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Silver: Like Gold, Only On Steroids

Scorpio

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#1
Silver: Like Gold, Only On Steroids
Peter Krauth




Silver DRAMATICALLY outpaces other assets, this year included, and including gold…


We’re still in the early innings of a precious metals bull market.


And if you’re wondering whether you need to own some silver, my answer is categorically yes.


It’s only a matter of degree.


With silver that’s important because it acts like gold, but on steroids.


Silver can languish for extended periods, even if gold moves. But then it tends to play a rapid game of catch-up.


Timing such moves is difficult at best. Instead, it’s better to build a silver position on price weakness, then simply sit patiently.


Because as I’ll show you, the payoff tends to be very rewarding.


Silver Dramatically Outpaces Other Assets


Silver has been on a tear so far this year, up 38.3% versus gold’s 25.7%.


Much of that gain came in Q3, when silver clocked a 33% gain against gold’s more modest 6.7%.



By all accounts, silver’s being driven by its monetary metal characteristics. The jury is out on whether gold or silver was first to be used as a currency, but we do know that they were used going back at least 5,000 years.


Fans of both metals should be happy, since the oldest known coin is the Lydian trite from around 600 BC. It was made of electrum, which is a gold and silver alloy. Still, silver was the most commonly used metal in daily transactions until the 20th century.


More recently, demand for silver has exploded. The Silver Institute breaks down demand into five main categories: industrial, photography, jewelry, silverware and physical investment. 2019 saw smallish decreases in four of these categories over 2018. However, within the industrial sector, photovoltaics (solar panels) enjoyed a 6.7% increase.


The standout, however, is net physical demand, where 2019 saw an impressive 12.3% increase over 2018. In my view, given the large price gain this year, that trend will persist.


As well, Goldman Sachs equity analysts believe global solar installations will jump 50% between 2019 and 2023 as green energy silver demand surges higher.


Silver Investors Are Loyal


One telling indicator of the “stickiness” of silver ETF buying is the action of Robinhood account holders.



By all accounts, silver’s being driven by its monetary metal characteristics. The jury is out on whether gold or silver was first to be used as a currency, but we do know that they were used going back at least 5,000 years.


Fans of both metals should be happy, since the oldest known coin is the Lydian trite from around 600 BC. It was made of electrum, which is a gold and silver alloy. Still, silver was the most commonly used metal in daily transactions until the 20th century.


More recently, demand for silver has exploded. The Silver Institute breaks down demand into five main categories: industrial, photography, jewelry, silverware and physical investment. 2019 saw smallish decreases in four of these categories over 2018. However, within the industrial sector, photovoltaics (solar panels) enjoyed a 6.7% increase.


The standout, however, is net physical demand, where 2019 saw an impressive 12.3% increase over 2018. In my view, given the large price gain this year, that trend will persist.


As well, Goldman Sachs equity analysts believe global solar installations will jump 50% between 2019 and 2023 as green energy silver demand surges higher.


Silver Investors Are Loyal


One telling indicator of the “stickiness” of silver ETF buying is the action of Robinhood account holders.



Both the RSI and MACD momentum indicators have been trending upwards. But “smart money” silver hedgers are still short just over 56,000 contracts, not suggesting bullish sentiment right now.


If silver manages to rise from here, I’d watch for it to possibly “test” resistance near its 50-day moving average around $26. If it reverses from there then we’re likely looking at more weakness/consolidation before rallying.


The silver stocks to silver ratio has been rising slightly since early August.



But momentum has been flattening, and the 200-day moving average has been acting as overhead resistance. Also, in late September we saw the 50-day moving average cross downwards over the 200-day moving average, which also suggests possible ongoing weakness in the near term.


In my view, silver could require more selling to rebalance sentiment. If that happens, then of course I’d expect silver stocks to magnify such a drop.


Still, I expect any near-term weakness to remain short-lived. All the fundamental and technical drivers are in place to push gold and silver much higher in the months and years ahead.


As the next chart of SLV versus GLD shows, silver is up 108% against gold’s 29% since their March bottom. That’s nearly four times the return.



I think we could see silver take out its August $30 high, and possibly test the $37 level before year’s end.


So, if you’re concerned about silver’s volatility, then just allocate a smaller slice of your portfolio while maintaining some exposure.


Remember, when silver gets going, it’s like gold on steroids.


