I know this might sound ridiculous to some, but I think silver could reach $300.
No, I haven’t lost my mind. After all, it’s a metal that’s known for massive rallies.
You see, when silver went trough its 1970s bull market, it started from a low of $1.31 in October 1971. By the time it reached its peak in 1980, silver had run all the way up to $49. That was a 37x return.
If we consider that silver was priced at $4.20 in late 2001, a 37x return would take it to about $155. However, I think this bull market could be an order of magnitude larger for a number of reasons, the main ones being debt, credit and money printing.
As a result, I think silver’s ultimate peak could be $300, and I won’t rule out possibly even higher.
Bullish Silver Fundamentals
Most developed and many developing nations have been in multi-year or even multi-decade deficit scenarios. This now looks to have become a permanent state, at least until we reach some sort of global financial reset.
The Institute of International Finance explains how the COVID-19 pandemic response added $24 trillion to the global debt mountain last
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Copper has been powering higher in the last month.
This move adds another leg to a run that started a year ago. (To be fair, copper was trading around US$2.60 per lb. before crashing to just US$2.10 per lb. when COVID hit. So the chart below catches a bit of the COVID crash, but only a bit.)
This last month copper has traded higher no matter what other metals are doing, often even no matter what the US dollar is doing. I’ve discussed before the swath of bullish medium- to long-term narrative, which distill down to overall recovery plus green energy pushing demand higher against in sufficient supply.
In discussing copper, I had cautioned that a pullback might materialize. And so it did, sort of, with the price sliding from $4.25 per lb in late February to $3.98 per lb a few weeks ago.
Looks like that might have been it. The thing with copper is that, despite being a massive market that turns over 20 million tonnes of metal a year, it is also always a tight market. And the thing with tight markets is that they are easily disrupted and they respond to disruption, especially when
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“… gold will be a bit late to the party” …. All the time that I have been following you (2 years) and going to the Metals Investor Forum, gold has been about to rocket off into the cosmos. Then last September gold has gone sideways; and now “…gold will be a bit late to the party”.
Not happy. Please explain.
Reader NM
In the last 2.5 years gold has done this:
Gold miners as a whole have done this, using the GDX as a proxy:
There really is no good proxy for junior gold explorers. The TSX Venture Composite Index used to be a reasonable representation but now, with virtual currencies and pot stocks and other tech items, it really isn’t any more. So I can’t show what juniors have done. I would say they’ve followed a similar pattern, albeit with smaller gains (explorers don’t enjoy the same leverage to a rising metal price as miners enjoy because they don’t actually produce, or often even have in the ground, any gold) and a lot more volatility stemming from results.
So my first response is that gold has done darn well.
My second response is that I do not
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Copper went on one heck of a run from November through February, rising from US$3 per lb. to touch US$4.25 per lb. a month ago.
Runs like that can’t last forever and so this one stalled out, leaving copper trading around the US$4.10 level.
First things first: US$4.10 per lb. is a great copper price, strong enough to encourage lots of exploration and to entice investors to the space.
Of course, investors are most enticed when they see further upside. So what’s the outlook from here?
I think it divides into two parts: near-term uncertainty and medium-to-long-term optimism.
In the near term, there are a few factors at play. First, speculative investors piled in when copper went on its 40% run. Not surprisingly, many of those investors booked gains and moved on. Long fund positioning on the CME copper contract fell sharply in March. Because they are liquid and offer leverage options, funds often use CME contracts to establish copper exposure, so a downturn in long positions is clear evidence that such bets are falling off.
Importantly, short positions have not really risen. So it’s not that funds are flipping their bet from Copper Up to
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I was going to run through the outlook for copper today but I’ve shifted gears, for two reasons.
One: copper is relatively boring right now. After going on a major run it is stepping back and the near term is not particularly interesting.
Two: in the last two days uranium jumped up and started yelling Pay attention to me!!!
So I’m covering uranium instead.
Here’s what happened in the last two days:
Denison announced a $75-million financing that it will spend to build a strategic 2.5-million-pound uranium stockpile. Denison wants to own a whack of uranium, for two reasons. One: if the price ramps up in the coming years it can sell the stockpile for a nice profit and use the proceeds to build its planning-stage Wheeler River project. Two: if it does build Wheeler River, Denison will negotiate deals with buyers and a stockpile of uranium would give it flexibility around the scale and timing of such deals (the stockpile would be a cushion of supply around the risks of getting a new mine into production)
Yellow Cake PLC, a fairly new company with a mandate to hold physical uranium for the long term, closed
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Newmont has offered to buy GT Gold (TSXV: GTT) in a cash deal valued at $456 million. The price represents a 38% premium to GTT’s volume-weighted average share price in the preceding 20 days.
More importantly: the deal shows a mining sector working the way we, as investors, want it to work.
Junior companies are supposed to explore, make discoveries, expand those discoveries, wrap initial economics around deposits to show that they work, and all the while foster strong relations with all stakeholders so that the project has support.
Major miners engineer, build, and operate mines. They do some exploration but not a lot, and what they do is specialized: they take on the kinds of exploration that are too expensive for a junior to do, such as figuring out a new, district-scale area or drilling deep targets where each hole costs a million dollars.
As for the period in between defining a great new discovery and building a mine – that can end up with a junior or a major. It’s the not fun part, though, as the Lassonde Curve lays out.
The ‘Orphan period’, as this version of the Lassonde curve from Visual Capitalist calls it, is
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