Gold Equities Outpace Commodity 4x as Fresh Institutional Money Floods Mining Sector

• Olive Resource Capital posted exceptional September returns of 38-39%, bringing year-to-date performance to 121%, significantly outperforming major commodity ETFs like GDX and COPX which gained 20%
• Gold equities outperformed the underlying commodity by approximately 4x in August and September, signaling fresh generalist money flowing into the sector and indicating a more sustainable bull market ahead
• Over $1 billion in capital was raised in the sector last week, demonstrating institutional interest and marking the transition from early recovery to intermediate phase of the commodity cycle
• Derek emphasises the bull market is still in "early innings" (third inning analogy), with substantial runway remaining despite significant gains, supported by central bank buying and weakening US dollar
• Key strategy is to reassess positions continuously rather than selling on gains, as companies may be cheaper on a relative basis after positive results due to improved fundamentals and higher commodity prices

Olive Resource Capital delivered a comprehensive market update highlighting exceptional performance through September 2025, with broader implications for investors navigating the current commodity cycle. The discussion between Derek Macpherson, Executive Chairman and Sam Pelaez, President, CEO & CIO, provides insight into portfolio performance, market dynamics, and investment strategy during what they characterise as the early stages of a commodity bull market.

Exceptional Portfolio Performance

Olive Resource Capital recorded what management described as potentially their best month ever, with September returns between 38-39%. This performance propelled the fund to 121% gains year-to-date, following strong results in the first and second quarters.

The September performance represented significant outperformance relative to benchmark indices. The GDX, the largest gold investment ETF, gained 20% in US dollar terms during September, while the COPX copper industry equivalent also rose 20%. Sam emphasised that despite approximately half of Olive's assets being allocated to precious metals including platinum group metals, the fund delivered returns comparable to gold-focused products while maintaining broader commodity exposure.

"We are not a gold investment product. At any given time, we have about half of our assets in precious metals. That also includes PGMs. But we've been able to deliver gold-like returns and that obviously is testament of the outperformance of our portfolio."

Market Dynamics and Capital Flows

A critical observation highlighted by management concerns the relationship between equity and commodity performance. During August and September, gold equities outperformed the underlying commodity by approximately fourfold. Gold equities gained roughly 20% each month while the gold commodity itself advanced 5-7%. According to Sam, this pattern indicates fresh capital entering the sector, particularly generalist money from outside traditional commodity investors.

"You're talking about typically 4x performance of the equities to the commodity. That only happens when there's fresh money coming into the space. There's no other way where that can happen. It’s the generalist money and the money that's on the fringes coming directly to participate in the industry and buying up these equities."

The capital raising environment corroborated this assessment. Over $1 billion in capital was raised in the sector within a single week, primarily directed toward pre-production equities across various project stages. Derek noted that financings exceeding $100 million typically signal generalist money participation, as the capital-intensive nature of mining requires substantial outside investment during bull markets.

Bull Market Positioning

The duo characterised the current environment as transitioning from early recovery to the intermediate phase of the commodity cycle. However, they cautioned against assuming the cycle is mature, using a baseball analogy to suggest the market is approximately in the "third inning" rather than approaching conclusion.

Several factors support the view that substantial upside remains. Gold is approaching $4,000 per ounce (*ed: it has surpassed $4,000 since this discussion was filmed), with management noting the absence of obvious catalysts that would materially slow price appreciation. While geopolitical risks in the Middle East and Ukraine could potentially reduce risk premiums, the fundamental drivers like central bank buying and US dollar weakness remain intact and mutually reinforcing.

The two also observed increased visibility for mining and gold investments across media channels previously absent from the sector, indicating broadening interest. However, they noted the market has not yet reached the speculative excess characteristic of late-cycle behaviour, such as indiscriminate capital deployment to unprepared companies or projects lacking quality catalysts.

Equity-Commodity Performance Relationship

The discussion shed light on the significance of equities outperforming underlying commodities. Sam explained that when equities lead commodities, it signals market expectations that commodity price increases will be permanent and that additional profits will flow to company bottom lines rather than being absorbed by cost inflation. Historical precedent suggests this pattern indicates more sustainable, longer-duration bull markets compared to commodity-led rallies typically driven by supply constraints.

This dynamic extends beyond gold. Derek noted that copper, zinc, and other industrial metals are showing signs of strength, with the COPX matching GDX performance in September. They observed that fundamentals driving gold appreciation ultimately benefit other hard assets, with silver typically following gold and industrial commodities subsequently participating in the broader rally.