–Peter Krauth








Peter Krauth is a former portfolio adviser and a 20-year veteran of the resource market, with special expertise in energy, metals, and mining stocks. He's the resource specialist for Money Map Press and has contributed some of its most widely read and highly regarded investing articles to Money Morning. As editor of Real Asset Returns, he travels around the world to dig up the latest and greatest profit opportunity, whether it's in gold, silver, oil, coal, potash, chromium or even water. Krauth holds a Master of Business Administration from McGill University and is headquartered in resource-rich Canada.​






http://www.silverbearcafe.com/private/10.20/steroids.html
 

Son of Gloin

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#2
Didn’t Sinclair say this exact thing about silver? Or am I remembering wrong?
 

Buck

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#4
i just bit my only silver dime, to make sure it's still real...i'm gonna be Rich!
 

WillA2

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#7
I like them both, silver and gold. In another thread there is a good (ongoing) discussion of the gold to silver ratio.

They both can be your friend.
 

917601

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#9
Didn’t Sinclair say this exact thing about silver? Or am I remembering wrong?
Sinclair stated due to price, more people tend to buy it and it has industrial use . I do know ( through my big mouth at work), half a dozen co workers are buying mostly silver, monster boxes, a few bigger into gold but not making big purchases like the silver crowd. I have advised when asked, buy 60 percent silver, 40 gold- that has been my formula since 2001.... and a few ounces of platinum at current prices. I tend to lean towards silver as IF the big run up occurs, a $300 Silver Eagle will be easier to sell than a $3500 gold eagle.
 

917601

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#10
I can add that silver having an industrial use, is less likely to punitive action, confiscation, high taxation- both of which are being mentioned more often by financial greats.
 

Son of Gloin

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#13
Sinclair stated due to price, more people tend to buy it and it has industrial use . I do know ( through my big mouth at work), half a dozen co workers are buying mostly silver, monster boxes, a few bigger into gold but not making big purchases like the silver crowd. I have advised when asked, buy 60 percent silver, 40 gold- that has been my formula since 2001.... and a few ounces of platinum at current prices. I tend to lean towards silver as IF the big run up occurs, a $300 Silver Eagle will be easier to sell than a $3500 gold eagle.
I’m agreeing with you. I just have it in my mind that Sinclair said that quote, that in the future, at some point, Silver is going to be like gold on steroids. Maybe he said it in one of his interviews with Greg Hunter. I could be wrong, with my crazy memory.
 

D-FENZ

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#17
If only we knew... I bought a few ounces of palladium for a couple hundred per ounce after it fell from some 600 per. When it passed that and hit 900 I figured that it wouldn't get any better than that and sold- actually swapped them- for silver. Even offered them up here for under spot first. Mistake.

I didn't mean to be snarky, just still a little butt hurt from that deal is all.

Shoulda coulda woulda...
 

edsl48

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#18
To add to the above

Silver market
As a general rule, the most successful man in life is the man who has the best information

2020.10.17
Despite recent headwinds, it looks to be clear sailing going forward for silver, according to recent forecasts from three financial services firms.
“A higher gold price, along with the ongoing recovery in industrial demand, particularly from China, means that the price of silver is likely to rise in the year ahead,” Capital Economics said in a report published on Sept. 30.
“All in all, a market deficit in conjunction with a higher gold price should lift the price of silver to $25 and $27 per ounce by end-2020 and end-2021, respectively,” assistant commodities economist Samuel Burman wrote. He added,
“Demand for non-interest bearing safe-haven assets, such as gold and silver, should rise as real yields in the U.S. drift a little lower. We forecast that the US ten-year nominal yield will fall to 0.50%, from 0.70% currently, by the end of this year and that it will remain at this level in 2021. The Fed has already stated that it will keep policy ultra-loose until at least 2023 and allow inflation to overshoot its target.”
The London-based firm predicts gold will be back to $2,000/oz by year’s end. CIBC concurs that gold is likely to push higher, reaching $1,925/oz in the third quarter and $2,000 in the fourth, for a full-year average price of $1,800. The Canadian bank has also raised its longer-term gold price forecasts, to $2,300 an ounce in 2021, $2,200 in 2022 and $2,100 in 2023.
As for silver, CIBC estimates a run up to $32/oz in 2021, $31 in 2022 and $30 in 2023. This year it expects the white metal to hit $25/oz in Q3 and finish the year at $28/oz.
“The outlook for continued low real interest rates, increasing government debt burdens coupled with geopolitical uncertainty arising from the upcoming U.S. election are all supportive of further significant price appreciation,” the bank’s analysts wrote in a research note to clients.
Silver, it says, “has potential to provide investors with even more torque given the relatively smaller market for silver vs. gold.”
Raymond James also raised its silver price forecasts for 2021, to $25 an ounce, 37.9% higher than its previous call, and to $22.50 in 2022 - a 25% increase. The brokerage firm uses a model that bases predictions on the gold-silver ratio. Its current model uses an 85:1 ratio to estimate silver prices, and an 80:1 ratio for silver prices in 2021, 2022 and further out.
“Our price forecast changes reflect our views that the significant increase in monetary stimulus and Central Banker indications that interest rates are expected to be lower-for-longer have created a macroeconomic back drop that supports increased investment demand for gold, driving prices higher,” the Raymond James analysts wrote in a research note.


