The Miles Franklin Newsletter |
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From The Desk Of David Schectman |
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The ONE most important thing you need to know about the bull market in gold and silver -
I lied. It’s four, not one
David's Commentary (In Blue)
A day doesn’t go by without me spending hours on end reading and staying current on topics that are relevant to my industry. I’ve been doing that for the last 37 years. For most of those years, rarely was there an event that I considered to be a “game changer”. Until recently, that is. The fundamentals for gold and silver are vastly different today than they were at the beginning of the year. Big changes are happening now, and yes, they are “game changers” and they are fundamental changes that will affect the price of gold and silver for years to come. Things are changing very fast and most people are unaware of the significance of what has happened. And it’s not just Covid-19.
Yes, it is different now, in almost every conceivable way. And I want to make you aware of what these changes are.
Today, many central banks, including the Fed and ECB, are more dovish than they have been in years. They are not only creating more “fiat” currencies than ever before, and many of them are also accumulating more gold than at any time in decades. Let’s dig a bit deeper into this.
(1)The first Game Changer occurred on March 29, 2019. My son Andy calls it the biggest change to our industry in the 30 years he has been at Miles Franklin. That is when the BIS reclassified gold as a Tier 1 asset. That means that central banks can now, for the first time since 1971, legally hold gold as a “reserve” at full value, along with US Treasuries. Before this reclassification, central banks could only hold Treasuries as reserves. As a result, many central banks started accumulating gold. Central banks became major buyers of gold, led by Russia and China. Turkey, Iran and other central banks also became major buyers. This created a big new demand for gold. You can see the effect on the price in the following chart.
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Do you think that it was a “coincidence” that gold started its upward move around the time that the Basel 3 agreement (re-classifying gold as a Tier 1 asset) went into effect?
Gold was around $1,250 when the change occurred. Gold cut through the $2,000 barrier like a hot knife through butter on Monday and has already shot past $2,050. There is NO TECHNICAL RESISTANCE to slow it down. Gold is in uncharted waters now with no past history for the traders to rely on. In the last two years, the price of gold is up $800, or 64%. As a point of reference, the Dow is up 8.8% in the same time frame. And the bull market in gold is just getting started.
Now think about this. A Tier 1 asset is supposed to be a “riskless” asset. A US Treasury can’t default, so it is considered riskless. But is it really riskless?” If a 10-year bond is paying only 0.05% interest and inflation is running at (let’s use Shadowstats numbers) 4%, then when the bond matures, if the inflation rate stayed at 4% the bond would lose nearly half of its value. That is hardly what I call riskless. The “riskless” aspect of the Treasury is it can’t default, but that does not make it riskless, not when the rate of interest it pays is less than inflation. Do you think that this is motivation for the BLS to rig the numbers to ensure that inflation appears to be at or near zero?
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The central bankers aren’t stupid and many are now starting to unload treasuries (which means dumping our deflating dollars) and replacing them with gold. China and Russia are absolutely doing this in a big way. It goes without saying that they are not buying our bonds, which is bad enough. That leaves the Federal Reserve as the buyer of last resort and that means more money creation and that means further diluting the value of the dollar. Remember, the real definition of inflation is an increase in the money supply relative to goods and services – and we are increasing the money supply by trillions and trillions of new dollars.
(2) Which leads to the next big Game Changer. The dollar is starting to lose its status as the world’s reserve currency. And that was happening before the Coronavirus send our economy into the toilet and forced the Fed to start printing trillions to keep everything from collapsing. Holding dollars or a dollar-based asset is now a losing proposition. This is a strong tail wind for gold and silver.
Last fall, when the Fed tried to raise interest rates and shrink their balance sheet, the stock market threw a tantrum and Wall Street started clamoring for liquidity. The Fed quickly reversed from a Hawkish stance (guarding against inflation) to Dovish and started pushing interest rates down. In September, the Fed intervened in the market and offered at least $75 billion in daily repos and $35 billion in long-term repo twice per week. Subsequently, it increased the size of its daily lending to $120 billion. This was the beginning of the Fed opening the monetary flood gates to help stabilize the financial markets on Wall Street.
After the Coronavirus caused a shut-down to the economy the Fed stated that it would provide all the liquidity (money printing) necessary to support the stock market and the economy and they moved into the bond markets buying up corporate bonds and junk bonds to hold interest rated down. Along with their guaranty to print as much money as necessary (inflate), Jerome Powell (Chair of the Federal Reserve) stated, “I am not even thinking about thinking about raising interest rates.” And last week he said, “I am not thinking about thinking about thinking about raising interest rates.”
