Hi Ho, Silver! The Bull Case for the White Metal
It’s not just the paranoia of Fed-bashing, hard money zealots who build bunkers in their backyards. Precious metals really do make a lot of sense now, for all types of investors.
Fact is, the market’s wild daily gyrations are giving average investors the cold sweats. In the wake of last week’s stock market correction, gold and silver are showing considerable luster. As the number of coronavirus cases grows, you can expect further price appreciation of precious metals.
Every portfolio should hold gold. But don’t forget about silver. The “white metal” is a time-proven crisis hedge that often and unfairly takes a back seat to gold.
If you’re concerned about stock market volatility, both gold and silver warrant your attention.
The versatility of silver…
Industrial demand plays a key role in silver’s bullish story. Both gold and silver are used in several industrial processes and consumer products, but silver is far more prevalent and crucial.
According to the Silver Institute, about 46% of world silver supply is used in industrial applications. Silver is a superb conductor of heat and electricity, making it an integral component in medicine, electronics, automobiles, food processing, solar energy, textiles, and radiography, to cite only a few industries.
Silver is found in computers, televisions, batteries, smartphones, calculators, cameras, conventional and electric vehicles, rockets, airplanes, watches, clocks, microwave ovens… the list goes on.
As the following chart shows, global industrial demand for silver enjoys an upward trajectory.
The unstoppable momentum of solar energy is a particularly powerful tailwind for silver, because the metal is vital for the production of photovoltaic cells. Another boost for the white metal is demand for silver-zinc batteries, which are widely used in missile, space launch, and electric vehicle applications.
These indispensable uses for silver will continue increasing, even if the economy downturns in 2020 as some analysts fear. The activity in any individual application could dip, but overall silver demand will remain recession-resistant because without this versatile metal, many processes or products couldn’t exist.
Gold and silver are traditional safe havens during times of market anxiety. But when gold prices rise, silver tends to rise even higher. Silver is considerably cheaper per ounce than gold. As gold climbs in price, traders perceive a bigger bang for their buck with silver.
Case in point: during the gold bull market of June 2001 to August 2011, gold jumped from $270 an ounce to $1,889 an ounce, for a 600% gain. That’s pretty darn good. But over the same period, silver soared from $4 to over $43, for a 975% gain.
Gold currently hovers at about $1,640 per ounce, for a gain of 27.3% over the past year. Silver sits at around $17.1/oz. In 2018, the average price for silver stood at $15.7/oz.
How high can silver go? Predictions are all over the map. The consensus outlook for silver remains positive, with the annual average price projected to rise by at least 13% in 2020. I think that projection is way too conservative.
Consider this: during the uncertain 1970s, the price of silver rose more than 3,600% from its November 1971 low to its January 1980 high. A precedent exists for massive gains in silver.
The supply and demand equation…
Fueling the expected rise in silver prices is a growing shortage that resulted from cutbacks in production among miners in recent years, as the price of the metal slipped.
It doesn’t take a genius in economics to figure it out: when demand for a commodity increases but supply has dwindled, prices will soar.
The coronavirus outbreak, rising geopolitical tensions, worsening dysfunction in Washington, DC, growing signs of inflation, and a shaky stock market all add up to bullish conditions for silver and gold.
Over the past few days, we’ve witnessed historic swings in the major stock market indices, with unprecedented moves in some sectors. Extreme volatility is a sign that the bull market is on tentative ground.
Risk-on assets have been lagging traditional safe havens, a warning sign of further trouble to come. It would only take a whiff of bad news to send stocks reeling again. Are you prepared?
Conventional wisdom dictates that portfolios should contain at least 5% to 10% of precious metal assets as protection against economic downturns and market corrections.
The aging bull market will stagger into its 11th anniversary this month. Last week, we witnessed huge coronavirus-induced sell offs, with more probably ahead. Despite the dubious assertions of public officials, the deadly epidemic is far from contained.
As a hedge, your portfolio’s precious metals sleeve should contain roughly equal proportions of gold and silver.
The Arctic bonanza…
The best way to gain exposure to precious metals is by purchasing shares of mining companies, which use operating leverage to exponentially benefit from rising metals prices.
In fact, our investment experts have pinpointed a precious metals mining play…in the remote Arctic Circle, of all places…that’s ready to hand investors outsized returns.
Amid the polar ice caps of the Northern Hemisphere, warming temperatures are melting the frozen tundra and unearthing a massive mineral deposit. It’s possibly one of the largest treasure troves of precious metals ever discovered. And one that geologists and precious metals experts estimate is worth $100 billion or more.
Early investors in this mineral bonanza stand to make a fortune. There’s a small-cap miner, in particular, that’s poised for explosive gains. To get in on the action, click here for details.
John Persinos is the editorial director of Investing Daily. Questions about precious metals investing? Drop him a line: firstname.lastname@example.org