Colin Kettell, founder of the raw materials company Palisades Gold, recently published a blazing appeal for investments in small junior companies. Kettell points out that the TSX Venture Composite Index is currently trading at multi-year lows. This is extremely unusual during a gold bull market. For years, the Canadian raw materials market would have distinguished itself by the fact that rising prices would have led to a “trickle effect” from top to bottom.
Rising prices pushed the stocks
Rising prices initially pushed the stocks of large commodity producers and later led investors to discover medium-sized companies. This would have had the consequence that the differences in valuation compared to junior companies, i.e. exploration and development companies without their own funding, had become so great that this sector had also ultimately benefited.
Kettell still believes that such a scenario is realistic today: For example, gold would benefit too much from the current market situation. Still, prices from smaller companies in the sector would not have risen. This could be because market observers believed that everything was different this time. The boom would only affect large companies. According to some market observers, the increased use of ETFs could also lead to smaller companies that are not represented in important indices being ignored by the market.