What does all of this mean and why is it a game changer? It means that interest rates will hover around zero and may even go below zero (pay people to hold your money). It means that the Fed can’t raise interest rates without crashing the stock market and the economy. It means that the Fed’s stated monetary policy is permanent inflation – or as Richard Russell used to say, “inflate or die.”
That is the most bullish environment for precious metals possible. Unlimited dilution of the dollar (as the Fed creates multiple trillions of dollars out of thin air) and negative “real” interest rates (interest rates minus inflation) are the new normal. This is an epic change and all but guarantees a years-long bull market in gold and silver. When interest rates are less than inflation there is no reason to hold large sums of money in Treasuries or money market funds. You lose money. That makes gold, “which pays no interest,” much more desirable. When the Fed is creating trillions out of thin air, it threatens the purchasing power of the dollar which makes owning gold much more attractive. Look at the results.
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Gold was below $1,600 an ounce when the new year begin. It’s up $450, or 28% since then. |
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Silver started the year off at $18 and now the Comex price is closing in on $28, so silver is up $10, which is a rise of 55.5%. But you can’t buy physical silver for that price. The wholesale “premiums” on silver have increased from around $1 an ounce to at least $4 an ounce. And if you want to buy a Silver Eagle, your cost is “spot” plus $7.95 with a one-week delay. A Silver Maple is “spot” plus $5.25 with a 2- or 3-week delay. The delays will get longer and the premium over sport will continue to get larger. In other words, a one-ounce Silver Eagle will cost you around $36, not $28.
So why is the price of gold and silver rising? My answer is the price of gold and silver are not rising. The dollar is falling. It takes more dollars to buy them. Gold is, after all, the number one form of money; it is a Tier 1 asset.
(3) Game Changer. For the first time, the holders of Comex gold and silver “long” contracts are not closing them out and settling for cash, or rolling their contracts over into future months. They are standing for delivery. This is a game-changer. If this continues, it could easily be the end of the futures market. Since the issuers of the contracts (the large bullion banks) only have a fraction of the actual gold and silver that is promised on the contracts, and the “stoppers,” those who are standing for delivery of actual gold and silver, are standing for delivery, the commercial banks (usually JPMorgan leading the way) will have to find a way to come up with an enormous amount of gold and silver to deliver to the contract holders. They will have to stop their naked shorting of gold and silver. And what happens when they stop the shorting? The prices rise – like you are seeing right now. This is what the gold and silver market looks like minus the decade-long price suppression by the bullion banks. Up, up and away.
(4) Game Changer: JPMorgan has stepped aside and is no longer short gold or silver. In fact, they recently went long. Why? This is a game-changer. JPMorgan was the bank that did the most shorting of gold and silver and kept a lid on the prices since they took over the massive silver short position held by Bear Stearns. According to Ted Butler, the Department of Justice recently came down hard on them for spoofing and market rigging and told them to stop the naked shorting and sell off a big chunk of the 1 billion ounces of silver they acquired since 2008. In the past couple of months, JPMorgan has sold off around 300 million ounces of their physical silver, and provided it to the “trapped” shorts on Comex so they can use it to close out their contracts without going long, which would have sent silver to $100/ounce already. The game is always rigged in their favor, and no one of any consequence will go to jail, but at least gold and silver appear to finally be free to move up, unabated. I have listed this as number “4” but it could easily be the number one biggest change because it eliminated the price suppression scheme on the Comex and is now allowing actual supply and demand of physical metals to set the price.
Can stocks continue to rise in an economy that is in a depression? Yes, for a while if the Fed continues to issue a “put” on the stock market, but in so doing they are destroying the value of the dollar. Gold wins either way. A falling dollar is super bullish for gold and silver. A crashing stock market will force big money out of equities into metals. It’s a win, win.
“There is no means of avoiding the final collapse of a boom brought about by credit expansion.” - Ludwig von Mises
When I went to work in the precious metals industry in the early 1980s, I was introduced to the Austrian School of Economics and Ludwig von Mises. His views were highly respected and his warnings were taken seriously. As the years passed by, his warnings faded into the background and it became commonly accepted that we could continue to print and borrow forever, without any consequences. I said - to myself - “This makes no sense, there will be a price to pay. ” von Mises’ warnings were ignored but not by me.
