Winter is starting to feel a whole lot closer with leaves on the ground and temperatures flirting with 0 celsius. I can’t help but feel like it comes so quickly, leaving us almost no time to acclimatize. Anyway, time to get the gloves, hats and fall/winter coats out. And the “fall back” to standard time is here too!
Enough of that. There’s plenty for silver investors to look forward to in the near and medium terms. Let’s start with some macro.
Another Fed meeting has come and gone, and this one produced no changes to rates, stuck at 22-year highs of 5.25% – 5.50%, while the Fed is allowing for a hike before this year ends. It’s looking like the market is doing a good chunk of the Fed’s work.
Consider that nearly the entire US Treasury yield curve is above 5%, with the only exceptions being the 2-year (4.95%) and the 10-year (4.73%). This suggests the market is expecting inflation to stay elevated and wants to be rewarded for lending, even to the lowest risk lender. Higher long-term yields are a considerable headwind for businesses, mortgages, car loans, and beyond. And with inflation stubborn around 3.7% in the U.S., we could see rates stay higher for longer.
In the aftermath of the Fed’s announcement gold hardly moved yet remains strong near the $2,000 level.
And that’s despite competing with hefty yields from bonds and money markets. Those yields are attractive money away from stocks and bank deposits. So maybe it shouldn’t be that surprising that, during October, gold actually outperformed the S&P 500, with the Gold to S&P ratio has rallied sharply, pushing it above its 200-day moving average, a bullish sign. And the Silver to S&P ratio has managed to do the same.
The World Gold Council has just released Q3 statistics, telling us that central banks have been big buyers, and this at high prices rather than on the cheap. In fact, Q1-Q3 buying reached a total of 800 tonnes, a new record. The World Gold council thinks this strong pace will continue, leading to a solid 2023. Interestingly, China is leading this buying the buying as it moves away from dollar reserves.
So this is all very bullish for gold. And as we know, where gold goes silver tends to follow. When it starts to play catch up, silver is likely to surprise many on the upside. Right now, the junior discovery model seems to be working best. We recently took partial profits of about 140% on one company whose drill results are hitting it out of the park. Thankfully, we still have the bulk of our shares, because they are now up 355%, with likely more great news to come.
On a small housekeeping note, I’m going to make a minor change to the format of this newsletter. To help shorten the monthly issue without sacrificing overall content, I will move my monthly essays to the mid-month issue. That should help spread out the reading load, and you get all the same content, just more evenly distributed.
In my book, The Great Silver Bull, I explain how precious metals will “sniff out” when central banks start losing their battle with inflation in advance. I think gold’s impressive strength near all-time highs is signalling just that. That helps me to make the case for silver as a generational investment opportunity over the next several years. The book is an easy synopsis read on this outlook.
It also details how to build a silver investment portfolio and explains what role junior miners/explorers can play.
If you haven’t picked up a copy yet, it’s easy, and it’s now also available in audiobook format!
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