What you need to know: • Gold had strong start to the year rising over $100/oz to $1928/oz in January. Copper also rose dramatically, rallying 12% to $4.20/lb • We anticipate 2023 to be a standout year for both precious metals and base metals and encourage investors to position themselves accordingly • Many central banks bought record levels of gold in January fuelling the price increase; gold takes hold as a safe-haven Sentiment Update As we anticipated from our December note, the mining sector had a strong start to the year with gold and copper breaking out to near-term highs up 6% to $1928/oz and 12% to $4.20/lb, respectively, during the month of January. Silver, lead, and some other metals struggled, however the equities still performed well. The breakout month for gold and copper drove the miners to outperform broader markets with the GDX, SIL, and COPX up 11.7%, 7.5%, and 16.6%, respectively, compared to the TSX which was up 7.1%. We anticipate this strong start to the year for precious metals to continue as a recession becomes increasingly inevitable, rate hikes come to an end, quantitative tightening slows, and central banks quickly build their gold reserves. On Feb 1st, the Fed raised rates 25 bps, its smallest increase in 11 months, bringing the target for the federal funds rate to a range of 4.5% to 4.75% (compared to the previously stated 2023 target of 5.1%). Despite Powell stating another hike is likely in March, this is another step in the direction of a pivot. Markets rose on the news signalling its belief that the fight against inflation is almost over. We don’t share that opinion and think inflation will be stickier than expected. With inflation declining at a measly pace, we think that in 2023, gold will increasingly be viewed as a safe-haven especially considering the deteriorating economic data and potential for lower interest rates. Following a strong month in the mining equity space, we believe there exists further upside as the negative sentiment towards mining investment begins to lighten on the back of significant market outperformance. Investor sentiment towards the producers, who have battled dramatic cost inflation over the last several months, has begun to turn positive as the peaking (and now declining) of inflation and rising gold price should make for a strong first quarter if things persist. Many developers are stuck between a rock and a hard place as investors wait to see the full effect inflation on capex estimates and the financing terms due to elevated rates, while the recent rise in the gold price doesn’t help much as most economic studies will continue to use conservative gold price estimates in the $1,500-1,600/oz range. We will be monitoring the results of newly released economic studies as well as financing terms for mine construction over the next several months before forming an investment decision in the developers. The explorers, despite having a strong January, remain inexpensive and continue to trade at an average of ~$33/oz (in the ground), down ~50% from 2020 highs. Molybdenum had a record month rising 58% to $73.5/kg.