The “Bandwagon” only has room for winners. Us gold and silver die-hard bulls hung around for the last eight years while most investors jumped off. Now they want back on. Funny how a new bull market can change attitudes. Shall we let them back on? Hell yes! The more the merrier. On the one hand there is a sense of being vindicated (some would call it gloating), yet deep down we (a few of us) knew how this would play out. It’s called conviction. I always had plenty of that. I never cared what the “price” indicated; I just knew I was right. The fundamentals and logic made that clear to me. It just took so much longer for the advice of von Mises to come into play. Do my critics give me credit? Nope, they say, “Even a broken clock is right twice a day.” Call it what you will, but I have had eight years to accumulate gold and silver at ridiculously low prices. I am not the fool. They are.
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There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved. - Ludwig von Mises
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In a recent Bloomberg article, Deutsche Bank said the Fed will have to increase their balance sheet to $20 Trillion to save the economy. It started the year around $3 trillion. Is there any wonder why gold and silver are headed to the moon?
I know I am repeating myself, but it is easy to forget that gold is NOT rising, it’s the dollar that is falling. It takes more dollars to buy an ounce of gold, which is THE standard. It was down again yesterday and now is hovering around 92.92. Recently it was at 103. This is a bad trend for the dollar. When it drops into the 80s the fall should pick up steam. When it falls below 60 – according to Jim Sinclair – it’s game over for the dollar. How high can gold go? I don’t know - how low can the dollar go? If the dollar collapses, gold goes to infinity. A fiscal policy (the Fed) that relies on creating trillions and trillions and trillions of new dollars to keep the economy afloat has to result in the destruction of the dollar.
Keep an eye on the price of the basics you buy at the grocery store and you will be shocked. My wife and son tell me food prices are rising rapidly. What do I know? I don’t grocery shop, I just pay the bills.
So far, most of the inflation has been relegated to financial assets (real estate. stocks, bonds, etc.) but it is beginning to work its way into the basic things we need for our day-to-day survival. There are trillions of dollars that are locked up in the stock market that are just waiting for an excuse to pour out into the real economy - and then we wake up one day and it looks like Venezuela. What be the “excuse?” When the stock market crashes – the real panic will set in when the next “correction” pushes the Dow down below the 18,500 level it hit in March. There will be a rude awakening – people will dump financial assets and rush into hard assets like – drum roll please – gold and silver. But believe me, they will pay through the nose to buy gold and silver, and that’s assuming it will even be available, at any price.
Those of us who were right, but early, should not expect to get an apology from friends and family. They will probably say, BFD – it only took eight years. We don’t need one. We will survive the challenging times that lie ahead. And those who mocked us and refused to listen to common sense will be coming around singing the Fenton Robinson blues classic, “Loan me a dime.” (The version by Boz Skaggs and Duane Allman is one of my all-time favorites.)
A Day In The Life of Andy Schectman
I spent Monday and Tuesday hanging out with my son Andy, trying to get a “feel” for what is happening with our business. I sort of live in an ivory tower while he is on the front lines. With the Covid-19 lock down, he is working from home. I see the numbers, and our business is incredibly strong, but I wanted to see first-hand what “a day in the life is like for my kid.” I needed to experience it in real time. Andy told me that he works 18 hours a day fielding calls, non-stop, and at the same time, he is inundated with emails every single day, even on the weekends. It’s been that way for four months. He does not stop working until every order has been entered and every email has been answered. His day starts before 8 A.M. and he never gets to bed until after 1 in the morning. He has virtually no time to spend with his family and he no longer has much of a social life. He is losing weight and the strain of the onslaught of business is wearing him down. He does allow himself to golf on Thursday mornings, but still takes phone calls while golfing. This is a good problem to have and he is up to the task. We have been waiting for a market like this for a long time. All of our brokers and support staff are swamped. Fortunately, most of our people have been at this with me for many years, and they are all real “pros”. And this is just the beginning of the run.
I have never seen anything like this in my 37 years in the industry.
