Goldman Sachs: When Risks Rise, Gold Is Your Best Bet

Goldman Sachs: When Risks Rise, Gold Is Your Best Bet

The current geopolitical environment highlights the many reasons gold can thrive in any scenario. It’s a reminder to the attentive investor why gold has been the financial hedge of choice throughout recorded history. Let’s examine how gold compares with other assets when market volatility, recession, geopolitical conflict and inflation are all risks that are either on the horizon, or have already materialized.

Gold vs. “digital gold”

Bitcoin has emerged to prominence for several reasons, not the least of which is its fixed-supply cap. In January, the CPI saw its fastest monthly rise since 1982, exceeding already-pessimistic inflation expectations. Investors and even those who have previously had little to no interest in actively managing their savings are growing wary of currency depreciation. In other words, as time passes, each dollar buys noticeably less. A quick glance makes a fixed-supply asset look very appealing when trillions of dollars are being printed.

Yet, in a recent note, Goldman Sachs’ analysts called bitcoin a “risk-on inflation hedge” and gold a risk-off inflation hedge. The top crypto is, for better or for worse, infamously volatile, having recently shed 50% from its November high. With clear signals of a growth slowdown and worries over a recession, the team views a long gold position as the best way to protect oneself against market downturns. Recent history has indicated that, while bitcoin and other cryptocurrencies have tremendous growth potential, their astonishing volatility is all-too-tightly correlated with speculative, “risk-on” investments. By this measure, bitcoin isn’t a suitable hedge.

Gold as the investment of last resort

It seems that traders are equally concerned and unconcerned about a conflict between Russia and the West, the latter by proxy via Ukraine. Some estimate an only 10% chance of a true shots-fired escalation. Nevertheless, there has been no shortage of scrambling among traders. Any conflict would make riskier investments, such as equities, vulnerable to a market rout. So what are some of the options traders are exploring to cover their bases?

With the cost of defensive assets going up, investors are betting on everything from French and German stocks to safety in the U.S. dollar and the yen. But one hardly needs reminding that the stock market can never really offer protection. And in the face of the highest inflation in decades, is hedging with paper currencies really a good idea?

Roberto Lottici, fund manager at Banca Ifigest in Milan, has minimized both cost and exposure to risk by doubling the gold and silver allocation of his fund to 6%. It’s a percentage many would find conservative even in the absence of huge red flags. Nonetheless, to Lottici, it’s enough to offer peace of mind in whatever scenario unfolds.

“If the situation spirals out of control,” said Lottici, “then it’s going to be one of the very few assets that can offer protection.”

That’s just the thing with gold, though: even if the Russia-Ukraine situation unfolds in the most peaceful manner possible, Lottici won’t regret his precious metals allocation. Just the opposite, as any of the aforementioned risks stands prepared to turn gold from a hedge and into a top performer.

For Gold Investors, the Glass Is Half Full

For Gold Investors, the Glass Is Half Full

As VanEck Portfolio Manager Joe Foster notes, for gold last year was a lot less disappointing than traders might have one believe. One of the best things about long-term investment in sound assets is that there is no urgent need for outperformance. And while we didn’t notch a new all-time high gold price, we got plenty of solid footing and a stage for gold to continue its climb.

Gold’s price trend in context

Perhaps the most important takeaway is that gold’s price averaged $1,250 from 2013 and 2019. In a little over a month, it will be two years since the market crash which redefined the word uncertainty. Despite a somewhat steep fall from its all-time high, gold’s price since the crash has averaged $1,817. That’s a 44% increase based on average prices. We could argue that gold’s price should be higher, given the macroeconomic conditions and ongoing uncertainty, but that’s just speculation.

The fact is that gold’s average price surged since the Covid crash.

Foster notes that gold is at historically high levels even after a year of many factors working against it.

The dollar’s effect on gold’s price

Despite a tidal wave of multi-trillion-dollar stimulus printed in the last two years, the U.S. dollar index ended 2021 up 6.4%. And perhaps because of this stimulus, the year was marked by absolutely manic risk-on investment. Equities, real estate, crypto, junk bonds, leveraged loans, SPACs, the rare whiskey index and cartoon monkey images all skyrocketed in price. This is the so-called “everything bubble,” brought to you by Federal Reserve Chairman Jerome Powell with a combination of massive money-printing and near-zero interest rates that pushed investors desperate for yield into some of the strangest corners of the market (and even invented new ones).

