Chris’ note: Today, I bring in my good friend E.B. Tucker, precious metals expert and editor of Strategic Investor, to give us a big-picture update on the gold and silver markets.
As regular readers know, E.B. was spot-on with his prediction in December that gold would hit $1,500 an ounce this year. Gold’s up 20% this year… crossed the $1,500 barrier earlier this month… and is showing no signs of slowing down.
But what some readers may not realize is that E.B. made another important call recently. During an interview with Investing News Network at the Sprott Natural Resource Symposium in Vancouver last month, he said silver would hit $20 this year.
That’s looking very likely now after silver’s huge day yesterday. It’s currently sitting at $18.40… up 13% from when he made the prediction.
Below, E.B. explains why both metals are still buys today… and shares an easy, one-click way to get some silver exposure…
Chris Reilly, managing editor, Casey Daily Dispatch: E.B., as regular readers know, you were spot-on with your “$1,500 gold in 2019” call back in December.
You recently made another call for $20 silver, which is also looking good after yesterday’s run-up. What’s next for silver now?
E.B. Tucker, editor, Strategic Investor: Good question, and I’ll get back to that a bit later… but let’s actually take a closer look at my gold prediction first. There’s something very important going on.
Where I’ve had the most success over my career is when I was able to get the big picture right. Once you get the big picture right, you don’t have to really do anything except stay put in the trade. It’s very easy. For instance, when I got the big picture right on rental property back in early 2009, at the height of the housing crisis, I didn’t have to start flipping rental property. I just had to buy rental property and watch it go up in price. I still own it today.
I got the big picture right in gold. And so far, all you have to do is put the trade on and watch.
I think people need to be very careful right now of their thinking with gold. A lot of people have been involved in gold before and are burned out… and they don’t believe that this move in gold is real. And what they’re going to do is sell at the first sign of life. And then, the price will keep running higher, and they’ll wait to get back in. And they’ll end up kicking themselves and buying in later at much higher prices.
Don’t do that. If this is a true bull market in gold, you don’t want to watch it run away from you.
When I made the first call for $1,500 gold, it was December of 2018. Gold was at $1,237 at the time… down 35% from its 2011 peak.
And I stuck to that call throughout this year. In January, I sat back down with the same reporter at Kitco, and she asked me if I was willing to double down on that call. I said yes. I sat down again in March with gold at $1,300. Yes, I was still calling for $1,500. I sat down again in May, about a week before the gold price took off, and the reporter asked me once again, “Are you willing to stay with this?” Once again, I said yes.
I saw the setup. It was easy. Sure enough, 10 days later, it took off. It’s at $1,550 today. It’s a big move. Now, Chris, it’s important for you to understand that people still don’t believe it. They truly don’t believe that this gold rally is real. I’ve been all over Canada for meetings this month. I’m very connected in the gold business. No one thinks it’s real, but it is.
Chris: Why do you think people are doubting it?
E.B.: One of the reasons why is because Canadian investment bankers have been doing billions of dollars’ worth of deals in the cannabis and blockchain businesses. And yes, business has been great for these guys. And the gold sector has been absolutely dead since 2013. In fact, it’s been barbecued… and the fire went out and everybody abandoned it. And so, people see gold shoot up $250… over 20%… and they think, “Ah. This is gold, though. Nobody buys gold anymore. It’s over.” Now that’s what you call apathy.
And when you see apathy, you want to pay close attention, because apathy is a great sign that something big could be around the bend.
It sounds strange to say it that way, but in markets, people tend to be overly enthusiastic at the top of a bubble – and have apathy at the bottom when things are dirt cheap. You see it a lot when something is shooting higher to an irrational price. Take, for instance, our bitcoin call back in late 2017. As you know, bitcoin was soaring, and just days before it reached its all-time high, we told our readers to recoup their initial investment. It went on to fall 84% over the next year. This was at the same time that my son’s nanny asked, “Mr. E.B., should I get the bitcoin?”
Everyone was enthusiastic at that point. Even nannies were enthusiastic, and no disrespect to nannies, but typically, they’re not on the frontlines of new investment trends.
Chris: Good point.