"The fundamentals that drive gold higher ultimately benefit all sorts of hard assets including other commodities like copper, platinum, palladium, etc. After following gold, silver is second and we've seen a big move in silver.” 

Investment Strategy in Bull Markets

A significant portion of the discussion addressed investment decision-making during bull markets, particularly regarding positions showing substantial gains. Sam pointed out that natural investor bias toward selling winning positions can be counterproductive, using the example of positions up 200-300% that may actually be cheaper on a relative basis following positive developments.

"Some of the stocks that we've talked about recently on this podcast that are up multiple times on the back of specific results may be even cheaper today based on the new results than they were prior to the results. What I'm trying to say is that, [in some cases,] I'm more compelled to buy more today than I was before the results in some cases."

The Great Bear Resources example illustrated this principle. The company traded at $1 per share initially, reaching $5 before pulling back, then $10 with another pullback, and $15 with further retracement. Sam noted the stock experienced four separate drawdowns exceeding 50% from previous highs before ultimately being acquired at $28-29 per share and importantly, this occurred outside a commodity bull market without the benefit of rising commodity prices.

The duo advised continuously reassessing positions based on new information rather than anchoring to historical entry points or previous price targets. They cited their K92 Mining position as an example: initially purchased at $6 with a $15 target, the stock now trades at $18. However, with gold prices having doubled and comparable valuations up 150%, management suggests the company has not yet realised its full organic value relative to current benchmarks.

Capital Raising Cycles and Market Opportunities

The discussion addressed the cyclical nature of capital raising and its market impact. Heavy capital raising periods in August and September typically lead to subsequent consolidation as investors who participated in financings reassess their positions. Many financings include warrants, and investors often need time post-closing to evaluate what they own and make portfolio adjustments.

This dynamic can create opportunities for patient investors. Derek noted that after intense capital raising periods, markets tend to experience lulls or modest pullbacks of 5-10%, which they do not view as threatening to the overall bull thesis but rather as opportunities to add positions or re-enter trimmed positions at more favourable levels.

Seasonal factors may also contribute to near-term consolidation, though management suggested that Federal Reserve rate cuts and dovish monetary policy could offset traditional seasonal weakness. The expectation of a pullback itself may prevent it from occurring, a common market dynamic where widely anticipated moves fail to materialise.

Approach to News Flow and Discovery

As the bull market progresses, increased capital enables more drilling and project advancement, resulting in accelerating news flow. Derek observed current news volume requires substantial analytical effort to process and reassess multiple positions continuously.

"This week has been incredible. Just the number of news items that we've received. Honestly, we're barely keeping our heads above water with all the other responsibilities just trying to reassess all of this new information."

They emphasised the importance of not dismissing opportunities simply because stocks have already moved substantially on initial results. Using Sterling Metals as an example, Derek noted that despite a 100% gain on drill results, the subsequent pullback might present attractive entry opportunities for investors who properly assess the discovery's significance and the company's ability to raise capital and advance the project.

The key discipline involves dropping historical biases and conducting fresh analysis as if evaluating a new opportunity, considering current commodity prices, comparable company valuations, and project advancement. This approach applies across the spectrum from explorers to producers.

Conclusion

The discussion underscores management's conviction that despite substantial year-to-date gains, the commodity bull market remains in relatively early stages with significant upside potential ahead. The combination of favourable technical indicators (equity outperformance of commodities), fundamental drivers (central bank buying, dollar weakness), and capital market dynamics (substantial institutional participation) supports a constructive medium-to-long-term outlook. Derek and Sam emphasis on continuous reassessment of positions rather than mechanical selling based on gains reflects their view that many opportunities remain undervalued relative to improving fundamentals and rising commodity prices. For investors, the key implication is that successful navigation of commodity bull markets requires flexibility in reassessing positions and overcoming natural biases toward anchoring on historical entry points or price targets that may no longer reflect current market conditions and company fundamentals.

TL;DR: 

Olive Resource Capital achieved 121% year-to-date returns through September, significantly outperforming commodity benchmarks, as gold equities outpaced the underlying commodity by 4x, a signal of fresh institutional capital and sustainable bull market characteristics. Management views the market as early-stage (third inning), supported by $1B+ weekly capital raises, central bank buying, and dollar weakness. The strategic focus is continuous position reassessment rather than mechanical profit-taking, as companies may be relatively cheaper post-positive results given improved fundamentals and higher commodity prices.

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