Bill’s Blog | September 14, 2022
Bold words, but I will back it up with historical precedent, current trends/uses, and clear reasons why you need to own Silver to build and protect your wealth. Lastly, I will cover what several silver experts believe with unfold with Silver and a few basics you need to understand before you purchase. For those who know me, I have strongly advocated owning physical Gold and Silver as a significant part of your portfolio for over a decade. Also, what I teach, I do myself. So today, I will solely focus on Silver; next week, I will cover Gold.
So, what does history teach us about Silver? First, humanity has been fascinated with the white metal for over five millennia and sought after it. Refined Silver became jewelry, valuable objects, coinage and adorned palaces and wealthy kingdoms from ancient times to the present. If you ever get a chance to visit London Tower, you will see a fantastic display of the Royals Silver collection. Then, due to Silver’s unique properties (scarce, beautiful, divisible, transferable, fungible and durable), it became money and was first minted in ancient Lydian around 800 BC. Silver has the most extended history as pure money from the Greeks, Babylonians, Mesopotamian kingdoms, and Rome, and Silver enriched the European empires of Portugal, Spain, and Britain. The USA and Canada developed their monetary systems around the precious white metal and continued until the 1960s. I will briefly cover why this ended, which is very important for you to understand.
One of the most critical trends that profoundly impacted every human on the planet was politicians’ decision in the West in the 1960s (Silver) and 1970s (Gold) to detach real money from the monetary system/currency. “Money is supposed to represent “stored value,” which you access in the future as you need or wish,” But maintaining the purchasing power of your money becomes crucial when you intend on using your savings in the future.” Direct quote from Peter Krauth’s excellent new book called “The Great Silver Bull.” I highly recommend you read Peter’s book (as I did) if you want to receive a thorough education on Silver and its many incredible qualities and the potential opportunity to create lotto-style wealth, but far more likely! I will conclude the Blog with Peter’s and other experts’ well-thought-out analysis and conclusion on future silver prices, and you will be shocked!
What happens when you detach real money (Gold and Silver) from the monetary system?
- History is replete with endless examples of what happens to “Fiat Currencies” (paper money) without physical Gold and Silver backing them. They ultimately go to their actual intrinsic value, ZERO!!! This process often takes decades or longer, but the death of the currency is unavoidable once the nation’s debt load becomes unsustainable.
- Wreckless Politicians (past & present) make these short-sighted decisions (to maintain power and buy votes) to create massive inflation and destroy the purchasing power of every person in their country. Inflation is a thief of your savings and wealth. Continuous currency printing destroys our children’s financial future, expands taxation and causes asset bubbles, as we see today in real estate, bonds and many stock markets worldwide. As an important note, Silver is currently highly undervalued as an asset class.
The next trend is increased silver demand due to its exceptional properties and the many uses in the “Green Revolution.” Finally, the big push in price will come when the world finally wakes up to Silver’s incredible financial and wealth preservation qualities.
- Approximately 55% of Silver has industrial use. Think of every technology device on the planet that uses a small amount of Silver (cell phones, laptops/computers, EVs, solar panels, high-tech weaponry/rockets/missiles/satellites, photography and hundreds of other applications.
- Due to silver antimicrobial and antibacterial properties, Silver has immense use in medical equipment and healthcare products.
- Due to the political and practical need to green our energy grid, Silver plays a significant role. In addition, the growth of solar panels over the next few years (30% or more in many regions of the world) will add to the stress of the current global production of Silver. Silver’s number one industrial use is in solar panels and makes up about 11% of the annual global supply.
- New Silver out of the ground annually equals just under one billion ounces, but the trend has been declining production for several years. Why? Low prices and few new mines have come online, and the lack of discovery of significant high-grade deposits. When a world-class silver deposit has been discovered, it will take over a decade and hundreds of millions to bring into production. Shortages in supply will eventually cause price appreciation.
- I have often said I love to buy things when they are unloved and undervalued. Silver checks both boxes. I told clients this summer that purchasing Silver in the low 20s (US) is a great value. Last week when the gold/silver ratio hit 95, I could not help myself, and I purchased more Silver for under $18 US (this does not include premiums which makes the price more expensive). As a note, Silver has only hit a 95 to 1 gold/silver ratio three times in history! I am trying to make a point to buy Silver at these extremely undervalued prices. At the time of my writing this Blog (September 12), Silver shot up $2 in price from a week ago, and now the gold-silver ratio is 87.1. Any time silver is over 80 to 1 ratio (meaning, as of today, it takes 87 ounces of Silver to purchase one ounce of Gold), it is screaming to you, “buy me, buy me, I am on sale!” At the 95 to 1 ratio last week, when I purchased Silver, my poor silver friend’s voice became hoarse from yelling so loud.
- Here is a simple table of when to buy Gold and Silver. First, 80 to 1 ratio or above, buy Silver as quickly as possible and build a position. Next, a 60 to 1 ratio purchase of Gold and Silver indicates a balanced market in recent history. Maybe, you purchase 50/50 or 60/40 Gold to Silver. In an extreme bull market, Silver can go below the 30 to 1 ratio; now it is time to bring your truck and buy as much Gold as possible. Ironically, Silver comes out of the ground at a 9 to 1 ratio against Gold. This reality tells you just how out of wack the current ratios have become.
