Category Archives: Investment

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In a recent interview on the Money Metals podcast, host Mike Maharrey sat down with Peter Krauth, a seasoned precious metals expert and author of The Great Silver Bull.

During their discussion, Krauth shared valuable insights on the current and future state of the silver market, highlighting its role as an undervalued investment, the dynamics of the gold-silver ratio, supply and demand challenges, and the potential impact of economic policy on precious metals.

(Interview Begins Around 6:34 Mark)[embedded content]

Peter Krauth

Peter Krauth is a seasoned metals analyst and expert in the resource market, with over 20 years of experience specializing in precious metals, mining, and energy stocks. He is the editor of the investment newsletter Silver Stock Investor, which focuses exclusively on silver investments.

Silver’s Price Trajectory: Perceptions vs. Reality

Krauth acknowledged the perception that silver lags behind gold in performance. While gold reached 38 new record highs this year, with prices rising by 38% since mid-February, silver has outperformed gold with a 46% gain during the same period. 

Krauth emphasized that while silver may often appear as a “laggard” early in a bull market, it historically outpaces gold in the long run, driven by industrial demand and investor interest during periods of market stress.

The Gold-Silver Ratio and What It Signals

The gold-silver ratio, hovering around 83 to 84:1 in recent months, is notably higher than the historical range of 40 to 60:1. This indicates that silver remains relatively undervalued compared to gold, a situation Krauth views as an opportunity for investors. 

Despite silver’s gains, the high ratio is partly maintained by gold’s strength and persistent investor interest. Krauth advised keeping a close eye on the gold-silver ratio, as it reinforces silver’s undervaluation and offers a potential entry point for long-term investors.

Supply Deficits: A Key Factor in Silver’s Potential Upswing

One of the more pressing issues Krauth discussed is the silver supply deficit. Over the past three years, silver demand has exceeded supply, driven by an expanding industrial demand—particularly in electronics, solar panels, and electric vehicles. The silver market operates with an annual supply of around 1 billion ounces, 85% from mining and 15% from recycling. 

Yet, annual demand has surged to 1.2 billion ounces, creating a 200-million-ounce shortfall, currently covered by existing stockpiles. Krauth predicts that these reserves will deplete within the next 12 to 18 months, which could result in supply constraints and significant price increases if demand remains high.

Industrial Demand: The Steady Floor Under Silver Prices

Industrial demand for silver is strong and growing, with uses across various fields. According to Sprott Investment Management, silver ranks second only to oil in terms of its global applications, spanning electronics, medical applications, and renewable energy. 

Notably, in 2024, industrial demand is expected to represent 70% of the total silver supply, up from 50% just a few years ago. With renewable energy mandates in many countries, demand from solar panel manufacturing alone accounts for over 20% of global silver consumption.

Parallels with Uranium: Potential for a Strong Price Rally

Krauth drew an intriguing comparison between silver and uranium markets. Like silver, uranium faced a period of high demand and limited supply, with secondary sources filling the gap until they dwindled, leading to a price surge from $23 to $83 per pound over three years. 

Krauth sees similar dynamics in silver, where above-ground stockpiles are shrinking, and new supply is limited. He anticipates a price rally in silver, propelled by industrial demand and the eventual depletion of available stockpiles.

Global Factors Influencing Silver: India and Russia

India’s surging silver demand also plays a critical role. The country recently cut import duties on silver, resulting in a fivefold increase in silver imports in Q3 2023 compared to the same period in 2022. India’s expanding solar panel production and cultural affinity for silver jewelry are driving this demand. 

Krauth also highlighted Russia’s decision to include silver in its national wealth fund, potentially to support domestic industries and accumulate silver as a strategic asset. Krauth views these developments as additional positive drivers for silver prices.

Policy and Precious Metals: Harris vs. Trump

Looking at the broader economic landscape, Krauth discussed how a potential presidency by either Harris or Trump might influence precious metals. He believes silver and gold are poised to rise regardless of who holds office, as government spending and debt continue to escalate. 

While a Harris administration may prioritize renewable energy initiatives that could bolster silver demand, a Trump presidency may favor deregulation and support for mining industries. Both scenarios, Krauth argues, would contribute to a bullish environment for precious metals.

Final Thoughts and The Great Silver Bull

In closing, Krauth recommended his book, The Great Silver Bull, which explores the factors driving the silver market and offers a generational investment perspective. Through short, digestible chapters, Krauth provides insights into silver’s economic fundamentals, its role in portfolio diversification, and strategic approaches for investing in both physical silver and mining stocks.