For me, Monday and Tuesday with Andy was one of those “you have to experience it to believe it” moments. I kid you not, from the time I arrived at his house at 8:30 until I left at 5:00, he was not off the phone for more than 30 or 60 seconds between calls. He was on the phone the entire time, without a break. In that time, he wrote up more than three dozen orders and personally sold over a million dollars of gold and silver each day. He would be quoting prices or writing up an order and another incoming call would arrive. He would have to put the first caller on hold, (sometimes two or three times during the conversation), get a phone number from the caller and tell them he would call them back shortly and resume the conversation with the first caller. And then, the phone would ring again, and he would field another incoming call, putting the first caller on hold again, with an apology. This went on all day long. He looked over at me with a smile on his face and said, “See, I told you what this was like and you didn’t believe me.” He was NEVER off the phone yet everyone was treated professionally and he somehow managed to maintain his composure in the middle of this MADNESS. Our sales staff and support staff are crushed with new business. Yes, NEW business. People are coming out of the woodwork. Mostly first-time customers for Miles Franklin.
For the first time - ever - wealthy people who know Andy and live in Minneapolis are calling him and placing large orders for gold and silver. These are people who would never give Andy the time of day before. They are stock and bond investors and never paid any attention to gold or silver. We see this as a developing trend and for the first time in my experience, Wall Street mentality people are rushing to buy gold and silver. Our industry is bursting at the seams trying to handle the volume of new buyers, and the thing is, this is just the beginning. The real problem we will have to deal with is - where will we find the product to sell to all these folks? There is a finite supply of physical gold and silver and an infinite number of potential new buyers. We have preferred relationships with the industry’s largest wholesale suppliers and always get placed at the front of the line, but lately the wholesalers are running out of product. What product there is, we will be able to source, but when there are more buyers than available product and when the really wealthy individuals and hedge funds decide to join in on the party, it will be challenging. Which is why I say, do it now, while you can still get product.
I constantly check the prices and the inventory of all the major dealers on the Internet. Our prices are competitive with the lowest prices in the industry. All of the major gold and silver dealers are posting “OUT OF STOCK” on the most popular items. They have very little inventory. If you want a gold or silver American Eagle or Maple Leaf, chances are there will be a long delivery delay, and the premium will be ridiculously high. We do not benefit from the premium; it goes to the wholesaler. It will only get worse.
The US Mint announced that it will only produce gold OR silver coins, one or the other, but not both, for the next 18 MONTHS. Yes, that means shortages and the dealers are already straining to meet the demand, even before this recent announcement. – Add to that, the big money is just beginning to pour into precious metals.
If you are considering buying gold or silver, I can assure you, “The early bird gets the worm.”
On Tuesday, I sat there next to Andy, watching the price of gold and silver rise by the minute, all day long. The phones never stopped ringing. Everyone was a buyer and they weren’t concerned what the price was, or what was available. They wanted to buy gold and silver now. What do you think it will be like when gold is $2,500 (soon) and silver has passed $30 and is setting sights on $40 and $50?
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"It's just astonishing and breathtaking and you have to sort of pinch yourself sometimes to sort of realize that it's actually happening." - Michael Hartnett, BofA Chief Investment Strategist
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If it’s mayhem now, what will business be like heading into the election? We are stretched thin now and are in the process hiring additional sales and support staff – for the first time in years. Mind you, these are good problems to have and Lord knows, we have waited a long time for this, but that old Chinese proverb has proven to be true once again: “Be careful what you wish for, your wish may come true.”
Rising gold and silver is great but now, it comes at a price. Social disarray, over 40 million lost jobs, millions of evictions are coming, there will be a massive increase in the homeless, despair and fear is in the air for millions of people, many wondering where they will sleep tonight and where there their next meal will come from. Yes, this is the beginning of the Greatest Depression the world has ever experienced, and I see no way to avoid it. Von Mises knew that. That is the “catastrophe” he wrote about that inevitably follows a credit-induced collapse, and we are witnessing the unwinding of the largest debt bubble the world has ever known right now.
The Federal Reserve has NO choice but to keep interest rates at zero (so the government can keep issuing trillions of dollars of new bonds without having to pay interest on the new debt). And they have no choice but to keep issuing trillions upon trillions of new dollars, created out of thin air, just to keep the system from a total collapse. This is a fundamental change; a structural change, and it is not going away. What is going away is the status of the US dollar as the world’s reserve currency and the only island of safety are precious metals – which can’t be defaulted on.
