Top Stories This Week: Burry of “Big Short” Fame Touts Gold; Lithium Faces Turmoil

Editor’s Picks: Burry of “Big Short” Fame Touts Gold; Lithium Faces

After ending last week above US$1,760 per ounce, gold went even higher this week.

The yellow metal peaked at about US$1,783 on Wednesday (November 16), but had fallen back down to the US$1,750 level by the time of this writing on Friday (November 18). Hawkish comments from US Federal Reserve officials, including James Bullard and Esther George, appear to have put a cap on gold’s progress. Bullard said the central bank needs to keep raising rates to fight inflation, while George said bringing down inflation may require a contraction in the economy.

At the same time, gold has attracted attention from a perhaps unlikely source. “The Big Short” investor Michael Burry said on Twitter that he’s long thought the time for gold would be when “crypto scandals merge into contagion.”

Burry didn’t elaborate in the now-deleted tweet, but market watchers see it as a reference to the collapse of crypto trading platform FTX and other related issues. In contrast to the crypto volatility seen this year, gold has held its value — it’s currently down only about 3 percent year-to-date compared to Bitcoin’s roughly 65 percent drop.

Bearish bank reports hurt lithium stocks

In the lithium sector, stocks were rocked this week by new reports from Goldman Sachs (NYSE:GS) and Credit Suisse (NYSE:CS).

Back in June, Goldman Sachs created market turmoil with its claim that the battery metals bull market was over, at least for the moment. In its new report, released last week, the investment bank said it no longer expects the major surpluses it originally predicted for this year and next year, but still sees price pressure in 2023.

For its part, Credit Suisse reported that Wuxi lithium carbonate futures were down on “speculation in China that a major cathode producer might have slashed production targets,” as well as forecasts of a softer market later on in 2023.

Speaking to INN’s Priscila Barrera at the Benchmark Week event in California, Rodney Hooper of RK Equity honed in on the Goldman Sachs commentary, saying that his issues with the first and second report are the same — lithium production doesn’t equate to battery-grade supply, meaning that not all output makes it into batteries.

“Lithium production does not mean battery-grade supply, they’re two separate things. Qualification timelines are still tough. Everything that’s produced is not qualifying into the supply chain” — Rodney Hooper, RK Equity

When asked whether the negative sentiment from Goldman Sachs and Credit Suisse has created a buying opportunity in the lithium sector, Rodney said it’s important to be selective given the run that companies have already seen. However, like many experts, he has high hopes for the long term, and thinks early stage companies have potential.

“I still think that early stage companies that can drill up have a lot of opportunity if we’re going to see elevated prices for most of this decade, which a lot of us believe that you will” — Rodney Hooper, RK Equity

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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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