Share:

Gold prices surged over $1,900 an ounce on Friday morning -- up over 5% for the week.

Gold could hit a new record high as early as today. However, it wouldn’t necessarily be a bad thing if the market first pulled back a bit and established a base for its launch to $2,000 and above. 

A negative divergence took place yesterday in the gold mining stocks, which fell a couple percent as a group. That may suggest some corrective action ahead in the gold market. But on a long-term basis neither the miners nor gold itself appear to be anywhere near major bull market tops. 

As long as the U.S. Congress and Federal Reserve keep pumping stimulus dollars into a moribund economy, upward pressure on gold will likely persist. Another stimulus package is coming with $1,200 checks for most Americans and hundreds of billions of dollars for various other programs. It will all be financed with more debt – and, ultimately, with fiat currency created out of thin air.

Successful American capitalist and past Money Metals podcast guest Steve Forbes warned on Thursday that the gold market may be anticipating a “category 5 economic hurricane” ahead.

Steve Forbes: When gold moves up, smart investors pay attention. The yellow metal today is up about 60% where it was two years ago. It has jumped smartly in recent days. The surge is a warning. The Federal Reserve, America's central bank, is starting to create too much money. And if this continues, we'll face a serious financial and economic crisis, perhaps as soon as next year.

Of course, whether we get into serious trouble will depend heavily on economic policy in Washington. If after the elections, we get a tsunami of new taxes and regulations, the economy will falter and our central bank will respond with an eruption of new money printing. But monetary policy can't overcome a rip of higher taxes and crushing burdens on businesses. In this situation, the dollar will teeter and we'll undergo a category five economic hurricane.

Well, if it’s been a big week for gold, it’s been an even bigger week for silver. The white metal broke above $20 an ounce on Monday and spiked all the way up to $23 by Wednesday. 

What’s behind the huge move in silver prices? 

For one thing, the round number breakout to multi-year highs induced a wave of short covering. Leveraged futures traders who had made bearish bets against silver were forced to cut their losses by buying back their short positions.

For another, demand for physical silver is set to rise at a time when mining supply is constricted. 

Silver is used in a wide range of high-tech and industrial applications. One of the fastest growing sources of silver demand is in solar panels and other so-called “green” technologies.

The European Union’s recovery fund allocates a huge chunk of its spending to environmental initiatives and alternative energy development. The EU may issue “green bonds” to help boost investment in wind and solar farms and other projects.

It’s no coincidence that two of the best performing niche sub-sectors this year are solar energy and silver mining. Solar panels as well as the batteries needed to store power at night require a number of specialty metals, including silver. 

Investors are seeing opportunity in every stage of solar energy deployment, from the raw materials that go into it to the companies that sell rooftop panels to consumers.  

The hottest high-profile stock of 2020 is Tesla. Its shares have more than tripled in value this year. Elon Musk’s electric car company is now worth multiples of some conventional car markers despite having less revenue. 

Tesla’s sky-high valuation has left many Wall Street analysts scratching their heads. But perhaps Tesla investors aren’t eyeing vehicle sales as much as they are seeing massive growth potential in Tesla’s solar panel and battery businesses.

In the years ahead, residential solar arrays could become ubiquitous as relative cost efficiencies improve while government incentives and mandates expand. One way to play this trend without buying expensive stocks or speculating on up-and-coming players within the solar industry is to buy physical silver. 

The upshot is that since silver is also a precious metal, it is also valued for its monetary properties. Silver could appreciate hugely during an economic crisis, currency crisis, or political crisis that creates a difficult business environment even for mining companies.

This looks like the perfect storm for silver. And if so, the last few days could be only the beginning.
 

Share: Feed news

Money Metals Exchange and its staff do not act as personal investment advisors for any specific individual. Nor do we advocate the purchase or sale of any regulated security listed on any exchange for any specific individual. Readers and customers should be aware that, although our track record is excellent, investment markets have inherent risks and there can be no guarantee of future profits. Likewise, our past performance does not assure the same future. You are responsible for your investment decisions, and they should be made in consultation with your own advisors. By purchasing through Money Metals, you understand our company not responsible for any losses caused by your investment decisions, nor do we have any claim to any market gains you may enjoy. This Website is provided “as is,” and Money Metals disclaims all warranties (express or implied) and any and all responsibility or liability for the accuracy, legality, reliability, or availability of any content on the Website.

Follow us on Telegram

Stay updated of all the news

Join Telegram

Recommended Content


Follow us on Telegram

Stay updated of all the news

Join Telegram

Recommended Content

Editors’ Picks

EUR/USD stays in daily range near 1.0850 ahead of US data

EUR/USD stays in daily range near 1.0850 ahead of US data

EUR/USD holds steady at around 1.0850 after edging higher on hot French and Spanish inflation data in the early European session on Thursday. The market action remains subdued as focus shifts to inflation figures from Germany and the US.

EUR/USD News

GBP/USD holds ground above 1.2650, awaits US PCE inflation data

GBP/USD holds ground above 1.2650, awaits US PCE inflation data

GBP/USD is holding ground above 1.2650 in the European trading hours on Thursday, as the US Dollar remains on the back foot amid a better mood and sustained USD/JPY sell-off. The focus shifts to the US PCE inflation data for fresh USD price action. 

GBP/USD News

Gold price consolidates as focus remains on US core PCE Price Index

Gold price consolidates as focus remains on US core PCE Price Index

Gold price awaits the US core PCE Price Index data for a decisive move. The underlying inflation data will sharpen the interest rate outlook. Fed’s Collins expects the Fed’s path to 2% inflation will be bumpy.

Gold News

XRP price surges to $0.58 amidst allegations of price manipulation by Ripple using bots

XRP price surges to $0.58 amidst allegations of price manipulation by Ripple using bots

XRP price continued its rally towards the $0.64 target on Thursday. The altcoin climbed to $0.58, sustained above key support at $0.55, maintaining its uptrend.

Read more

Canada GDP Preview: Economy expected to have resumed expansion in Q4

Canada GDP Preview: Economy expected to have resumed expansion in Q4

Following the annualized 1.1% contraction recorded in Q3 2023, the Canadian economy is predicted to have performed very well in the latter part of last year, growing by 0.8% and prompting the BoC to maintain its prudent monetary policy stance.

Read more

Majors

Cryptocurrencies

Signatures