“Make no mistake, we’re in a gold bull market.”
This is according to legendary natural resource investor Rick Rule who firmly believes bull markets follow predictable patterns and this means the rest of the mining sector will soon follow.
In a wide ranging interview with Mining.com.au, the globally renowned investor details how as a safe and resource-rich country, Australia is well-positioned to benefit substantially from the forthcoming touted boom.
“We’re going to see a bull market that’s reminiscent of the bull market that we enjoyed in the early part of the decade of the 90s. Bull markets follow predictable patterns. The market is led by the commodity,” Rule explains to this news service.
“We saw that in 2023 in gold. Gold led, but the gold stocks went nowhere. That’s easy to understand. The buyers were foreign central banks and they didn’t buy shares, right?
“So, the asset class that had a buyer went up and the asset class that didn’t have a buyer didn’t go up. Surprise, surprise. But that follows an age-old pattern because gold bull markets are led by fear buyers and fear buyers don’t buy stock, they buy the gold.”
The veteran investor suggests two things happen when gold itself establishes the momentum. The first is that the inertia of the precious metal reinforces the gold narrative and makes the whole sector around it ‘more interesting’.
The second thing is that the increase in the gold price, once momentum gets underway, is faster than the increase in the input cost to produce it.
As such, the biggest and the best producers start to deliver “absolutely blowout earnings” – something witnessed in 2024 when most gold miners exceeded their own optimistic performances about their quarters. And investors were newly conditioned to that by the increase in the price.
Gold prices have surged in the just-completed financial year, rising to more than $5,000 (about US$3,300) an ounce with a return of 43%, according to ABC Bullion.
Cracking the bullwhip
As Rule tells this news service, the best way to visualise the impending bull market is by envisaging a circus master’s whip. Picturing the handle of the whip, well the front of the whip moves first, that’s gold. That has to precede.
The next thing that whips past the circus master’s shoulder are the biggest and highest quality companies in the world to move next, pulled by gold.
“Then the best of the rest move. Then the developers move. Then the penny dreadfuls move. This follows a predictable pattern with each stage of the rip whip,” Rule continues.
“When they move, they move faster and they move further. But the whip moves qualitatively.”
The veteran investor says the market is now in the part of the whip that favours majors like Franco-Nevada Corporation (NYSE:FNV) and Agnico Eagle Mines (NYSE:AEM) – “the best of the best”.
“Then the best of the rest move. Then the developers move. Then the penny dreadfuls move. This follows a predictable pattern with each stage of the rip whip”
“But the move will come very quickly to the best of the rest.”
Stopping short of declaring a broader industrial materials bull run being underway, Rule thinks that market at present is hampered by the spectre of a worldwide recession.
While his view is to not look for relief in nickel, copper, or oil and gas in the near-term, he remains adamant their time will come too – and soon enough.
Niv Dagan, founder of Peak Asset Management, agrees. He believes the capital inflows already seen with commodities like antimony, copper, palladium, platinum, rare earths, and tungsten, will continue in the second half of the year.
Amid various conflicts around the world, a falling US dollar, and China’s restrictions on metals such as antimony, germanium, palladium, REEs, and tungsten, the outlook looks positive as capital will flow towards commodities, as they are denominated in USD, Dagan tells Mining.com.au.
Dagan also believes the market is likely to enter into a significant commodity bull cycle.
Bull run has begun
In terms of the biggest and the best producers delivering solid earnings with many outperforming their own expectations, the belief is it’s currently back to the future with gold miners.
“We saw just 15 weeks ago, investor interest, retail investor interest stormed back into the gold ETFs after having been absent for three years. This has happened in every bull market of my life. When that happens, the senior producers – the largest, the most liquid, the highest quality producers develop valuation disparities,” Rule explains.
“They get the buyers and in particular, they get the index and passive buyers. And so their share prices relative to their net asset values grow. Well, the best of the rest – the other producers don’t participate.”
Then one of two things happens under this scenario. The ‘relative value’ investors – the Rick Rules of the world – assess certain asset classes to be cheaper than the class that has already moved.
“So I have to shift some of my dough from up here to down here. If that doesn’t happen, the big guys take over the little guys because their cost of capital is lower. After that happens, the single asset producers and the best of the rest move for the same reason – valuation discrepancies,” Rule continues.
“And then finally, the juniors and developers move. These follow predictable patterns. This will happen again. There is a bull market coming to a sector near you. In fact, we’re in it. I’ve seen these before.”
“There is a bull market coming to a sector near you. In fact, we’re in it. I’ve seen these before”
The World Gold Council has released its Gold Market and ETF reports for April 2025, which saw gold rise 6% as the US dollar plunged and uncertainty escalated, finishing just above US$3,300 an ounce.
Structural factors likely to continue driving investment demand include US policy uncertainty and their effect on the US dollar, inflation concerns, and the prospect of rate cuts, as well as overall gold market capacity (investment levels remain below record highs while ETF adoption grows).
Looking at gold ETFs, physically backed funds attracted US$11 billion globally, pushing total assets under management (AUM) to a new global high of US$379 billion ($575.45 billion). Asia-led inflows accounted for 65% of the net global total – the region’s strongest month on record.
Australian ETF investment continues to grow into new record territory, adding 1.2 tonnes in April (4 tonnes year-to-date), pushing total local ETF assets under management to US$4.9 billion.
Can calves catch up?
“Well, let’s start with the bad news. The junior market as a whole worldwide deserves to be a wreck. If you merged every junior in the world, all 3,000 of them, the Australians, the Canadians, from AIM (the international market for growing companies trading on the London Stock Exchange), the US over-the-counter crap. If you merged them all into one company, (hypothetically called) Junior ExplorCo, that company in a good year would lose US$2 billion,” Rule says.
“Expenditures over M&A, stuff like that in a bad year, which perversely they would call a good year, because they could raise money, they’d lose US$10 billion.”
According to Rule, globally there are too many juniors and many “aren’t worth the paper that they’re printed on”.
“That belies the fact that five, 10, sometimes 15% of the juniors generate such exquisite value that they add legitimacy and even lustre to the sector. And that subset of high quality juniors is going to absolutely rip.”
“(But) we’re going to see a bull market that’s reminiscent of the bull market that we enjoyed in the early part of the decade of the 90s. Take it from me, it was a lot of fun.”
In June, the World Gold Council released its 2025 Central Bank Gold Reserves Survey showing an overwhelming majority of respondents expect gold reserves to increase, up from last year.
The annual survey collected data from 73 of the world’s central banks – the highest response since the survey began eight years ago, representing about half of the central bank community.
The survey shows that 95% of respondents believe central banks overall will increase their gold reserves in the coming 12 months, up from 81% last year.
Some 43% of respondents have plans to increase their gold reserves in the coming 12 months, up from 29% last year, and 76% of respondents believe the precious metal will be a larger proportion of global reserve assets in five years’ time, up from 69% from 2024.
Gold’s performance during times of crisis, its use as an effective portfolio diversifier, and its role as a long-term store of value were the top three most relevant reasons for central banks to hold gold.
The Rule Symposium 2025 is coming to Boca Raton, Florida from 7-11 July. Mining.com.au will again be in attendance this year.
Write to Adam Orlando at Mining.com.au
Images: iStock, Unsplash & World Gold Council