For those interested in precious metals, Krauth’s comprehensive analysis of silver’s unique market dynamics, historical context, and future potential offers a roadmap for understanding this often-overlooked asset. As the world faces rising demand for renewable energy and geopolitical shifts, silver stands as a compelling investment with substantial growth potential.

Key Questions & Answers 

 Here are the key questions and answers from the podcast interview between Mike Maharrey and Peter Krauth:

Is silver a laggard compared to gold?

Yes, silver is often perceived as a laggard in bull markets, but it ultimately outperforms gold, especially in the later stages of a bull market. Despite gold reaching record highs this year, silver has actually outpaced gold in percentage terms, with a 46% increase since February compared to gold’s 38% gain. Silver tends to be back-end loaded in bull markets, where its performance accelerates toward the end.

How does the gold-silver ratio affect the silver market?

The high gold-silver ratio, recently around 83 to 84:1, indicates that silver remains undervalued compared to gold. This is an opportunity for investors, as silver is historically undervalued when the ratio is high. The high ratio reinforces silver’s appeal as a long-term investment and reflects its relative affordability against gold.

What impact does the silver supply deficit have on future prices?

With silver demand outstripping supply by 200 million ounces annually, covered by existing stockpiles, there are significant price increases likely once above-ground reserves are depleted. These reserves may run out within the next 12 to 18 months, creating the potential for a price rally, especially if demand from industrial uses remains high.

How does industrial demand influence silver prices?

Industrial demand for silver is strong and rising, accounting for around 70% of supply in 2024, compared to 50% in previous years. Silver is essential in electronics, solar panels, electric vehicles, and medical applications, creating a steady demand base. This robust industrial demand will provide a stable floor under silver prices.

Are there similarities between the silver and uranium markets?

There are similarities between silver and uranium markets, where high demand and limited supply eventually led to a price surge in uranium. Similar dynamics are seen in silver, with above-ground stockpiles being drawn down and limited new supply, which could lead to a significant price rally for silver in the future.

How is India influencing the silver market?

India has become a major silver buyer, recently reducing import duties, which led to a fivefold increase in Q3 2023 silver imports compared to 2022. India’s demand for silver is driven by industrial uses like solar panels, cultural jewelry demand, and its bargain-hunting culture as gold prices rise.

What does Russia’s inclusion of silver in its wealth fund mean for the market?

Russia’s decision to include silver in its wealth fund is strategic, possibly to support its domestic industries and accumulate a valuable asset. This move may restrict silver supply on the global market and reflects the geopolitical importance some countries place on silver.

How would a Harris or Trump presidency affect silver and gold markets?

Both candidates would likely drive precious metals prices higher due to continued government spending. A Harris administration may increase renewable energy demand, benefiting silver, while a Trump presidency may favor deregulation and support mining industries. Either outcome would likely have a positive impact on precious metals.

Why should investors consider Krauth’s book, The Great Silver Bull?

The book explores silver as a “generational opportunity” and provides insights into its economic fundamentals, investment potential, and strategies for physical silver and mining stocks. Written in a straightforward, accessible format, it helps investors understand silver’s market dynamics and the factors that influence its long-term value. Continue reading →

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Excerpt from this week’s: Technical Scoop: Trump Indicators, Market High, Metals Sell

Source: www.stockcharts.com

For the second week in a row gold fell, losing this time 2.0%. Silver was worse, down 3.8%. However, both remain up 30%+ on the year. The trend remains solidly to the upside. Platinum, whose performance is sluggish at best, fell 2.4% and is down 4.4% in 2024. Of the near precious metals, palladium lost 10.5% while copper was down 1.4%. The Gold Bugs Index (HUI) was off 1.7% while the TSX Gold Index (TGD) fell 1.9%. That generally the gold stocks held in on the week is one of the positives we gleaned from this week’s sell-off because normally the stocks get hit harder.

The culprit for the fall of gold? Continued strength in the U.S. economy and a soaring US$ Index, celebrating Trump’s victory. Trump’s promises on the surface are good for the U.S. dollar, but trade wars and more could end the celebration. Lower taxes and deregulation would also be bad for the U.S. dollar as the deficit is poised to rise, possibly substantially. All could unleash a new round of inflation, putting pressure on the Fed to hike rates even as Trump wants the Fed to them. Fed Chair Jerome Powell’s declaration that he can’t be fired (he’s right) is small comfort to a president who would have no hesitation in opening a brawl with him. BTW, Trump appointed Powell. But it’s based on recommendations and a vote from the Fed Board of Governors who wield the power. A massive increase in debt would be music to gold’s ears. Even in Trump’s first term, gold gained over 60% but then so did the SPX. Gold also responds positively to geopolitical risks. A reminder that, just because Trump was elected, that doesn’t end the culture wars and the huge political divide in the U.S. today.