Well, that’s one consequence of the Fed’s actions. The other? Levels of inflation across the board that dwarf anything we’ve seen in the last 40 years. We have to go back to 1984, the tail-end of the Carter-era stagflation episode, to see anything like it.

Here’s what gold has going for it

With gold showing exceptional resilience even in such an inflationary environment, we’d do well to go over some of the things that are working in the metal’s favor. And there’s no untying them from inflation.

Foster urges anyone who thinks that gold missed an inflationary period’s upside to reconsider. There have only been two such stretches in the last 50 years, one in the 1970s and the other between 2003 and 2008. We all know what happened to gold prices after each. Unsurprisingly, both were very much characterized by the same kind of not taking inflation seriously until we have to sentiment that we’re seeing from the Fed today.

Foster thinks we’re witnessing the start of a wage/price spiral that will keep driving prices up (though arguably it’s already well underway). S&P CoreLogic Case-Shiller National Home Price Index rose 18.8% in November (latest figures) year over year. The priciest housing market in history coincides with a lack of job creation, leaving the U.S. with 21 million fewer people employed than before the Covid crash.

Foster points out that inflation-adjusted, average hourly earnings have declined by 2.7% so far this year. In an example of inflation psychology setting in, unions are negotiating to get cost-of-living adjustments (COLAs) written into their wage contracts. All this, and we’re expecting yet another year of spikes in prices of basic goods amid ongoing supply chain disruptions.

What about the Fed’s plan to raise interest rates?

As for policy, the federal government wants to print and spend more money. The Federal Reserve is taking it away. At least, they’ve threatened to take it away…

UBS analyzed the Fed’s previous three rate hiking schedules, those in 1999, 2004 and 2015. As was the case last year, gold pulled back 5%-10% six months before a hike and then gained 10%-20% after each initial hike.

It goes without saying that the fourth hiking schedule could make way for gains beyond even those. So even the most long-term gold investor should find plenty of good news for gold’s price in the year ahead.

Surging Inflation Launches Gold Rocket “To the Moon”

Inflation is the fuel that will send the gold rocket to the moon

The Bureau of Labor Statistics (BLS)’s December 2021 inflation update pushed the cost of living to a nearly 40-year high of 7% after nineteen consecutive months of increases. A far cry from the Federal Reserve’s self-imposed target of 2%.

The bad news is, inflation is most likely headed higher. The most recent Producer Price Index (PPI) report, which tracks cost increases at the manufacturing level, measured 9.7%. The official BLS press release didn’t even try to sugarcoat the news…

the largest calendar-year increase since data were first calculated in 2010.

Gold futures climbed and continue to climb on this double helping of bad news.

As Peter Spina, president and CEO of Goldseek put it,

The most important takeaway for gold here is that gold is a rocket ship and inflation is its fuel. Now with inflation showing itself to be baked into the system and growing recognition of inflation, gold is going to benefit in a big way.

The U.S. dollar fell against most currencies after these reports. It seems as though global traders aren’t really expecting the Federal Reserve to follow through on its 3 predicted price hikes in 2022 (or maybe they’re already priced in?)

Jeff Wright, chief investment officer at Wolfpack Capital, said of Powell’s recent comments,

No fireworks, rather dovish and no surprises. Gold has done well with Powell’s ‘go slow’ management of the Fed.

On the downside, Wright said there’s a possibility that both quantitative tightening and tapering could accelerate, which would stop a gold rally in its tracks.

What are the odds?

Bond king on “recession watch”

Jeffrey Gundlach, the billionaire “Bond King” doesn’t think the Federal Reserve will be able to thread the needle and bring the economy to a soft landing.

Inflationary pressure is building. If we look at the economy, it’s undeniable that’s been supported by the quantitative easing and the Fed’s balance sheet expansion. And since that’s going away, it is just not plausible to think that we don’t have more headwinds in 2022 for risk assets and, ultimately, for the economy. The signals from the bond market are starting to look a little bit like a pre-recessionary period.

Gundlach believes gold is the best asset to hold in periods like this, when inflation consumes so much of our purchasing power and the world’s central banks don’t seem able to contain the chaos.

He’s bullish on gold because he’s bearish on the long-term value of the U.S. dollar. And when dollars shrink in value, it takes more and more of them to buy the same amount of gold. (From this perspective, buying gold early offers a sort of discount…)

Gold’s Growing Appeal in a World Desperate for Alternative Investments

Golds Growing Appeal in a World Desperate for Alternative Investments

As the World Gold Council’s latest report indicates, low interest rates are forcing investors to chase gains. Steady portfolio performance is desirable for regular investors and a necessity for portfolio managers. Yields on government and corporate bonds have reached all-time, mostly-negative lows worldwide. Even an alleged, tentative interest rate hiking schedule is unlikely to push real yields out of negative territory.

