Following significant strength last year, the buying behind gold and silver is no longer driven by a single source of capital but by multiple overlapping macroeconomic and industry forces, making a reversal difficult in the short term. High price levels for precious metals are likely to persist and further transmit to mining sector mergers and acquisitions, with related stocks potentially having room for catch-up gains.
On February 3, Coeur Mining CEO Mitchell Krebs stated in an interview with Bloomberg that the gold rally is driven by "all factors combined," including a weaker US dollar, central bank diversification, expectations for future lower interest rates, debt and deficit pressures, and geopolitical uncertainty.
Silver, while sharing the aforementioned macro factors, also benefits from strong industrial demand.
At the industry level, Mitchell Krebs believes the high-price environment will drive more mergers and acquisitions and a return of capital to mining stocks. Having recently received shareholder approval to acquire New Gold, and following the earlier completion of the Silvercrest acquisition, Coeur is positioning itself as a "North American precious metals mining platform."
He stated that as the market gradually recognizes the sustainability of current price levels, both deal activity and demand for allocations to mining stocks are expected to heat up, while the reaction of mining stocks to the rise in gold and silver has so far been insufficient.
The core drivers of gold: Central bank diversification and interest rate expectations in sync
In the interview, Mitchell Krebs attributed gold's upward drive to multiple "tailwinds blowing simultaneously." Among these, he views central banks diversifying their reserves away from assets like US Treasuries as one of the important forces supporting gold over the past several years.
He also mentioned that market expectations for lower future interest rates, combined with debt and deficit issues and geopolitical instability, collectively form the macro foundation for gold demand, making it more akin to a sustained asset reallocation rather than short-term sentiment trading.
Silver leans more "industrial metal": Electrification demand and supply-demand gaps amplify volatility
Compared to gold, Mitchell Krebs emphasized that silver's difference lies in its heavier weighting towards industrial demand. He listed examples, stating that silver benefits from increased usage driven by the electrification wave, from solar panels in power generation to "anything with a switch" in power distribution and end applications, including circuits, semiconductors, as well as electric vehicles, robotics, and data centers.
On the supply side, he noted that the silver market has experienced a supply-demand deficit for five consecutive years. Given that the silver market is smaller than gold's, he believes that against this supply-demand backdrop, speculative forces can more easily accumulate, thereby amplifying price volatility.
A new demand variable: Tether and the "central bank-style" buying narrative
When discussing changes in demand structure, Mitchell Krebs mentioned the Bloomberg report on Tether, calling it "surprising," and noted that the company has quietly amassed a substantial gold reserve, comparable in size to some of the world's largest central banks.
He also pointed out that the trend of central bank gold buying has persisted for four years and accelerated after Russia's invasion of Ukraine in 2022, driven by the motivation to diversify away from US dollar dependence more rapidly. He believes this theme has not weakened but is strengthening, with no signs of change in the near term.
Miner strategy: Coeur bets on North American assets and "low-risk exposure"
Against the backdrop of strong gold and silver prices, Mitchell Krebs shifted the industry focus to how mining companies can translate price premiums into cash flow and scale advantages. He said Coeur is reinvesting internally through methods like exploration and production expansion, while simultaneously pursuing serial M&A, having completed the Silvercrest deal last year and receiving shareholder approval to acquire New Gold just last week.
He stated that the post-merger Coeur will form a "North American mining platform," with its business footprint focused on Canada, the US, and Mexico. As investors seeking precious metals exposure increasingly prioritize jurisdiction and risk controllability, the company aims to attract more equity capital with its "low-risk exposure" profile.
M&A and valuation: Expectations of price sustainability may drive catch-up in mining stocks
Mitchell Krebs anticipates that as companies and investors gain more confidence in the sustainability of current price levels, more M&A transactions will emerge. He mentioned new deal announcements already appearing in the industry that day and believes such activity is likely to continue.
At the secondary market level, he judges that the rise in gold and silver prices has not yet been fully priced into mining stocks. As the industry begins to report fourth-quarter earnings in the coming weeks, and subsequent quarters may show stronger cash flow performance, mining stocks have potential catalysts for a re-rating.
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