EV/Lithium

Originally posted by 1ronnie: ↑

Why Gold over Lithium?

I am not talking about next week, next month, but the next 1-2 years

First Demand
* Demand for Gold is soaring, not just by central bankers (mainly China, emerging economies) but wealthy family offices, individual buying and soon ETF inflows.
Lithium demand has fallen due to battery oversupply and overcapacity, resulting in large lithium miners scaling back short term production activities. EV demand and growth moderating due to a variety of reasons as covered under my EV/Lithium thread

* Demand for Gold will rise more as and when the USD eventually drops, that is when the Fed finally pivots...and we know that will happen.
Demand for Lithium is beholden to EV growth which is susceptible to an economic downturn. And there is higher probability of the global economy falling into recession or continue under slow gear pace than a return to a robust economy, especially with China's struggling economy. EV growth needs lower priced lithium to scale for mass adoption. So a higher lithium price won't help its cause because it does not help EVs becoming cheaper to grow faster to reach a higher penetration rate into the motor vehicle industry.

* Demand for Gold is driven by both geopolitics and safe haven seeking and we know that would only gain more traction
Demand for Lithium is insecure as EV battery chemical technology is subject to potentially rapid change, just look at nickel now, once a darling metal due to its main input in NCM battery for EVs now less relevant as cheaper LFP (lithium iron phosphate) taking over

* Gold price is in an upward trajectory; lithium has crashed and consolidating in a tight range lower band and could stay there for a more protracted time. China is helping Gold go higher, on the other hand is helping lithium go lower. And with Chinese EV commanding a lion share of the world EV market, we can reasonably conclude that China won't allow lithium price to return to those levels in 2020-21

SUPPLY
* Gold is increasingly more costly to produce as the low hanging fruit gold deposits have already been dug up. And with lower supply at higher production cost, Gold will have to go higher. If it doesn't, gold mine production would shrink with lower investments and help gold price to go up again.
Lithium supply is abundant and available in many countries and continents and the EV revolution has sparked a race to explore and produce them virtually in all continents. There won't be a short of supply despite the lower lithium price, because lithium miners know and believe that demand will return as it takes a long time to produce lithium. The increasing supply over time would actually meet the moderating EV growth and hence demand so on balance there is unlikely to be any deficit (or large deficit) enough to warrant a substantial rise in lithium price. It is the lack of lithium processing that is more a concern than a spodumene raw material and China controls it to a large extent.

* Australian Gold has no worries about finding a market. Gold is easily sold when produced.
Australian Lithium has no buyers on the domestic front. BYD which is now the No 1 EV maker has 3 African lithium mines that can satisfy 10 years of its demand, and it has another in Chile. Tesla produces many of its EVs in China as with other EU OEMs as well, they can source lithium from closer to China, while its US plants could buy from both US and Australia. Logistically, we are further away from the EV producing plants so our costs are likely higher than those produced from Africa, South America and even DLE brine from US.
* Australian gold stocks stand to gain from higher AUD gold price and present as a leverage play.
Australian lithium stocks are likely hampered by a lower lithium (Spod) price for longer and face margin compression from high opex and capex costs and cost of capital, and can only likely increase profits from higher production levels, if it could do that.

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1ronnie - I am amazed you find the time for posting regularly on here - and to also post on some relevant threads (LTR) - I held LTR, made a good profit, sold out.
I learnt my lesson about posting bad news on a different thread (EUR) - where I, along with 2 or 3 others, posted facts we had read in the local newspapers (because we understand the language) and we were totally disregarded and/or vilified over it.
There is a tendency for true believers to form a cult, with one or two cult leaders, who then proceed to help everyone 'keep the faith' - true information has no business in this, and is regarded as pure 'evil' by the believers. There must be a way to make graphs depicting the emotional state of the rock-solid and 'believing' investors along with the share graph of a stock - and I bet you anything a similar pattern will show with all once favourite stocks.
(Just my tuppence worth of wisdom, which has cost me dearly - I once believed, too.)
I do find your daily column very informative and I am grateful you devote so much time to it. Today, it was almost all day, with some short breaks in the morning, when you probably gathered information . . . .
Thankyou!!
Taurisk