We have seen the gold-silver ratio decline from a multi-decade high of 127:1 in March, to the current 78:1, meaning it takes 78 oz of silver to buy 1 oz of gold. This is still high by historical standards, meaning silver remains undervalued compared to gold, and will likely move higher, towards the average historical ratio of 55:1.
Burman, of Capital Economics, thinks silver prices should gain momentum on the back of ongoing fiscal stimulus in China, and greater industrial activity which drives around half of annual silver consumption. He points out the latter will be helped by governments investing in green energy, including solar panels which contain silver paste.
The solar power industry currently accounts for 13% of silver’s industrial demand.
More and more silver will be demanded for its use in solar photovoltaic cells, as countries move further towards adopting renewable energy sources. Around 20 grams of silver are required to build a solar panel. The Silver Institute predicts 100 gigawatts of new solar facilities will be constructed per year between 2018 and 2022, which would more than double the world’s 2017 capacity of 398GW.
According to a recent report by CRU Consulting, the amount of electricity generated by solar power is expected to increase by 1,053 terawatt hours (TWh) by 2025, which is nearly double what was produced in 2019.
All of that solar will be a major boon for silver.
CRU expects PV manufacturers to consume 888 million ounces of silver between now and 2030. That’s 51.5 million oz more than the combined output from all the world’s silver mines in 2019.
A study last year by the University of Kent found that rising demand for solar panels is driving up silver prices.
5G technology is set to become another big new driver of silver demand.
Among the 5G components requiring silver, are semiconductor chips, cabling, microelectromechanical systems (MEMS), and Internet of things (IoT)-enabled devices.
The Silver Institute expects silver demanded by 5G to more than double, from its current ~7.5 million ounces, to around 16Moz by 2025 and as much as 23Moz by 2030, which would represent a 206% increase from current levels.
Although weak consumer confidence because of the pandemic has crimped demand for some of silver’s end uses, including autos and consumer electronics, governments’ recently announced infrastructure investment programs are expected to lift silver industrial demand.
On the supply side, among a second wave of covid-19 shutdowns this summer (the first wave was in March) were some of the biggest producing silver mines in the world, although some production has come back online.
In July, mining companies in Peru were forced to keep operations suspended, and halt new ones, as the number of coronavirus cases soared. Among the companies affected were Trevali and its Santander silver mine, Hochschild Mining’s Inmaculada, and Fortuna Silver Mines’ Caylloma. Investment projects such as Anglo American's $5 billion Quellaveco, Minsur's $1.6 billion Mina Justa and Chinalco's $1.5 billion Toromocho expansion have been delayed by several months.
In Mexico, the world’s largest silver producer, a surge of covid-19 cases in March led to the suspension of non-essential services. Among the companies forced to temporarily halt their operations, were Newmont Mining, Argonaut Gold, Pan American Silver, Sierra Metals, Excellon Resources and Alamos Gold.
The Silver Institute is predicting a 13% decline in silver production from Latin America this year - equivalent to 67 million fewer ounces - with global supply set to fall 7.2%.
Given both supply and demand factors, Capital Economics estimates the silver market will remain in a small deficit, right through to 2022.
Richard (Rick) Mills

aheadoftheherd.com

https://aheadoftheherd.com/Newsletter/2020/Silver-market.htm