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July 15, 2020

Time to Buy This Precious Metal?

Frank Cabibi

For the past few months, you may have seen metals like gold outpace the market as monetary policy degrades fiat currencies like the USD. Gold has surpassed all-time highs in the last week, and a lot of attention has been focused on it. But, today I want to talk about about a metal that has been quietly on it's way to breaking 4-year highs and continues to gain demand in global uncertainty.

Silver prices have gained 66% since the crash in late March. There have been some arguments against fiat money that governments prevent pairs to be traded in a free market through "currency manipulation". We've definitely seen market manipulation in the US from the Fed, but according to Kitco News, we are witnessing the same thing with currencies.

With that in mind, silver grows in demand as investors move their money from "uncertain" currencies and into this money-making metal. In another article by Kitco News, they mentioned how production has decreased during the shutdowns. What we can expect from this, as it has already happened, is that demand for silver will get even bigger, especially from all the factors I mentioned above about fiat currency.

What I think

https://www.cmegroup.com/trading/metals/precious/silver.html

Here is a table reporting silver futures through December. Because there is not much demand in the futures contracts, it might seem like silver has already reached a peak for this year since the price is already in the $19s range. However, I don't think that silver is not going to be a good long.

My thesis relies more on a greater economic downturn where the USD will not be such a great investment over time, but metals will.

https://www.statista.com/statistics/244983/projected-inflation-rate-in-the-united-states/

This is a table of projected inflation rates for the year 2021 provided by Statista.com. Notice how this year is significantly lower than that of 2021. That will be the highest jump in inflation since 2011. All of this is due to the amount of money printed in such a short time to help fuel the market. Eventually, in my opinion, the USD will be worth a lot less in the coming year compared to other 'safe havens' like metals. According to MarketWatch, silver has historically done better than US market surges, and metals like gold and silver also tend to gain strong momentum after financial stress hits global markets.

I think a break above $19.40 will be a good sign for bulls as a new support level could form. If prices come back down, I like the support around $19.15000s at the previous dip.

Featured Photo: https://responsive.fxempire.com/cover/1845x1230/webp-lossy-70.q50/fxempire/2019/10/silver-image2.jpg


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Disclaimer:

Please note that this email is my personal opinion only. I am not a licensed financial advisor, and any information shared or discussed is not to be construed as investment advice. Trading and investing involves a degree of risk, and is not suitable to all investors. Please consult with your financial advisor before making any sort of investment decisions.

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