Bill’s BLOG | January 19, 2023
I am not a big fan of price predicting for Gold/Silver or any asset class, but I closely watch trends and try to understand why an asset is moving up or down. “The trend is your friend,” as the saying goes. Participating in a significant upside trend in an asset class can significantly impact your overall portfolio and wealth. You can also make huge gains in a downtrend if skilled at shorting assets (not recommended for amateurs).
So for this Blog, we will focus on Gold and Silver’s big moves since the fall of 2022 and probable gains in 2023 and the near-term future. Gold bottomed at $1637.70 US on November 3, 2022; as I write today, it is in the $1910.30 US range. Wow, that is a $272.69 gain in just over 2.5 months. Silver by percentage did even better. On September 1, 2022, Silver bottomed at $17.66 US; today, we are in the $24 US range. That is a considerable $6.41 US gain in just four months. So, my clients, who have been purchasing over the last few years, are delighted, and I will explain why this trend will most likely continue for several years. I will cover the key drivers of this trend, considerations and action steps, and then you can decide if you want to participate. For the record, I have purchased Gold and Silver for over 12 years, and I will continue to accumulate as I am able.
Before I explain the key drivers of this trend, it is essential to remind the reader that assets never go straight up or down (unless we have a raging bull or significant crash for a season). All assets generally trade in waves (meaning ups and downs in price action) and have floors and ceilings (support and resistance levels). Also, stocks or asset classes can trend sideways for years or even decades with little gains or losses. Watching for breakouts above resistance and breaking through floors is critical to understanding a trend.
As a note, in the case of Gold and Silver in a crash, if this were the case, they would initially go down, and they would most likely recover very fast (if history repeats). I have followed markets for over three decades, understand how the playbook works, and am confident in repeatable cycles, and so should you be.
I love studying monetary and financial history and market cycles and watching trends. I send hundreds of hours each year following dozens of experts globally to gain perspective. Of course, it is impossible to catch every trend, but if you are watchful, you can catch a few trends and do exceptionally well. So, why do I like Gold and Silver as an asset class and believe it is in a supercycle that can last another decade or longer? Before I get there, a little perspective will be helpful.
Understanding the recent history of precious metals is helpful. In 1971 President Nixon defaulted on the Gold Exchange Standard established after WW2 (called the Bretton Woods Agreement). This agreement was between 44 nations and provided stability in global trade using the US dollar. In addition, the agreement ensured the US dollar had partial Gold backing and prevented the US government from going on debt binges…sorry they lied with the “guns and butter policies” of the 1960s. The consequence of breaking this agreement has been massive. All currencies in the world have no Gold or Silver backing except the promise of governments, and guess what happened in the 1970s? You guessed it, governments printed money without restraint and created raging inflation and interest rates hitting over 20% to reverse the crises. Back to Gold and Silver both went ballistic between 1971 to early 1980. Gold started at $35 US and went us 25 times, and little brother Silver started at $1.40 US and peaked in 1980 at $52.50 US, which was a whopping 3700% gain. If you were smart, you would have sold into the raging bull market in the late 1970s and made a fortune. Can you guess what happened next? Both Gold and Silver crashed and traded sideways for almost 20 years! Remember, as many real-estate and equity/bond investors learned last year and most likely in the foreseeable future, nothing goes us forever.
No legitimate asset or company stays up or down forever, and for the wise who saw it, a new bull run started in 2000 in both Gold and Silver. Unfortunately, I was not paying attention in 2000, and my journey into physical metals would start after the 2008 crash. Gold would rally for eleven years and hit an all-time high of $1900 US in 2011. Likewise, Silver would come close to 1980 high and hit about $50 US. Following the highs of 2011, there would be a sizable correction until 2015. However, the upward trend has continued to the present, and a commodity supercycle started in 2020 (these can last a decade or longer). I have mentioned in past Blogs that Gold has been the best-performing asset class since 2000 (beating all major indexes), averaging around 10% returns, and Silver was around 8%. The only exception was cryptocurrencies that provided insane returns for the brave in heart and intelligent speculator/trader! Ok, now the key drivers of the Gold/Silver trend for the foreseeable future.
Critical Drivers for Gold and Silver in 2023:
- The global recession in 2023.
- Stocks and bonds are still vulnerable and overvalued.
- Continued rising interest rates and eventual pause.
- The US dollar declined in the last four months after rapidly rising in 2022 till October. Weaker US$ is excellent for both Gold/Silver appreciation.
- Global inflation will remain high in 2023. The Fed and central banks will NOT reach their 2% inflation target.
- Then there are the possible black swan events, a debt crisis, war expansion or something else.
Comments and Action Steps:
- Every major central bank holds Gold and combined purchased nearly 400 tons of Gold in the 3rd quarter of 2022, the highest purchase since 1967! So what do Central Bankers know that the average person doesn’t? Remember, Gold is an excellent hedge in a crisis.
- Gold has been up 80% of the time since 2000.
- Gold will most likely explode higher after Fed stops raising rates.
- Since 1973, Gold has done very well in significant market corrections or crashes, averaging a 19.2% return.
- China purchased another 32 tons of Gold in November. Many sovereign counties have followed suit.
- Based on all of these factors, Gold should push through $2000 US per OZ in 2023. Longer term, I foresee 5 to 10K plus (5 to 10 years)
- Silver is still the most undervalued commodity on the planet.
- In a commodity supercycle, Silver historically has outperformed Gold in the 1970s, 2000 to 2011 and most recently, during the initial covid crisis (Gold was up 25% and Silver 37%).
- China is the largest consumer of Silver in the world. Therefore, lifting covid restrictions/lockdowns will boost Silver demand in 2023.
- Due mainly to India’s demand, Silver jewelry and Silverware forecasts will surge in 2023 by 29% and 72%, respectively.
- Silver has two primary purposes. Monetary metal 45% and industrial 55%. Mining continues to be restrained while demand increases for solar panels and EVs (the Greening Agenda). Industrial demand reached a record in 2022 of 539 million OZs.
Silver will most likely surpass $30 US in 2023 and, in the next five years, over $100 US.
- Read the free book on Gold & Silver by Mike Maloney’s NY best-seller, downloadable from my website: https://fivefoldfinancial.ca/solutions/why-physical-gold-silver/ **Scroll down to the bottom of the page.
- The main reason people do not invest in Gold and Silver is the lack the basic understanding of this great asset class. So please educate yourself before you invest, and if you need guidance from reputable analysts and experts, please let me know.
- Once you understand why you should have a sizable position in Gold and Silver, don’t hesitate to contact me for guidance. Also, I provide preferred rates for my clients on purchases, sales and vaulting services. I highly recommend having your Gold and Silver vaulted for peace of mind and security of your investment.
- Lastly, it would be best to consider starting with physical Gold and Silver (the least risky) as your investment. I can help you with cash purchases, RRSP or TFSA transfers and even RESP for your children.
All the best in 2023,
Bill Westmacott, Owner