Op-ed views and opinions expressed are solely those of the author.
Looking ahead for the rest of the year we at The Morgan Report see further strength in both gold and silver, with silver outperforming again in 2021. One of the key principles used to verify that we are in the next and most likely final leg up of this secular bull market is that silver will outperform gold on the way up. It could falter but this is not what we anticipate.
Once the gold/silver ratio gets below 70-to-1, we could see an acceleration as the algorithms might put on a spread trade, which means, long silver and short gold. Silver was up 50% in round numbers in 2020 and we expect similar performance for 2021, going from ~ US$27 to $40. However, due to the long-anticipated silver move making up for all the suppression and paper games, we might expect more, and seeing the $50 level at least tested once in 2021 would not be out of the question.
The main issue with precious metals investing is the fact it is not considered mainstream. Most investors consider it a fringe investment, and the financial press and wealth managers tend to treat it as such. Any true investor who really understands risk, especially in an environment where stocks and bonds are highly correlated, knows precious metals are the only asset class without counterparty risk. In other words, gold and silver are the money of last resort.
In January 2020, during an interview with Bloomberg, Scott Minerd said silver was the conviction trade for that year. Mr. Minerd is a founding managing partner of Guggenheim Investments. What is of note is this information was presented at the World Economic Forum in Davos, Switzerland. His call has proven to be true as silver outperformed all other precious metals.
Furthermore, the investment demand was off the charts. The official numbers are not going to be available until April and May of 2021, but preliminary indications are that perhaps half of the annual mine production went into investment, with the majority of that in the Exchange Traded Products (read ETF’s).
Many investors do not know that silver is going to play a significant role both in 5G communications and the electric vehicle (EV) market, both of which are growth markets. Demand for silver may rise to as much as 23 million ounces by 2030. This is not counting how much silver will be used in the new 5G phones, which will be significantly more than 4G and previous generation phones. Perhaps by that time, most cell phone retailers will be collecting and paying for used phones so the metals can be recycled.
One area that is totally overlooked is the fact that Samsung has produced a silver-zinc battery for the EV market that supports a larger capacity, longer life cycle, and better safety. Even more astonishing, this battery is about half the size of current equivalent lithium-ion batteries. It gets even better because the range is almost double on the current battery technology, with an estimated 500-mile range. This battery design can be recharged up to 1,000 times. This could take the EV market to the next level.
One of the more important ideas for 2021 comes from the PGM market. We turned bullish on palladium but not platinum some time ago and made some decent gains. We think the tides are going to turn because, contrary to popular opinion, one can be substituted for the other and the Platinum Guild’s latest report indicates that some changes will take place soon, in which platinum will be used in place of palladium in catalytic converters.
Even though we consider the precious metals vital to portfolio management and suggest a ten percent weighting for most investors, many ask us “When will we have our day?” Many investors in this sector expect to see the types of capital appreciation that stocks and real estate have experienced. The answer of course is we do not know. But Mike Maloney of GoldSilver.com performed an analysis earlier in the year comparing the last bull market to the current one. His results indicate that gold will peak in November 2023 at over $11,000 per ounce.
This would mean the market gained $9000 “dollars” in three years, which is approximately 85% of the move in about 13% of the time. All markets accelerate dramatically, and many go parabolic once the buying frenzy begins. The main point to understand here is twofold. First, this is the time to hold on fiercely; and second, the buy and hold mentality usually produces the biggest overall gains.
David Morgan is a widely recognized analyst in the precious metals industry and consults for hedge funds, high net worth investors, mining companies, depositories, and bullion dealers. He is the publisher of The Morgan Report, a world-class publication designed to help you build and secure your wealth. He is the author of “The Silver Manifesto“, and a featured speaker at investment conferences all over the world.
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