Even though the newsletter I write for Casey Research is focused primarily on gold, our metals investments cover all the precious metals, and when warranted, some base-metals plays too. And with the markets in the state they are, I want to say something about silver.
My talk at the Vancouver Resource Investment Conference in January was titled Is D-Day for Silver Approaching?, and highlighted the delicate balance between supply and demand. I concluded that there would be insufficient metal to meet a major spike in investment demand if it were to occur, leading to all kinds of negative consequences for those who don’t own silver (and lots of wonderful rewards for those who do).
I had plenty of compelling charts and convincing data. But here’s the rub: I don’t believe that what’s ahead for the price of silver (and gold) will have anything to do with that data. After all, there are articles from researchers and analysts that use similar data to paint a bearish outlook for the metal.
Instead, my reasoning is based on psychology. Here’s a good example…
At a recent outpatient hospital visit, the nurse ran through the usual background questions, one of which was what I do for a living. I told her, and this was her response:
“Oh, gold. That’s exciting. But it’s too expensive for me. I can’t afford it.”
Now, this is an RN in a hospital – someone who earns a good living and can afford to take a vacation and eat at the occasional fancy restaurant. She has money to buy birthday presents for her kids and probably contributes to a retirement account.
But when the value of money begins to erode more seriously and inflation makes front-page headlines, and my nurse turns to precious metals to gain some semblance of lifestyle protection, what is she going to buy? If she can’t “afford” gold now, it won’t be any “cheaper” later.
She’ll buy silver. And so will a lot of other panicked investors who don’t think they can “afford” gold and are watching their purchasing power relentlessly decline. It will drive prices higher. Perhaps wildly so.
The effect on the availability of bullion is obvious and will be all negative – high premiums, delayed delivery, and mandatory rationing. For those of you who’ve followed our lead and purchased bullion, consider this: you’ll be paid above spot for any ounces you sell during this time.
The message is crystal clear: if you don’t have a meaningful amount of silver bullion, buy more now.