Yet investors, whether individual or institutional, must have return on investment. The combination of high inflation and negative real yields have pushed investments further and further into high-volatility, low-liquidity assets. That’s an issue, because in the world of finance and investing, risk and return are inextricably linked.

The WGC cites data from research firms and various sources which indicate that investors are showing more appetite for riskier assets. A recent survey suggesting that a third of portfolios might be allocated in alternative and other assets in the next three years.

Gold offers high liquidity and low volatility

Most of these “alternative” assets have a few things in common.

  • High growth potential
  • High risk
  • Low liquidity

Consider the relatively low liquidity of real estate, the growth potential of cryptocurrencies and the risk of NFTs. Consider also the lack of price discovery among assets that aren’t traded on open exchanges, or otherwise regularly marked-to-market.

During the financial crisis, liquidity was a major point of concern, and nearly half of the participants in the survey stated that it’s a key consideration in their long-term portfolio planning.

Here, gold once again starts to emerge as something that should be treated as a necessity, and likely will as investors take on an uncharacteristically aggressive approach. While it might seem as if though there is little room for defensive assets in a high-risk portfolio, the opposite holds true in the case of gold.

For starters, no prudent investor will forgo hedging their bets whatever their approach is. Bonds might have once been the hedge of choice for risk-on investment, but since it is their underperformance that is prompting the chase of returns, gold is there to assume the role.

There are many more nuances, of course. Risk and uncertainty go hand in hand with market crashes and selloffs. Last March was an infamous example, as even the safest of assets such as gold fell. In situations like these, investors want liquidity both for safety reasons and to make bargain bets in other asset classes. The same month also showed why gold continues to stand out among all other assets, as it was the only one to recover by the end of the month. And, as is by now known, it went on to post one of its best years on record.

This is just one of many occasions where diversification with gold would have assured a portfolio’s stability and maintained its performance as turbulence rocks the markets. There’s a reason it’s the gold standard of safe haven assets.

The world is looking more turbulent than it has in a while, and yet investors aren’t willing to wait and see what happens in order to post a return. During a time when things like farmland and collectibles enter portfolios that they might otherwise never find a place in, a time-proven and highly liquid asset like gold is a prime candidate to steady the rocking boat.

Gold Is the “Best Omicron Virus Defense You Can Buy”

Inoculate Your Savings Against the Omicron Virus with Gold

For the third time in as many years, governments around the world have declared a pandemic. What are we to expect, and is the virus likely to infect your portfolio? Gold pushed above $1,800 following the announcement, and not without reason. It was the conditions of last year that caused it to post a new all-time high of $2,070.

Since we’re already and again hearing the words like “lockdown” and “shutdown”, it pays to reassess the road so far. Especially considering today’s gold price is under $1800/oz.

Early last year, governments around the world shut down their economies and started printing money out of thin air to make up for it. It pays to note that most, if not all of these economies were already underperforming, nearing or having reached stagnation. There was a broad sell-off in all asset classes as the situation was unprecedented, and even gold wasn’t spared from the havoc. Nations, for that matter, were briefly selling their bullion as uncertainty peaked.

This time around, however, there is no broad selloff. But there was a marked one in stocks. After all, who wants to own stocks of companies that aren’t operating? Uncertainty is once again peaking, and it seems that gold is even better positioned to benefit from it.

Some present a short-term model that includes record low consumer spending, a lack of appetite for sending kids to school and a federal government that borrows anywhere between $2 to $5 trillion more to deal with this. The model might as well be titled “Economic Disaster”. Going back to the first half of last year, there were talks of how the global economy could take years to recover in a best-case scenario. We are either in, or steadfastly approaching, a worst-case scenario. Anyone touting economic recovery over the past two years was either easily duped or had other motives.

The companies were performing, but they were doing so in the same thin-air fashion as the economy itself, being propped up by newly-printed money handed to them. The same money printing caused inflation to spike to 6.2% this year, over three times the intended target, with projections that it will reach 9% and onwards to double digits next year. This is mostly the result of a $3 trillion stimulus.

