendous results, yeah, that price of that junior is probably going to go up five or 6x very quickly. But I think that the big producers have three, four, even 5x potential from these levels if they get valued correctly.
37:04 And not only that, but as the market, the generalists come in and they look ahead and they start assigning some ridiculous price to earnings ratios as they do when they get excited about a market. >> So, it's not just a matter of these big producers trading at appropriate prices, but as every market heats up, it shoots past equilibrium and goes too far to the upside.
37:31 These are not long-term investments, producers. They are timing mechanisms and when you have what I believe is still the early stages of a metals bull market they offer tremendous potential and this is the most potential I've ever seen that the big producers offer and with less risk than further down the food chain and the developers and especially the explorers.
38:00 >> Now I got to ask just for your expertise and we won't go into the amount of years you've been doing this, Brien, but you've seen a few things obviously, right? And some of the retail investors from the top, they maybe bought at the top back in January, February, they're sitting on a couple of these equity sides, they're curious about what's going on. So let's make it your money instead of everyone else's for a minute. What is the most expensive mistake that you made last cycle and what did it cost you, something you learned from?
38:27 >> Well, I've paid a lot of tuition over the years and in this market, to be quite frank, I'm a very good buyer, and to be equally frank, I'm a lousy seller. And so I do preach that my readers, my subscribers need to always take money off the table but I am prone personally to riding some of these stories a bit longer because I'm in love with these stories. There's a romance and excitement in this sector that is like nothing else that you'll find in any other area of investing. And there are
39:05 narratives in this sector. Every company has a narrative. If they're marketing themselves correctly, then they are putting forth some type of a unique selling proposition, some type of a story to the market that investors can grab a hold of. And I am, to my discredit, prone to holding on to those a bit longer than perhaps I should.
39:31 I do tell my readers what to do correctly. And that is that in a bull market, on one hand, you buy the dips. On the other hand, you skim the froth off of the market when it really gets frothy. In January and then we had that rebound right back up to near the same highs in February until the war with Iran kind of killed it all off.
39:58 But that market would have fallen over itself at some point. It had gotten too overheated and it would have stopped and we would have had a significant correction even if the Iran war had not developed. But that was obviously a case of a frothy market and that is one where people should have taken money off the top and I advised my readers and the audiences that I addressed at the time that they needed to do that.
40:28 >> I did some of it myself. >> Unfortunately — well, fortunately actually — I was able to roll some of it back into the market in some place that did very well. So, >> I did take some froth out of the market. Could have had better timing, but actually grabbed a few opportunities with the money that I had taken out of the market.
40:50 >> Yeah. >> But silver on that run to $118 an ounce. Yeah, that was something that the market was handing us an opportunity to take profits and we should have at the time. >> Yeah. And to your point, I remember almost a year ago, I guess almost now, we were back in New Orleans at your conference and I was hearing from a lot of your guests, speakers on the stage talking about that frothy market just as it begun, talking about maybe taking some profits. 7 weeks —
41:20 you're putting a room full of people who disagree with the consensus into one building in New Orleans. I love the show. Of course, we're going to be there with Kitco News. Any themes this year? Are they going to be talking about this bond market? What are you hearing from your subscribers? >> Well, we don't have a theme for each event.
41:40 We don't try to convince our attendees of anything. What we do is we take the best thinkers out there, at least in my view, the best thought leaders out there, the people with good arguments, some of which I may disagree with, but are well reasoned and I think valuable. And in this environment I think some of the obvious topics are going to be metals and miners.
42:06 It's going to be the bond market. It's going to be the affordability of debt at these levels. It's going to be whether the Federal Reserve can actually raise rates or have any sort of a lengthy rate hike campaign with the debt this large and a number of other issues. Is the interplay between the Federal Reserve and the Treasury.
42:29 I think that's an issue that's going to develop and evolve over the coming weeks. >> And you sent a chill down my spine telling me it's only seven weeks away. We've got a lot more to do in the meantime, but it is coming up very rapidly. >> And what we're talking about today is the issues of the day because we have such smart and accomplished and expert experts that whatever comes up, even on a moment's notice, they'll be able to address and give their timely advice and strategies to counter it.
