Saddle Up with Silver

There’s an old saying, “It is the difficult horses that have the most to give you.” Boy, that sure could apply to silver. This metal has given us nothing but trouble for years. Now, it could win the trophy!

Why? Because there is a stampeding herd of market forces that are VERY bullish for the metal …

Bull Force #1: Industrial Metal

Silver is an industrial metal as well as a precious metal. In fact, 55% of silver demand comes from industrial fabrication. That’s huge, compared to 20% for jewelry, 20% for coins and bars, and 5% for silverware.

It hurts silver when investors think that China, the world’s industrial engine, is slowing down. But here’s the deal: China has been slowing down for over a year. Its gross domestic product is forecast to grow at 6.2% in the second quarter, the slowest growth during a three-month period since at least 1992.

The Chinese aren’t just going to roll over. In fact, they’re throwing money at the problem, with economic initiatives and big-ticket projects. The stimulus includes $291 billion in tax cuts, and the government is pushing on big infrastructure projects.

This is all stimulating industrial demand for silver. Those industrial applications include electronics, solar, water purification, chemical reagents and more.

Bull Force #2: Currency Wars

The U.S. trade war with China is turning into a currency war. Société Générale, Pimco, Deutsche Bank and others say investors could soon feel the pain of “competitive devaluation” as the U.S., Europe and Japan all weaken their currencies to stave off deflation.

When investors worry about currencies, they buy gold. They buy silver, too, though in lesser amounts. Still, it’s a bullish force for the metal.

Bull Force #3: Negative Real Rates

Central banks around the world are slashing interest rates. Now many sovereign bonds, as well as corporate bonds that trade close to sovereign rates, have negative yields. That means it actually costs money to own those bonds.

And it’s happening a lot. As of last week, the value of debt with negative yields hit $16 trillion globally.

The more negative yields become, the better precious metals — gold and silver — look. That’s because precious metals don’t pay a yield.

Bull Force #4: A Real Supply/ Demand Gap

The next chart from the Silver Institute shows supply and demand for silver, as well as the net balance.

As you can see, silver mine production declined for the third consecutive year. In 2018, silver mine production dropped 2.5%. At the same time, physical demand rose for the first time since 2015, up 4%.

Stockpiles are covering this gap. For now. But the lower stockpiles go, the more upward pressure that puts on prices.

Bull Force #5: Silver Breaks its Downtrend

Silver (and gold) rallied sharply in 2016. The metal has been in a grinding downtrend ever since. But that’s changing right now.

This breakout gives us a minimum target of $19.50. That would be very good for silver and miners.

For a quick and easy way to play this, you can buy the Global X Silver Miners ETF (NYSE: SIL). Silver has pulled back recently, so you may want to stake your claim now while you can.

To be sure, it will be a zig-zagging journey. A wild ride. But it’s one you should take.

For more on which silver stock I like right now, check out a $9 trial subscription to Wealth Megatrends here.

All the best,

Sean

P.S. Back in June, I interviewed Bob Archer, former CEO of Great Panther Mining (NYSE: GPL) and now CEO of NewRange Gold Corp. (OTCQB: NRGOF). His case for silver today is stronger than ever.

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One comment on “Saddle Up with Silver

  1. John August 20, 2019

    I’m curious why you advocate SIL and not USLV? I’m in both names but the upside potential of USLV is exponentially higher than SIL.

    Reply