The aforementioned model finds it plausible that the Federal Reserve alone could pump anywhere between $5 to $10 trillion more into the global banking system. That’s not counting other central banks, whose countries are also dealing with record inflation as a result of their own money printing.

Anyone who’s watching these inflation numbers soar can appreciate the value of a truly inflation-resistant investment. In a world where outrageous inflation and currency debasement are one of the few things that have emerged, physical gold is becoming less of an investment and more of a must-have household item.

Gold Approaches $1,900 While Investors Mull Fed Chair Powell’s Reappointment

Gold Approaches 1,900 While Investors Mull Fed Chair Powell Reappointment
Photo by Aaron Munoz

Although analysts expect that gold could have a very volatile closing of the year, the consensus is that the metal is eyeing $1,900 as the next level to breach in the near-term, via Kitco. Market participants are always keeping a watchful eye on the Federal Reserve, so it’s no surprise that questions over the next Fed Chair nominee have caused a bit of tumult.

Some believe that there is a strong chance that Federal Reserve Governor Lael Brainard could take Powell’s spot after recent dissatisfaction with the incumbent’s actions. A Brainard appointment would result in a major shift in short-term yields, said OANDA senior market analyst Edward Moya, along with delaying hike expectations even further.

However, Moya noted that a Powell renomination would be far from negative for gold. Risk remains to the upside, and hikes are questionable regardless of who’s helming the central bank. Pepperstone’s head of research Chris Weston said that a new Fed Chair would cause the kind of uncertainty that most market participants dislike, yet that volatility seems to be in the cards regardless. (Update: Powell was renominated to his current position on November 22. His last Senate confirmation won 84 of 100 votes in 2018, so Congressional resistance is extremely unlikely.)

Weston expects an anything-goes December, partially because the U.S. Treasury will exhaust its measures by the middle of the month as the U.S. debt ceiling issue once again comes to the forefront. The central bank’s meeting, which should announce the tapering schedule, could be another stir for the markets.

TD Securities said that gold remains vulnerable to priced-in rate hikes, even in the absence of any evidence that they will materialize. So long as this remains in view, the bank believes that gold could come under further selling, especially if prices fall below the $1,840 level. Moya expects a very volatile week ahead, saying that gold could trade in a range as wide as $1,840-$1,890.

If the metal does dip to $1,840 or below, Standard Chartered precious metal analyst Suki Cooper expects an influx of buyers on every turn due to gold’s fundamental picture. She noted that gold’s headwinds are mostly absent and not of particular consequence. On the other hand, the upside to physical gold ownership is tremendous. Growth risks, elevated inflation, an expected pullback in the U.S. dollar and real yields establishing themselves in negative territory are far more pronounced than anything pushing gold downwards.

However November’s price action plays out, Moya expects investors to start pouring into gold as an inflation hedge next month and push it above the $1,900 level. This could be expedited by both uncertainty coming from Europe or any number of data reports scheduled for this week turning out disappointing.

Agnew Gold Mine Now Powered by Australia’s Largest Hybrid, Renewable Microgrid

Agnew Gold Mine Now Powered by Australias Largest Hybrid, Renewable Microgrid

With so little in terms of positive mining developments since the industry went on a cost-cutting spree post-2011, it can feel as if any news are great news. Yet the latest gold mining trend surrounding Gold Fields’ mine in Australia go past discovering new ore or opening a new spot, and have to do with innovations in an industry sometimes considered stagnant.

Gold Fields is one of the largest gold producers in the world, with a total of nine mines spread across Australia, Peru, South Africa and West Africa and Chile. Its Agnew gold mine in Australia is now the testing grounds for the largest hybrid renewable microgrid in the country.

The Agnew gold mine is the first gold mine in the country to be powered primarily by wind-generated energy, as part of an ongoing bid to utilize renewable energy sources on a global scale. The venture was funded by the Australian Renewable Energy Agency (ARENA), which gave $13.5 million through its Advancing Renewables Program.

The microgrid itself is constructed, powered and maintained by global energy producer EDL. In a press release, the company shared some specifics pertaining to the microgrid, revealing that it amounts to 56MW, 50%-60% of which come frome renewable sources. According to the press release, weather conditions can bring the percentage up to 85.

CEO James Harman boasted that the mine is a showcase of both engineering prowess and persistence, as the project was launched amid bushfires, supply chain disruptions and a global crisis that saw the mining industry come under even more setbacks. Furthermore, while wind is the primary one, the CEO stated that the project utilizes as many as five different sources of renewable energy.