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Gold's historic rally is a sign that the U.S. dollar’s reign as reserve currency is in question, says portfolio manager
Kitco News
This summer's massive gold price rally could be a sign that the market is losing confidence in the U.S. dollar as the world's reserve currency, according to Horizons ETFs portfolio manager Nick Piquard.
“The rally is telling investors that the financial system with the U.S. dollar as the reserve currency, [might need] some changes,” Piquard told Kitco News last week.
“Most Americans will be blindsided by what’s about to happen,” says Dr. Ron Paul, the former U.S. Presidential candidate and Congressional veteran.
Global debt and unlimited money printing are deteriorating the confidence in the U.S. dollar as the global reserve currency.
“The U.S. dollar system has worked so far. But we're getting to the point where there's so much debt in the world and with this new crisis, there’s even more debt,” Piquard explained. “People are figuring out that maybe they will have to make some changes to how the U.S. dollar acts as a reserve system. The U.S. is probably going to have to print a lot of dollars to bail out all this debt. That’s really fueling the gold rally.”
The market is also realizing that higher gold prices are inevitable due to the situation the Fed and the U.S. government have been forced into.
“Investors are seeing that this COVID crisis isn't going to go away anytime soon. The cases keep going up globally. And the longer it takes, the more debt needs to be created,” Piquard said. “Congress is debating right now about how many trillions of dollars they're going to have to spend for a new stimulus after having already spent trillions of dollars.”
And even once the COVID crisis is behind us, the economy is going to be weak for a while, Piquard pointed out.
“After all that money has been spent, it's not like you're going to be able to raise taxes to get that money back, or it's not going to be easy to raise rates,” he said. “The market is anticipating that the Fed is going to have to do more. And all those things are just beneficial for gold.”
The Federal Reserve cannot just go back to normal. “That will just be negative for everyone. Nobody really wins in that scenario,” Piquard noted.
Inflation vs. deflation argument
There are currently two camps out there: inflationary and deflationary one. In the inflationary scenario, gold will do great, while in the deflationary one, the yellow metal will perform poorly, Piquard explained.
“The deflationary guys think that gold is going to go a lot lower, stocks are going a lot lower and the U.S. dollar is going to go a lot higher,” he said. “Basically, what they're saying is that there's all this debt in the world and everyone has borrowed U.S. dollars and they're going to have a hard time paying it back, especially with a weak economy … When they have to pay back that debt, everyone’s going to scramble for the U.S. dollars and that will drive down asset prices, which drives the U.S. dollar up.
The gold bulls believe in the inflationary argument that sees the Fed intervening and not letting deflation take over.
“All the Fed needs to do is buy what is being sold. And that's kind of what they've done,” Piquard said. “They’ve been buying bonds first. Now, they're saying they're going to buy corporates. Central banks around the world have already been doing this. The Japanese have been buying stocks for who knows how long, the Swiss central bank has been buying stocks.”
Based on the inflationary scenario, the Fed will continue to intervene, print more money and weaken the U.S. dollar. “That's positive for gold, which is the only asset that you can't print,” Piquard said.
Inflation doesn’t even need to go much higher, the portfolio manager added. “All we need is for rates to be extremely low for extremely long and for inflation to be a little bit higher. As long as the real yields are negative, that is good for gold.”
How to tell the gold price rally is over
The gold market has not seen its top yet with more upside potential still ahead of the precious metal, Piquard stated.
One major sign of a market top in gold is silver prices catching up and hitting their all-time highs of $50 an ounce.
“Silver price generally makes new highs towards the end of a gold bull market,” Piquard said. “The reason for that is because silver is more of an industrial metal, which is used more in the economy. So, when silver starts rallying, that implies that the economy might be picking up.”
So far, silver has risen but it is still significantly below its record highs. At the time of writing, September Comex silver prices were trading at $24.365, up 0.62% on the day.
“Gold has made new all-time highs and I think we need silver to reach its old highs as well. Then, there might be an indication that the economy's doing better. Once we see silver catching up, then maybe it's a sign that the bull rally has less room to go,” Piquard said.
Another sign of a market top is the economy recovering and the Fed’s 2% inflation target being breached on a sustainable basis. “The Fed said they're only going to raise rates once inflation recovers above their 2% benchmark. That that could take some time — a year or more,” Piquard noted.
