Sprott is a Toronto-headquartered asset manager specializing in precious metals and critical materials (NYSE/TSX: SII), tracing its roots to Sprott Securities founded by Eric Sprott in 1981 and now led by CEO Whitney George. It runs physical gold, silver and uranium trusts, ETFs, active strategies and resource lending, with about $65bn in AUM. The Insights column carries monthly commentaries and white papers on uranium, gold, silver, copper and critical materials by Paul Wong, Jacob White and John Hathaway (ex-Tocqueville gold manager) — note the house's structurally bullish commodity stance, as it sells the corresponding trusts and ETFs.
Gold prices have jumped from $1,993 to $2,350 per ounce since February, but most regular investors and advisors are ignoring it—gold ETFs (funds that track gold like stocks) actually lost 12% in holdings. This report says that cold shoulder is a good sign: if mainstream buyers eventually jump in, gold could rise another 25%. For everyday investors, it suggests now might be a good time to consider gold or gold mining stocks (e.g., GDX), especially with the Fed likely to cut rates and doubts about the dollar growing. Worth reading because it uses real data to explain why the lack of hype could be a hidden opportunity.
Sprott report notes that gold prices have broken out since February, rising from a low of $1,993 per ounce on February 13 to the current $2,350, an increase of nearly 18%. However, mainstream investor interest remains tepid: global gold ETF holdings fell nearly 12% in the 12 months ending March 31,
This chapter discusses why the breakout rally in gold prices since February has been overlooked by mainstream investors, and the investment opportunities embedded in this neglect. The report notes that despite gold prices surging from a low of $1,993 per ounce on February 13 to the current $2,350, a gain of nearly 18%, global gold ETF holdings fell by nearly 12% in the 12 months ending March 31, 2024. Additionally, 75% of investment advisors have gold allocations below 1%, marking the highest aversion ratio since 2019.
The author’s core investment argument is that mainstream investors’ indifference to gold implies significant upside potential for prices. If mainstream buying approaches levels seen in 2008–2011 (when gold ETFs added 1,645 tonnes), gold prices could rise another 25%, far exceeding the lagging and conservative target prices set by banks and brokerage analysts. The counterintuitive insight is that the gold price breakout is not accidental but signals a crisis of confidence in the U.S. dollar. Moreover, gold mining stocks are historically undervalued relative to gold and tend to outperform physical gold during Federal Reserve easing cycles.
1. Mainstream Investor Neglect: Global gold ETF holdings fell 12% over 12 months; 75% of investment advisors have gold allocations below 1% (highest since 2019).
2. Significance of Gold Breakout: Represents a positive resolution to three years of stalemate between bulls and bears. Technical analyst Carter Worth (Worth Charting) sees a target 10% above the current $2,350.
3. Historical Comparison: If mainstream buying approaches 2008–2011 levels (ETF additions of 1,645 tonnes), gold could rise another 25%.
4. Mining Stock Opportunity: GDX is up 32% year-to-date (January 1 to April 9), while gold has risen 14.12%. Mining stocks are historically undervalued relative to gold (GDX/GLD ratio at low levels).
5. Costs and Profits: Industry average cost in 2023 was $1,750/oz, with an average gold price of $1,943/oz, yielding a profit of $200/oz. If the 2024 average price matches Q1’s $2,072/oz, profits would rise by approximately 61%.
6. Federal Reserve Policy: Powell hinted that if the labor market weakens significantly, the Fed could “slow the pace of balance sheet runoff fairly quickly,” leaning toward QE. The author believes easing is “delayed but not derailed.”
7. Dollar Confidence Crisis: Central bank gold purchases hit a record 1,037 tonnes in 2023; the dollar’s share of global foreign exchange reserves fell to 58.4% (lowest since Q3 1995). U.S. Treasury debt increased by $168 billion in 20 days, equaling the entire 2002 deficit. Year-end interest payments could become the largest single government expenditure.
Comparative Data Table:
| Indicator | Data | Time |
|---|---|---|
| Gold price low | $1,993/oz | February 13 |
| Current gold price | $2,350/oz | At time of writing |
| Gold price gain (from low) | 18% | February–April |
| Global gold ETF holdings change | -12% | 12 months ending March 31, 2024 |
| Investment advisors with gold allocation <1% | 75% | Highest since 2019 |
| GDX year-to-date gain | 32% | January 1–April 9 |
| Gold year-to-date gain | 14.12% | January 1–April 9 |
| 2023 industry average cost | $1,750/oz | 2023 |
| 2023 average gold price | $1,943/oz | 2023 |
| 2024 Q1 average gold price | $2,072/oz | 2024 Q1 |
| 2023 central bank gold purchases | 1,037 tonnes | 2023 |
| Dollar share of global FX reserves | 58.4% | Lowest since Q3 1995 |
This chapter discusses why, after gold prices have broken out to the upside, mainstream investment circles still regard this as a "marginal event," and the investment opportunities arising from this cognitive lag. The author argues that market consensus has yet to reset, and the true narrative of the gold bull market has yet to be widely written.
The author's core judgment is: Gold's breakout rally is not short-term speculation but the beginning of a structural value reassessment. The current neglect of gold by mainstream investors (especially value investors) precisely represents a key window for contrarian positioning. The counterintuitive point is that although gold prices have risen nearly 18%, the market still categorizes this as an isolated event within the "precious metals niche," rather than a turning signal for macro asset allocation.