While we are still in the beginning stages of huge financial uncertainty, the need to plan for the next decade is here. Investors should be looking for a place to hide and caution is in order. With unprecedented monetary expansion and stimulus comes tremendous risk. Based on industry trends and historical valuations, silver offers tremendous upside potential.
Gold-to-Silver Ratio
The gold-to-silver ratio or the number of ounces of silver required to purchase one-ounce gold is a tool used to analyze the relative value of silver. As of the writing of this article, the ratio stands near 100 which is historically high (silver price: $17.80, gold price: $1,750), meaning that silver is cheap relative to gold. If the gold-silver ratio was to return to its 40-year average of 40:1, with no change in gold, silver would jump 146% to $43.75. If silver were to return to its April 25, 2011 ratio of 31:1, it would jump 217% to $56.45. If gold continues its upward trend as paper assets lose value, silver could appreciate by two or three times that of gold on a percentage basis.
Market Cycle Begins to Favor Silver
May investors have been lulled to sleep by silver. Many companies have touted silver for over a decade as an undervalued metal ready to skyrocket. However, those who allocated significant portions of their precious metals portfolios to silver have been soundly disappointed by lackluster performance while gold has shown steady recent gains. By all accounts, we are over 18 months into a bull market cycle for gold with the yellow metal gaining nearly 35% in that period. Silver remains little changed. Every market fundamental favors a higher gold price. The last time the Federal Reserve engaged in massive monetary expansion was in the wake of the 2008 financial crisis. In the wake of this expansion, gold prices increased over 100% and silver prices over 400%. The monetary expansion amid the COVID19 pandemic dwarfs the expansion in 2008. Nearly every precious metal bull market cycle, including that begging in 2008, saw steady increases in for 18–36 months before and massive move in silver prices. Market cycles indicate it may not be much longer before silver prices start to move.
Silver has been money for 2000 years
As much as the market views gold as a monetary metal, silver is a store of value. Silver has been considered a precious element for 6000 years. It was first used as a currency in 700 B.C. and has had a role as a trading metal in nearly every ancient and modern culture. From the drachma of the ancient Greeks, which contained an eighth of an ounce of silver to the Roman denarius and the British pound sterling, which designated a specific weight amount of the element, silver has long held a special place as a store of value.
US public debt increased $25 billion per day in 2020, more than five times the average daily rate over the past decade. The Fed is purchasing trillions of dollars of assets in the last few months. All this free money created out of thin air will eventually destroy the US dollar and treasuries. The market can only be held up falsely for so long before it all comes down. There were warning signs during the beginning of 2007. We were in full-fledged recession and crash by the fall of 2008. Silver was $10 an ounce in 2008 and zoomed to $49 by 2011. Silver performed as a store of value during the last crisis. A crisis that was never fixed, just delayed, and fueled for another decade.
Silver has many industrial uses
From electrical switches and solar panels to chemical-producing catalysts, silver is an essential component in many industries. Its unique properties make it nearly impossible to substitute. Its uses cover a wide range of applications.
Almost every computer, mobile phone, automobile, and appliance contains silver. It is the perfect substance for coating electrical contacts. Printed circuit boards, because of their high electrical conductivity and durability, are littered with silver. Painting silver ink on any non-metal surface provides an electrical pathway, eliminating the need for wires. According to The Silver Institute, Radio Frequency Identification Device (RFID) chips are replacing barcodes on many items in supermarkets and supply chain inventories. These RFID chips have paper-thin antennas that consist of sprayed-on silver. One of the most significant industrial applications for silver today is its use in photovoltaic (PV) cells, the building blocks of solar panels, and leading clean-energy technology. The electronic components that enable 5G technology will rely strongly on silver to make the global 5G platform perform at a very high level.
From 2010 to 2019, total global physical silver investment demand was 2.3 billion oz versus 345 million oz for gold. Yes, silver is a much more inexpensive metal than gold. Billions of ounces of silver have been lost in the last decade in homes, appliances, and electronics. Much of this will never be recycled. Roughly 50% of the silver mined is for industrial consumption and only roughly 20% is recycled. Only about 8% of the gold is lost forever mostly in technology equipment.
Fall of the dollar
The US dollar has started a steep fall in value. As debt piles on and as money is created out of thin air, paper assets lose value. Every investor is unique with their war chest to protect. Silver offers the potential for huge returns and also represents a possible more affordable form of protection for some investors. The knock on silver has always been it is just an industrial metal too volatile and inconvenient to store or transport. Yes, it is extremely heavy and difficult to own for those who move around a lot. For those willing to push aside those inconveniences and the future price volatility, silver could be one of the better opportunities for the next decade. Silver is a store of value that has the track record of doing tremendously well in the early 80s and late 2000s to sidestep a crisis or inflationary period. It has been used for bartering and is being accumulated heavily over the past few months as protection against the upcoming financial recession or possible depression.
Call Midas Gold Group today at 480-360-3000 or 805-601-6000 and see what silver allocations could be available. Silver is allowed in a retirement account or some investors may choose to load up their gun safe or basement. Midas Gold Group would encourage you to get some money out of the banking system or financial markets while you can. Call Midas Gold Group today at 480-360-3000 Monday through Friday from 8 am to 4 pm PST. The upcoming storm is approaching and could arrive at any time. Take that first step today to protect what you have worked so hard to build up. It’s better in your possession than to have the market take it!
