Why Does David Erfle Recommend Waiting Out Market Panic with Cash?

TL;DR

David Erfle recommends holding substantial cash, stepping back, and waiting for market panic to subside before making major investment decisions. At PDAC Day 2, he linked gold’s $125 reversal to margin calls and profit-taking used to cover losses elsewhere, while warning that more panic selling could follow an expected bounce. Read on for his views on gold, junior miners, and evaluating mining projects through site visits.

Transcript

with the investing news network I'm Scott Tibbles we're at PDAC day two and joining me now is David earthly founder of jr. my no junkie thank you so much for joining me David thank you Scott always great to talk to you so day two what are your thoughts on sentiments obviously there's a lot of coronavirus concerns going along as we were just discuss... Read More

Key Insights

• 🥺 The coronavirus concerns have affected the PDAC conference, leading to a sparse crowd and companies not attending.
• 💦 The recent drop in gold prices can be attributed to margin calls and profit-taking to cover losses in other areas.
• 🏅 The gold price is expected to bounce back, but further panic selling may occur, causing uncertainty.
• 💁 Site visits provide investors with valuable firsthand information about mining projects, helping them make informed investment decisions.
• ❓ Developing relationships with company management can increase the chances of being invited on site visits.
• ❓ Transparency and honesty from company management are crucial for a successful site visit experience.
• 🧘 During times of uncertainty, maintaining a large cash position and waiting for the panic to subside can help protect wealth.

Questions & Answers

Q: Why does David Erfle recommend waiting out market panic with cash?

Erfle says he is holding a substantial amount of cash and is not yet trying to buy at the bottom. With the market facing panic and uncertainty, he recommends taking a deep breath, stepping back, and waiting for the hysteria to subside.

Q: Why did the gold price fall so sharply?

Erfle attributes the decline to margin calls and profit-taking. After gold broke out above 1375 to 1,400, investors had profits they could realize to cover losses elsewhere, and gold was easy to sell because it is a liquid asset.

Q: Could more panic selling happen after gold rebounds?

Erfle expects gold to bounce, but he describes the outlook as a 50/50 scenario. He says there is a good chance of additional panic selling after the bounce, which is why he is waiting rather than buying immediately.

Q: Why were junior mining stocks hit even harder?

Erfle says junior mining stocks were hit harder because they are risky assets. During the panic, investors sold risky holdings first.

Q: What was market sentiment like at PDAC Day 2?

The PDAC Day 2 crowd was sparse amid coronavirus concerns, and many companies did not attend. Erfle also encountered a canceled program and said the gold price’s $125 reversal likely discouraged some people who were already uncertain about attending.

Q: What could influence the gold price after its rebound above 1600?

Erfle says markets were waiting to see when central banks would introduce major measures. He notes that markets had already priced in a half-point Federal Reserve rate cut and says the market’s reaction to such action would be important.

Q: Why are mining project site visits valuable to investors?

Site visits help investors understand a project’s scope and scale while identifying possible water, wildlife, and community issues. Being at the project also prompts questions that may not arise while speaking with a company at a conference booth.

Q: How can an individual investor get invited to a mining site visit?

Erfle recommends getting to know company management and showing serious interest in the project. If management believes an investor is considering a substantial investment, the company may invite that person on a site visit.

Summary & Key Takeaways

• PDAC Day 2 had a sparse crowd due to coronavirus concerns, with many companies not showing up.

• The recent reversal in the gold price, dropping significantly within a short amount of time, can be attributed to margin calls and profit-taking to cover losses.

• The gold price is expected to bounce back, but further panic selling may occur in the future, leading to uncertainty in the markets.