Stuart Mathews, Gold Fields Executive Vice President for Australasia, also said that the company is proud to partner with EDL in such a manner, underscoring that both the construction and operation of the project went well. As it stands now, EDL owns close to 100 renewable energy stations that span throughout Australia, North America and Europe.

While not explicitly stating that the technology would be utilized in its other mines, Mathews noted that the Agnew mine has provided the company with a framework on how to utilize renewable energy in its operations worldwide. Having the gold mining industry act as the center of renewable energy innovations during a time of peak appetite for these solutions is indeed promising. Perhaps the success of the Agnew gold mine and its renewable microgrid can bring some welcome sparks to the sector.

Inflation? Stagflation? Gold Is Fine With Either

Inflation? Stagflation? Gold is fine with either...

Gold’s price has seen some action recently, again climbing past strong resistance at $1,800 to a high of $1,813 before finishing the day above $1,790. Does this mean that market participants are finally, but very slowly, waking up to the economic reality? TD Securities’ analysts seem to think so, having initiated a $1,850 and $2,000 long call spread for gold’s price for April.

In their recent report, the commodity analysts said that inflation, stagflation and dubious tightening all play a part in the bullish forecast for the next four months. Even with nothing to support the notion, the markets still seem to be fully pricing in some kind of Federal Reserve tightening. This includes a reduction of the balance sheet, hikes and so on. This sentiment has been weighing heavily on gold over the past months, with November being the targeted date. It remains to be seen how the Fed intends to tighten its monetary policy in the current environment.

Wade Guenther, managing partner at Wilshire Phoenix, recently told Kitco that he believes the Fed won’t be able to rein in inflation. Guenther has also dismissed the idea that supply chain disruptions are being caused by consumer spending, something that has garnered quite a bit of ridicule as of late, and supports a far more grounded view that the cause is across-the-board inflation.

With the ever-hawkish Fed Chair Jerome Powell going as far as to admit that these disruptions could persist well into next year, it’s turning inflation into an even bigger problem, and also a worldwide one. In Canada, the latest report on consumer prices showed that they have risen to their highest level in more than a decade.

As TD Securities’ analysts noted, this is part of why stagflation is becoming a greater concern with every passing week. The threat of energy prices rising has turned into what the analysts call a global energy crisis, one that seems to be intensifying. There is also much to be said about crumbling economies, an issue that everyone seems to be ignoring right now. With hyperinflation being mentioned on one end and parallels being drawn with the Great Depression on the other, we might yet see the term stagflation redefined.

Another interesting bit of information is that speculators have, mostly based on optimistic sentiment, liquidated more than 190 tons of paper gold this year. Yet the massive dump, as opposed to slicing the metal’s price, only seems to have thwarted its rise for the time being.

Regardless of whether we see inflation or stagflation, TD Securities says that the conflux of factors appears to have primed the gold market for a very strong move upwards by early next year. In the shorter term, Saxo Bank’s head of commodity strategy Ole Hansen said that a breakout above $1,835 could move a lot of interest away from the stock market and into gold.

Inflation, Other Forces Will Continue to Push Gold Higher

Inflation, Other Forces Will Continue to Push Gold Higher

As Forbes contributor Frank Holmes points out, two weeks ago, the greenback hit its highest level in about a year. It beat a basket of other currencies in doing so, and once again showed strength against expectations. But was it a show of strength on the U.S. dollar’s part, or a show of weakness on the part of foreign currencies?

We’ve mentioned in the past that gold has been hitting all-time highs in currencies around the world heading up to 2019. Only when it comes to the greenback has its rise been slow, last year notwithstanding. And sure enough, checking the gold market’s price action in dollar denominations shows a familiar correlation: dollar up, gold down.

Dollar’s effect on gold’s price

Yet simple logic demonstrates that gold has little to worry about regarding dollar strength. With trillions of U.S. dollars printed last year, it’s questionable where that strength is coming from and how long it can persist.

Interestingly, despite the dollar’s relative strength recently, oil’s price has skyrocketed over the last few months. Americans notice at the gas pump when filling their tanks. However, oil price has much more far-reaching consequences than an extra $20 spent at the convenience store. Higher oil prices mean higher transportation prices, driving up costs of everything from fresh foods to imported manufactured goods.

Which leads us directly into the highest inflation in the last 30 years…

The Fed is losing control of inflation

The Federal Reserve has done nothing but downplay the threat of inflation so far. The PCE index, which monitors the prices of goods and services purchased by U.S. consumers, rose by 4.3% year-on-year in August. It was the ninth straight month of massively surging inflation, and the highest figure in the last 30 years.

