Don Durrett: Wall Street Is Ignoring the Cheapest Stocks in the Market
Summary
- Don Durrett argues gold and silver mining stocks remain dramatically undervalued despite the metals' strong price appreciation over the last two years.
- He identifies the bull market for gold as starting in February 2024, with silver joining in August 2025, and believes the cycle is still in its early innings.
- He expects at least two more years of rally in precious metals.
- The primary driver for gold's rise is not inflation but a fundamental, concerning change in the global economic system, signaled by non-Western central bank buying.
- The gold-to-silver ratio (GSR) is currently around 50 but is expected to normalize to 30-40, indicating significant potential upside for silver.
- Mining equity valuations have severely lagged the underlying metal prices; the SILJ ETF (silver miners) has not appreciated proportionally to silver's rise.
- At a gold price of $6,000, elite gold miners represent 2.5x to 3x return potential ("baggers"); at $7,000 gold, they are 3x return potential.
- Silver miners are seen as having at least 5x return potential from current levels.
- Wall Street is not yet involved in the mining sector, which is cited as a sign of being early in the cycle and a future source of buying pressure.
- The bond market is highlighted as a key variable for driving gold toward $7,000 and beyond.
Trade Ideas
Speaker states the precious metals bull market is in its early stages and expects "at least two more years" of rally. Gold's rise is attributed to a fundamental breakdown in the economic system, not inflation, with demand driven by non-Western central banks. The bull market thesis implies continued price appreciation with a cited target range of $6,000 to $7,000, offering significant upside. A resolution of the perceived systemic economic stresses or a shift in central bank buying behavior could halt the rally.
Speaker notes silver's bull market began later than gold's and that the Gold-to-Silver Ratio (GSR), though down from 120, remains elevated near 50 versus a historical norm of 30-40. As a monetary metal, silver tends to catch up to gold in a bull market; the current GSR implies substantial undervaluation relative to gold. Silver offers leveraged upside to the same macroeconomic drivers as gold, with the expectation it will rally to close the GSR gap. A stall in the gold bull market or a sustained divergence in monetary versus industrial demand could impair the thesis.
Speaker explicitly states gold mining stocks are cheap, lagging the metal's price rise, and that "elite gold miners" offer 2.5x to 3x return potential at $6,000-$7,000 gold. Higher gold prices directly and powerfully expand miner profit margins and free cash flow, but equity valuations have not yet discounted this due to Wall Street disinterest and investor misunderstanding. Gold miners represent a high-leverage, undervalued play on rising gold prices, trading at a fraction of their estimated fair value. Operational execution risks, cost inflation, and a failure of gold prices to reach expected targets could negate the upside.
Speaker argues silver mining stocks are extremely undervalued, noting their prices have not kept pace with silver's rise, using the SILJ ETF as an example of this disconnect. With silver prices well above the $35 level where miner margins were weak, profitability should surge, yet equity valuations have not reflected this improvement. Silver mining stocks are positioned for massive upside (characterized as "at least five baggers") as the sector catches up to the metal's bull market. These stocks are typically more volatile and carry higher operational/geopolitical risks than gold miners; a sustained decline in silver prices would be particularly damaging.