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Bill Holter is right. “All roads lead to gold.” I do what I preach, I get it while I still can. I have been buying precious metals since 1999. I prefer silver over gold; it is a much better value - for now . It makes more sense to buy silver at $30 than to buy it at $100 an ounce. And I really do expect silver to reach that level. I am not giving you financial advice; I am just telling you what I do and what is happening in our industry. I see prices rising and availability becoming more and more of a problem going forward. Make your own mind up, do your own research and take ownership for your own decisions. |
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Physical delivery on the largest gold futures exchange in the world, the COMEX in New York, has reached all-time highs this year. Usually, delivery is “negligible.” What has changed?
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Ben Bernanke assured the markets that there was nothing to worry about; he said we can always drop hundred bills out of helicopters. Guess what? They’re doing it now. What do you think the $600 a week checks to millions of unemployed workers every week is? |
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"Congress would grant the Federal Reserve an additional tool for providing support. The Fed would then activate the securities and deposit the funds digitally in households’ apps."
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No wonder the NASDAQ keeps rising. Not again! This is what weakened the balance sheets of many of our biggest publicly held companies and forced them to go begging to the government for bailout and stimulus money. They are trading “rainy day” money for more debt just to increase the price of their stock and the size of their bonuses. And when the rainy day comes, they do not have a strong enough balance sheet to survive it. |
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Google's buybacks were up 92% from a year prior; Microsoft's were up 25% from a year earlier, and Apple repurchased $16 billion.
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As bad as things are now, how bad do you think they will be if Covid-19 hangs around for another year or two, or forever? |
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How effective will a new vaccine be?
The declaration that a vaccine has been shown safe and effective will be a beginning, not the end. Deploying the vaccine to people in the United States and around the world will test and strain distribution networks, the supply chain, public trust and global cooperation. It will take months or, more likely, years to reach enough people to make the world safe.
For those who do get a vaccine as soon as shots become available, protection won’t be immediate – it takes weeks for the immune system to call up full platoons of disease-fighting antibodies. And many vaccine technologies will require a second shot weeks after the first to raise immune defenses.
Immunity could be short-lived or partial, requiring repeated boosters that strain the vaccine supply or require people to keep social distancing and wearing masks even after they’ve received their shots. And if a vaccine works less well for some groups of people, if swaths of the population are reluctant to get a vaccine or if there isn’t enough to go around, some people will still get sick even after scientists declare victory on a vaccine – which could help foster a false impression that it does not work.
A proven vaccine will profoundly change the relationship the world has with the novel coronavirus and is how many experts believe the pandemic will end. In popular conception, a vaccine is regarded as a silver bullet. But the truth – especially with the earliest vaccines – probably will be far more nuanced. Public health experts fear that could lead to disappointment and erode the already delicate trust essential to making the effort to vanquish the virus succeed.
The drive to develop vaccines is frequently characterized as a race, with one country or company in the lead. The race metaphor suggests that what matters is who reaches the finish line first. But first across the line is not necessarily the best – and it almost certainly isn’t the end of the race, which could go on for years.
“The realistic scenario is probably going to be more like what we saw with HIV/AIDS,” said Michael Kinch, an expert in drug development and research at Washington University in St. Louis. “With HIV, we had a first generation of, looking back now, fairly mediocre drugs. I am afraid – and people don’t like to hear this, but I’m kind of constantly preaching it – we have to prepare ourselves for the idea we do not have a very good vaccine. My guess is the first generation of vaccines may be mediocre.”
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It's articles like this one and other similar bullish predictions from Goldman Sachs that are opening the eyes of Wall Street investors. |
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Bank of America: Silver Could Hit $50 "In The Near Term"
A little over two months ago, Bank of America became gold's biggest cheerleader on Wall Street (and has been spot on so far) in predicting that the price of the yellow metal would hit $3000 in about 18 months due to "loose monetary and fiscal policies around the world" and with the US elections scheduled for November and the EU’s Recovery Fund in place from January 2021, the bank expects that demand will remain supportive next year, even though the pandemic continues to be an immense risk.
The current macro-economic backdrop is also bullish for the precious metals, with gold benefiting from record low real rates, at the same time as central banks are backstopping fiscal spending.
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But it's not just gold that stands to rise by about 50% according to BofA: silver also benefits from this macro backdrop but demand should also strengthen on the back of a so-called "green" stimulus as most stimulus proposals have some environmentally clean aspect to them; As a result, BofA also sees silver rising to $35/oz as a feasible target next year, but more importantly highlights that "the white metal could rally to $50/oz in the medium-term."