It just so happens that the PCE index is the Fed’s preferred measure of inflation, which might explain why Fed Chair Jerome Powell voiced expectations of ongoing market disruptions, which are intrinsically tied to inflation, well into next year. Quite a statement for someone promising to embark on a major tightening program next month.

As just one example of the kind of damage that inflation is doing, home prices, as measured by the S&P CoreLogic Case-Shiller National Home Price Index, rose 19.7% in the year ended July 2021. Hearing that it’s the highest annual rise since 1987 is troubling. Learning that the index started in 1987 really puts this number into perspective.

The dollar’s role in determining gold’s price

One of the key points of Trump’s presidential tenure was an ongoing back-and-forth with the Federal Reserve over various things, with the greenback being near the top of the list. President Trump wanted a weaker dollar for trade purposes, often saying that China’s devaluation of the yuan is continuing to give the nation a trade advantage.

Holmes notes that while a strong dollar might sound good on paper, it’s actually harming U.S. exporters, and it’s doing so during a time when no nation can afford to have economic weakness.

How this plays out remains to be seen. And while we wait for gold to truly respond to any of these tailwinds, it’s good to remind ourselves just how liquid of an asset gold is during a time when cryptocurrencies are taking their place on the global market.

While Holmes often tells people that gold is the fourth most liquid asset, the latest World Gold Council data shows that it’s actually the second, coming only behind S&P 500 stocks. Its daily trading volume beats all commodities, government and corporate debt and even currency swaps. Even amid bouts of tepid price action, the gold market itself is as action-packed as they come.

Solar, EV Demand for Silver Will Drive Prices to High Triple Digits

Solar, EV Demand for Silver Will Drive Prices to High Triple Digits

Out of all the possible drivers that could push silver up into the sky, Keith Neumeyer, CEO of First Majestic Silver, thinks governmental policies might just be the thing. But instead of loose fiscal ones, it’s the tightening grip on gasoline vehicles that’s shaping up to be a massive driver. In an interview with Kitco, the CEO spoke about the changes in the automotive industry that are taking place, driven partially if not wholly by governments favoring electric vehicles (EVs) over carbon-dioxide-spewing internal combustion engines.

The view that engines of the latter are polluting the environment might have opposing sides in general terms, but it has swept governments around the world by storm. With countries like the U.S. and U.K. already preparing to ban sales of traditional vehicles, it does appear that an automotive revolution is underway. And it just so happens to be one that will heavily favor silver.

Neumeyer has always been extremely bullish on the metal, having previously forecast that it could hit triple digits in the long-term. Now, he sees silver going towards the higher end of that triple digit range due to basic supply and demand dynamics. Silver’s supply picture has always been a lackluster one, with the metal mostly coming in as a byproduct of mining other metals (copper, lead and zinc primarily). Only 28% of silver mines primarily produce silver. This means that silver miners are slower to respond to rises in spot price. They have to consider the costs and value of the other metals they’re digging up.

There’s a grassroots movement of physical silver investors who believe that the paper silver market is heavily manipulated, and that there is nowhere near enough silver to cover the contracts. Neumeyer gives this theory his backing without citing evidence.

Interestingly enough, while Neumeyer acknowledges that QE and U.S. dollar debasement will boost gold and drag silver along the way, he views these drivers as considerably less important. Instead, he is looking towards the amount of available silver against the prospect of ever-growing demand from the industrial side.

As Neumeyer noted, the mining industry currently produces 800 million silver a year, of which 100 million already go towards EV production and another 100 million towards solar panels. Combined, that makes up close to 20% of annual production. Neumeyer points out that the automotive industry currently produces 19 million cars a year, of which 5 million are EVs.

If the governments of the world get their way, every gasoline vehicle will be replaced with an EV within a decade or two. Neumeyer says that this amounts to roughly a billion cars, which obviously puts quite a strain on the automotive industry and therefore silver miners.

With 100 million ounces of silver needed for every 5 million EVs made, it’s clear that even a slight increase in EV demand could quickly shake up prices. It’s definitely looking to come together nicely with growing demand for physical silver among investors, many of whom are staunch believers that the price is being suppressed through derivatives and that it should indeed be closer to Neumeyer’s forecasts than its current levels. Given the silver shortages in various top mints around the world as of late, the theory is not an easy one to dismiss.