43:05 >> You make a good point. I remember a couple years now we've been there and often on top of the contrarians and a lot of our Kitco News favorites. You do have people, not just an echo chamber up there saying an alternative opinion to the one that a lot of gold bugs would go for.
43:23 I think it's important to have both of those guests. You can hear from both sides. Where do you think the biggest disagreement in the market is right now? >> Well, I don't know if there's a big disagreement among the faculty for this year's event because they're pretty smart. And I think what they recognize is that the market is mispricing Federal Reserve policy.
43:46 They're pricing in rate hikes, not just a rate hike for show, but a number of rate hikes by Kevin Warsh. And I think that Kevin Warsh is a pretty decent guy. He's probably the best Federal Reserve chairman in my experience. But if he really thinks he can conduct a campaign of rate hikes, then he hasn't done the math and it just cannot be afforded.
44:16 There's no way to afford it right now. With the debt this large, the leverage with the debt this large of any even minor increases in rates is tremendous and has a tremendous bottom line effect. So, we're already spending more on servicing the debt than on national defense. We're just a hair's breadth away, relative hair's breadth away, from exceeding the other entitlement programs and it's taking a record portion of the federal budget just to service the debt that we've ever seen without being in a world war. So, yeah, I
44:56 think that's the big mistake that the markets are doing right now, pricing that in. And I think that provides us with a tremendous opportunity in gold. Every time that Warsh opens his mouth, gold takes a hit because the markets start to believe, the western traders start to believe that Warsh can actually raise rates, and yet gold pops right back because smart money comes back in, some of it from China for other reasons perhaps, but smart money comes right back in and brings the price right back up and the longer term uptrend
45:28 remains intact. >> So that's one of the opportunities. And at this year's event, we have an exhibit hall packed with mining companies from juniors to developers and even some producers. And the biggest winners over the next year are almost always found on that exhibit hall floor every year. >> All right.
45:53 And I think you had 5,000 as your call somewhere around there still with the gold price. You're seeing a little bit of upside here this year. >> Yeah. If I made a call on the gold price, then somebody twisted my arm awfully hard because I'm usually smarter than that. I, you know, we've already been, of course, well over 5,000 this year.
46:16 I don't think we're going to need as big of a speculative rally, a furious rally as we saw at the beginning of this year to get back over 5,000. So, I think that's still a pretty good bet by the end of this year. I think at some point over the remaining few months of this year, we're going to see a big move higher and we don't have that much higher to go before we get over $5,000.
46:45 So that's probably a good bet. I think the trend is up, and I don't think anyone really knows what price we're going to — I know no one knows what price we'll reach in any particular time frame, but I think we can easily recognize the trend and that remains upward.
47:04 I think we have a whole lot more to go in this bull market and you have to be invested in this. It is the opportunity of our careers. >> Yeah. And that chart, it looks a lot better doing this than it does, you know. >> Yeah. We were really spoiled for those first 18 months, I tell you, with the central banks buying, and now we're going to get those kinds of rallies.
47:26 But if you buy the dips, >> Yeah. >> and you sell on the excessive rallies, then you're going to do even better. >> All right. Brien Lundin, editor of the Gold Newsletter and host of the New Orleans Investment Conference. It runs October 28th to the 31st, and we'll be there, of course, on location. Come say hi. Brien, thanks again.
47:43 I'll see you in New Orleans. >> Thank you, Jeremy. It's coming up quickly. >> All right. And if you're new here, this is what we do. We bring on people who see the market differently, and we ask them the part that's harder to answer. Now, hit subscribe so the next one finds you. And in the comments, tell me one thing.
47:59 If gold keeps climbing up from here, do your mining shares follow it up. Yes or no? I do read them. I'm Jeremy Szafron. For all of us here at Kitco News, thank you for watching. We'll see you at the next one.