E.B.: So you see what I mean… The masses tend to be really enthusiastic at the wrong time. And then, when something is a good deal, people don’t believe it. For example, when I was buying rental houses in 2009 and 2010, I had a really arrogant guy in my town, a wounded real estate developer, who ridiculed me during dinner one night for doing what I was doing. He asked, “Didn’t I read the newspaper and see that there had just been a housing crisis?”
My point with all of this is that it’s important to look at people’s sentiment. And in gold, that’s apathy. And so, it tells us that gold’s going to have to prove them wrong and demand their attention, which probably means another $200 jump.
But I’m more excited about silver in the short run.
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Chris: What do you like about silver right now?
E.B.: Silver is historically very cheap right now compared to gold. And when the gold move took off, like I just explained, and nobody paid attention to it, nobody paid attention to silver, either.
But I saw a big move coming, as you mentioned earlier. After I made the $1,500 gold call on Kitco, I made a “$20 silver” call afterward. And that’s looking very good as well.
One reason we like silver so much is because of the gold-to-silver ratio, which tells you how many ounces of silver it takes to buy one ounce of gold.
In June, gold broke out to six-year highs. Gold rose 8% in June while silver sat flat. This helped push the gold-to-silver ratio to a 26-year high of 93 on July 3 – an extreme. This means it took 93 ounces of silver to buy one ounce of gold.
However, we’ve been calling for a 75-to-one ratio against gold, and we’re almost there. It’s at 84 today. A 75-to-one ratio puts silver at $20 an ounce.
We think it’s a reasonable ratio for the price of silver to the price of gold in the short run, and that assumes gold stays at around $1,500 and silver goes to $20, which is very likely now.
In short, we think silver has a lot of catching up to do, in regards to this crucial ratio. With gold up 21% since its May low, silver hasn’t moved as expected until very recently. Silver usually propels farther faster than gold in a bull market.
Now, with silver up only 28% since May, a swift price rally could catch the market off-guard. As we’ve been saying, we think gold is in the early innings of a long-term rally, but silver could prove to have more explosive gains over the next few months.
We think this is only the beginning of what may go down as the mother of all metals rallies.
Chris: Are you seeing anything else that tells you this silver run is the real deal, like you’re saying about gold?
E.B.: Definitely. I’ve been involved in several gold bull markets. Typically, what happens is, let’s say gold goes up 1% in a day. Silver will go up 2%. And it’s typically the case in the opposite direction, too. So silver tends to be much more volatile than gold in both directions, higher or lower. But in this recent run, where gold was at $1,500, silver was performing less than gold, so that tells you that there’s zero speculative interest in silver… yet it’s still been climbing higher. And at some point soon, the speculative interest will be there.
Buying silver right now is truly a layup trade.
Chris: Great stuff, E.B. So how can our readers take advantage of this rally?
E.B.: Well, if you don’t have any physical silver, then I would say that it’s a bit reckless to go out and buy a bunch of silver mining stocks, unless you’re just a trader.
So first, you may want to look into owning at least some physical silver. Just like with gold, physical coins are a good starting point because they represent a real, hold-in-your-hand asset. That’s opposed to a mining stock which represents a share of a company’s future profits. You can learn the best ways to buy silver coins in our free special report here.
But you’re going to see the biggest returns in the silver mining stocks.
I’ve been in this market a long time. Each time it starts to take off, people ask me what mining stocks to buy. We cover what I think are the best mining stocks in Strategic Investor. Shares of our key silver miner shot up over 50% from their May low to a 52-week high yesterday. If silver prices keep moving, shares could too.
I am not a fan of exchange-traded funds (ETFs) when it comes to buying mining stocks. Sure, they’re easy to buy and sell instantly, but if you dig deep, they own a lot of companies I don’t want to touch. All mining firms are not created equal. This is one sector where it pays to own the best.
As we always say, when speculating on miners, always do your research before buying any stock, and never bet more money than you can afford to lose. These stocks tend to be very volatile.
Chris: Got it. So readers should start with owning physical silver, and then consider speculating on the best-of-breed silver miners. Is there another way readers can get easy exposure to silver today?
E.B.: One alternative play that I think is trustworthy is the Sprott Physical Silver Trust, a silver bullion fund. Ticker PSLV. This is a way to get exposure to physical silver instead of a basket of silver miners. It’s a good place to start.
Chris: Perfect. Thanks, E.B. Always a pleasure.
E.B.: Same here. Talk soon.