We are a bit concerned that, because gold closed under $2,700 this past week, we could have more downside before we return to the upside. A break now of $2,650 the week’s low could trigger further selling to $2,600 or even down to $2,550 and the 100-day MA. It can’t be ruled out unless we regain back above $2,750 first. With move above $2,770 a new high is probable.

The strong U.S. dollar this week was bad news for gold as gold usually moves inversely to the U.S. dollar. But gold gains against other currencies that lose value to the U.S. dollar. Didn’t work this week, however, as gold in Cdn$ fell 2.3% while gold in euros was off 0.7%.

For the short term, we are a little negative towards gold, but long term we remain quite bullish. As we’ve noted many times, pullbacks like this are healthy in a bull market. You just don’t want it to break under key points. And right now, that point is $2,550 that could trigger a sharper decline to $2,400. Under $2,350, the decline could get worse.

Source: www.stockcharts.com

Silver as usual followed gold lower this past week, but the drop was worse. Silver fell 3.8%, far outpacing gold’s decline of 2.0%. Silver remains up 30% in 2024; however, we are down 10.3% from the recent high near $35. That is correction territory. We thought we were breaking out when we leaped to $35, but so far it hasn’t held and we did not like the fact we dropped back under $32. Still, we are only testing that uptrend line from the August 2024 low. However, we wouldn’t want to see it break. Another break under $31 would not be good and then we could fall to $29.50/$30.00. We regain back above $33 and new highs could be in order above $34. We’ll see this week against the backdrop of the CPI and PPI.

Source: www.stockcharts.com

Like everything related to the metals this past week, gold stocks fell. The TSX Gold Index (TGD) was down 1.9% while the Gold Bugs Index (HUI) lost 1.7%. That’s the bad news. The good news is their fall relative to gold and silver was about the same as gold but better than silver. That they didn’t get hit harder is actually good news. We also finished the week on an uptrend line but below the 50-day MA and just above the 100-day MA at 360. Below that, the 165-day EMA lies at 345 and finally the 200-day MA is at 326. Those areas would also be support. In the volatile world of gold stocks, we are down about 11% from the recent high. That is a fairly normal type of correction. On the run to the 455 all-time high in 2011, there were a few drops of about 15%. So not unusual—so far. The volatility comes from their thin nature as outstanding stock for the public is low. Many companies are held in funds, insiders, and more. That stock doesn’t usually come out with any regularity. We need to regain 400 to suggest we’ve made a bottom, and 405 to suggest we could take out the recent high at 417. Remember, we are still up almost 30% on the year, so it’s not all bad.

Read the FULL report here: Technical Scoop: Trump Indicators, Market High, Metals Sell

Disclaimer

David Chapman is not a registered advisory service and is not an exempt market dealer (EMD) nor a licensed financial advisor. He does not and cannot give individualised market advice. David Chapman has worked in the financial industry for over 40 years including large financial corporations, banks, and investment dealers.  The information in this newsletter is intended only for informational and educational purposes. It should not be construed as an offer, a solicitation of an offer or sale of any security.  Every effort is made to provide accurate and complete information. However, we cannot guarantee that there will be no errors. We make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the contents of this commentary and expressly disclaim liability for errors and omissions in the contents of this commentary.  David Chapman will always use his best efforts to ensure the accuracy and timeliness of all information. The reader assumes all risk when trading in securities and David Chapman advises consulting a licensed professional financial advisor or portfolio manager such as Enriched Investing Incorporated before proceeding with any trade or idea presented in this newsletter. David Chapman may own shares in companies mentioned in this newsletter. Before making an investment, prospective investors should review each security’s offering documents which summarize the objectives, fees, expenses and associated risks.  David Chapman shares his ideas and opinions for informational and educational purposes only and expects the reader to perform due diligence before considering a position in any security. That includes consulting with your own licensed professional financial advisor such as Enriched Investing Incorporated.   Performance is not guaranteed, values change frequently, and past performance may not be repeated. Continue reading →

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