Below are some more details on Boa’s bullish case:
As the bank explains, similar to gold investors have raised their exposure to the white metal over concerns about the current economic policy. Yet, with silver more exposed to industrial demand, these purchases did not matter during the lockdowns, with the gold: silver ratio peaking at 124, and still a ways away from its long-term average of 59x.
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Since then, silver has strongly outperformed gold as some offtake from manufacturers has come back. In addition, the prospect of further fiscal easing has also been supportive. Linked to that, BofA notes that the policy outline of US presidential candidate Joe Biden has caught the market’s attention. Perhaps the most ambitious goal in his plans is the 2050 target for achieving net-zero emissions across the US, if he is elected. Over the last fifteen years, US emissions have fallen more than 15%. Yet the drop has been attributable in part to a decline in industrial activity and coal plant retirements that were quickly replaced by combined cycle natural gas plants. |
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Going forward, in our view, substantial emissions reductions will be needed from all sectors of the economy in order to achieve this goal.
Biden’s climate plan also targets zero emissions from the power sector by 2035, which would require an overhaul of the industry. Coal, natural gas, and petroleum generated more than 60% of the power in the US in 2019 and nearly all CO2 emissions. According to Biden’s climate plan, an emissions-free power sector may be achieved through a combination of changes. First, increased end consumer efficiency, which would help cap or reduce power demand over time. Second, the power sector would need to build grid scale storage to support substantial increases in renewable power generation. Third, fossil fuel power generation would need to be replaced with renewables, nuclear, and other low/no carbon alternatives and negative carbon energy technologies would likely be required to offset any remaining fossil fuel powered generation.
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Sticking with the last point, a potential increase in photovoltaics matters particularly for silver, which is a key ingredient in solar panels.
Indeed, an accelerated de-carbonisation of the US power sector alone could boost annual global silver demand from 2285t in 2020 to an average of 4272t over the next 15 years.
Looking at the potential implications of that, market balances have averaged +1100t in the past five years (2016-19) and with limited supply increases currently in the pipeline...
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... the potential demand additions could push silver into a sustained deficit.
Why is this important? Because as BofA concludes "the last time this happened between 2006 and 2011, the precious metal rallied to $50/oz, a price level we would see within reach this time around as well."
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Hello North American Monetary Metals Summit attendees!
Please save this email - it provides valuable information on how to access the conference, and how to connect to your favorite presenters and fellow attendees.
How To Access the Conference
First - we will start with the howto. There are two ways to access the conference. You can access the event webpage by clicking this address, and logging in with your account details:
The web page should be self-explanatory, but let us know if you have questions.
If you prefer to use the mobile app, you can download it here:
Once downloaded, simply login with the user account that you created on the free registration page.
Here is the mobile app user guide, with a help video.
**Live Streaming Information**
We are live streaming all day (9am - 5pm CST), both days of the conference. I will be hosting, and we will have some of the conference presenters drop in at 12pm CST each day (Aug 6-7) to answer questions.
Feel free to stop by the live stream at any time. You can always go back to your conference session and replay it. Those sessions have been recorded, and can be reviewed a second and third time at your leisure.
To access the live stream, simply go to the Live Stream Q&A session on the Agenda tab for each day, and click the link to access it. Remember, they are live all day, each day, with the presenters stopping by at 12pm CST to answer your questions. Please see the attached picture on accessing the live stream.
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Meet the Organizer
You can meet Robert Kientz, Organizer and Founder of Gold Silver Pros, Wednesday August 5th at 4pm CST, before the conference begins. Login into the platform via web or app, and open the session for Aug 5th to speak to him.
We look forward to a fantastic conference, and meeting with many of you as well. Enjoy the Summit!
Robert Kientz
Organizer,
North American Monetary Metals Summit
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Private Safe Deposit Boxes
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Unencumbered / Segregated Storage
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About Miles Franklin
Miles Franklin was founded in January, 1990 by David MILES Schectman. David's son, Andy Schectman, our CEO, joined Miles Franklin in 1991. Miles Franklin's primary focus from 1990 through 1998 was the Swiss Annuity and we were one of the two top firms in the industry. In November, 2000, we decided to de-emphasize our focus on off-shore investing and moved primarily into gold and silver, which we felt were about to enter into a long-term bull market cycle. Our timing and our new direction proved to be the right thing to do.
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