The Gold ‘Capital Waterfall’

Understanding How Money Moves From Gold Prices To Juniors

If gold keeps performing at record highs, why aren’t the junior gold miners doing the same?

A well-established dynamic in gold cycles is that junior explorers consistently lag behind the price of gold. This is a natural outcome of how capital flows through the sector.

Gold itself is a global macro asset. It trades 24/7 and reacts instantly to interest rate changes, inflation, and geopolitical shocks — essentially anything that drives investors toward safety. That’s what we’re seeing now with gold hitting all-time highs. Once gold begins to move, capital tends to flow down the chain in a waterfall effect — first into the metal itself, then into senior producers, followed by mid-tiers, and eventually into junior explorers. Each tier comes with more volatility and more risk, which ties into the concept of risk tiering: capital always flows from safe to risky.  Juniors, being at the far end of that spectrum, typically begin to move only once confidence in the gold rally has been firmly established.

These are some of the reasons why junior gold companies tend to lag the broader gold rally:

Junior gold companies are inherently high-risk. Early-stage explorers often have no revenue, no NI 43-101-compliant resource, high burn rates, and ongoing capital needs. As a result, generalist investors wait to see if the gold rally has legs before betting on these riskier names.

Then there’s the dilution overhang. Most juniors have survived long bear markets by issuing shares, and as soon as the price starts to move, early shareholders who’ve been sitting underwater often sell out. That selling pressure drags on momentum in the early stages of a bull cycle.

There is also a natural delay in catalysts. Even when financing is secured, it can take months before capital is deployed, drilling occurs, and results are published — by which time the gold price may have already advanced significantly.

“Pavilion has been deliberately designed to let this waterfall run its course…”

Additionally, junior explorers often lack analyst coverage. Early in the cycle, most juniors have little to no analyst coverage, minimal media exposure, and are completely off the radar of institutional investors. So even if they look cheap, they can stay cheap for a while until the mainstream catches on.

This dynamic shifts in the speculation phase — the late stage of the cycle when retail and momentum money piles into juniors chasing high-grade results, new discoveries, or M&A potential. This is typically when the sharpest upside occurs and when the lag can turn into a slingshot. Speculative capital pours into the names that were previously ignored, especially those reporting exciting high-grade discoveries. Even companies with mediocre projects or weak fundamentals can see big runs, simply because they’re in the right district or riding the momentum wave. While this phase can generate significant returns, it often signals the later innings of a junior gold run, where disciplined profit-taking becomes increasingly important. That said, it’s worth emphasizing that the “capital waterfall” we speak of does not unfold overnight — it typically plays out gradually over many months or even years.

Why are we telling you this? Because this takes time, and Pavilion has been deliberately designed to let this waterfall run its course to the benefit of junior miners and investors.

Based on current market dynamics, we believe we are still in the early phases of this cycle.

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Pavilion FTLP 2025-1 is now open to investment. Contact your advisor for details or email us at service@accilentcapital.com.

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