- The total value of the physical silver market is in the four billion dollar range (of course, it fluctuates daily), and Silver is 1/10th of the value of the physical gold market. Unfortunately, Silver is a small asset class, so it can be volatile and easily manipulated by prominent institutional traders using paper contracts. Sadly, this practice continues despite huge fines by regulators in recent years against Silver manipulators.
- What has also depressed the price of Silver is the strong US dollar, up 15%, a massive increase historically. Due to the raging inflation globally, the US dollar against almost all currencies is a haven in times of uncertainty. In addition, rising interest rates also attract trillions of dollars in US treasuries as yields increase. Soon, this trend will reverse, and it will be very positive for silvers price.
- With very high inflation and negative real rates (the same scenario as the 1970s), Silver had two extended periods of massive appreciation (the last two years were explosive) and gained over 3700% in return in less than eight years. To the few who understood monetary history and took advantage of that rare opportunity, fortunes were made on a relatively small investment. A 20-thousand dollar investment would turn into 770-thousand if you had the fortitude to ride the bull run and sell in 1980. I firmly believe something similar could happen again, potentially in this decade.
I have read several books on Silver over the years and listened to hundreds of hours of analysis from resource experts worldwide (silver newsletter writers, CEOs of large silver producers, explorers and analysts). So here is what a few respected individuals are saying about possible future Silver prices.
- David Morgan of the Morgan Report (respectfully called the Silver Guru) has often stated, based on data and comparison to base metals and commodities, “Silver is the most undervalued asset on the planet.”
- David Smith: $166 to $250, the senior analyst with the Morgon Report and mining resource writer, has repeatedly stated that he sees Silver breaking its all-time high of $50 US and eventually going into triple-digit pricing. Sadly, David just passed away last week. I had talked with David many times, and he was a very thoughtful, kind and bright analyst of the resource sector. He will be missed by many.
- Keith Neumeyer: $300 to $1,000, CEO of First Majestic Silver (TSX: FR, NYSE: AG), has frequently said he believes the white metal could climb even higher, reaching into the triple digits.
- Mike Maloney: $100 to $200 in 5 years
- “Investment demand for silver bullion has risen sharply and, with the silver market being so tiny, it doesn’t take much investment to have an outsized impact on its price. Silver is dramatically undervalued and represents a very compelling investment opportunity. My prediction for Silver five years out is $100-$200.”
- Jeff Clark: +$100 in 5 years. Jeff is the senior analyst for GoldSilver.com and a frequent speaker at mining conferences.
- Peter Krauth: $300+ Peter is a 20-year-plus veteran in the silver space as a silver and mining investor, analyst, author and newsletter writer. I encourage you to listen to a recent interview with Peter on Kitco NEWS and his rational conviction that Silver will reach $300 ounce (27 minutes): https://www.youtube.com/watch?v=8IR5mjdcdNE
- An important note is that these silver bull often runs over 2 to 4 years. Once buying hysteria becomes mainstream, this is when you start to sell a portion of your Silver and best done in increments. No one can perfectly time a top or a bottom.
- Before investing in any asset class, research and thoroughly understand the downside risks and potential upside. I just listed a handful of respected experts, and you can often listen to them for free on many financial interview platforms. In addition, if you reach out to me, I am happy to suggest several excellent books on precious metals that I have read.
- Start with purchasing physical Silver as a base to build wealth/savings by accumulating a sizable position. You can purchase on pullbacks, which I have done often and scale in or dollar cost average. Remember the gold/silver ratio to determine the best precious metal to purchase and the possible percentage.
- Have a 5 to 10-year time horizon. Investing in physical Silver is not a get-rich scheme or something to be constantly trading. If you want to trade, buy silver stocks or EFTS, but then you need the skillset and discipline to be a trader. That usually takes several years to master.
- You can start with a small quantity of a few hundred dollars or purchase more significant amounts, as I frequently do for clients. The key is to get started after doing your homework on Silver. Then build a position over time, and be patient. I also recommend vaulting with larger purchases, which I do myself!
- So, what will the Silvers price be in 5 to 10 years? I have no idea, as there are far too many variables in our current global financial mess. I, too, believe Silver can reach triple digits, as many experts forecast. However, I am confident Silver will be much higher in price based on the fundamental supply and demand imbalances in the coming years. When investment demand explodes, so will Silvers price!
- In conclusion, do not sweat the short-term price action, daily, weekly or even over a year. Nothing goes straight up. Gold is far more stable as a pure monetary metal, and Silver is far more volatile (ups and downs). If history repeats, Silver will far exceed Gold in price gains once the bull market resumes and big money reenters the space. I expect this to happen in the coming years, which is why I stated, “Silver may be one of the best-performing assets of this decade.”
Thank you for reading my Blog, and if you found it of value, please pass it along to a family member or friends.
All the best,
Bill Westmacott, Owner