Time to Buy Coal

Time to Buy Coal, by David Archibald. First, the 1997 signal to buy gold:

The signal to buy gold was the Reserve Bank of Australia’s selling of two thirds of Australia’s then gold reserves, at about US$350/oz in 1997. That was 167 tonnes, then worth US$1.9 billion and now worth US$10.7 billion. The reason the RBA sold most of our gold is because they considered gold to be a barbaric relic left over from unenlightened times. The official reason was that they weren’t getting an interest income from the holding. …

While the nation has had some US$9.0 billion of value forgone by that RBA decision to date, that figure is set to blow out given credible forecasts of what the gold price will do. For example, the New York investment firm of Goehring & Rozencwajg recently produced a report entitled “On the Verge of an Energy Crisis”. On page 20 of that report is this discussion of the gold price outlook:

There is an historical relationship between the size of a central bank’s balance sheet and the price of gold going back to the Federal Reserve’s establishment in 1913. Even adjusting the Fed’s balance sheet for excess reserves (a debate in and of itself), we believe today’s balance sheet justifies a gold price in excess of $15,000 per ounce on the low side or $25,000 per ounce on the high end. ...

The lesson:

Virtue-signalling hysterics produce the highest-quality buy and sell signals. They pick the bottoms and tops of multi-decadal trends — just do the opposite of what they do.

Now a similar signal has been generated in coal:

Our major mining companies have been captured by virtue-signalling hysterics, and management makes sure they are succeeded by other virtue-signalling hysterics. What has low emissions got to do with company profitability?

These companies have also lost competence in running mining operations. … BHP and Rio Tinto are run by incompetent, virtue-signalling hysterics, but that is also true of the whole country now.

Why might coal now be a good multi-decadal investment? … Each tonne of coal, on average, contains the equivalent of two barrels of oil. … In the first decade of this century the natural gas price, for a few years, went to the oil price in energy equivalent terms. Eventually the coal price will go to the oil price in energy equivalent terms, less the conversion cost. That frabjous day is coming.

That, plus the world is about to find out that it’s not carbon dioxide that controls the global temperature. While it has an influence, its role is greatly exaggerated in the climate models.