• After a volatile 2022, silver prices are set to surge over the next few years
• Skyrocketing demand and limited supply are pushing silver prices up
• Investors are turning to silver alongside gold for its safe haven qualities during economic uncertainty

Experts are Bullish on Silver

If you don’t have silver in your portfolio, now is the time to add it. After a volatile year, silver prices are set to surge. Exponentially increasing demand, limited supply and continued economic uncertainty could send silver into record territory.

Silver earned its nickname as the ‘restless metal’ in 2022. After recovering from price drops, silver demand spiked to an all-time high. It’s been on an upward trend since mid-October, adding 30% to its price. The rise was partially fueled by news that China is loosening its Covid restrictions.

Silver prices were also boosted by the prospect of lower interest rates in the future. Like gold, silver tends to go down when rates go up. That’s because investors are drawn to interest bearing assets over precious metals.

The upswing in silver prices coincided with news that demand is projected to hit a new record of 1.21 billion ounces.¹ This will result in a second year of supply deficit. “At 194 million ounces, this (deficit) will be a multi-decade high and four times the level seen in 2021,” a recent report from the Silver Institute states. Global silver output is projected to increase by only 1 percent. Any fresh supply will be quickly absorbed. Mining production is being limited by skyrocketing costs for energy, supplies and transportation.²

“Silver is in a unique place. Many factors are transitioning silver into an industrial metal. This, with supply issues, government regulations and current pricing, is poising silver for a breakout.” says Steve Cope, President & CEO of Silver Viper Minerals.³

Growing Demand

Industrial demand accounts for half of total silver consumption. Silver is vital to the production of solar power cells. The market for photovoltaics alone could support the surge in the metal’s price. This demand will grow as government’s push renewable energy policies. The European Commission just mandated rooftop solar panels be installed on all public and commercial buildings in the next five years.

Silver demand is also being driven by the electric car market. Electric vehicle manufacturer’s need for silver will climb from 45 million ounces in 2017 to 70 million ounces by 2030.⁴

Investment demand for silver is increasing as well. Investors are turning to silver for the same reason they look to gold – to hedge against inflation and risk. Sales of silver coins and bars for investment jumped 36%. Investors bought 278.7 million ounces, the highest amount since 2015. “Retail investors in North America and Europe, motivated by safe-haven and inflationary concerns, took advantage of periodically lower silver prices to purchase coins and bars,” said the Silver Institute.⁵

Frank J. Basa is Chairman & CEO of Canada Silver Cobalt Works. He said, “I expect that increasing demand for silver for solar panels, along with growing investor interest for silver as a hedge against inflation, will together drive the price of silver higher in the coming year.”⁶

Future Silver Prices

Analysts forecast silver will hit $34 in 2023. Some are predicting that it will break $48 by 2024 under the right conditions. Silver will move higher as the dollar drops and inflation remains high.

Data indicates that silver is likely to outperform gold in 2025 and 2026. Silver is historically undervalued relative to gold right now. Making it an attractive investment opportunity. Supply trends cannot keep up with longer-term demands. Green technology demands will increase even if there is a global recession.

The gold to silver ratio is also sending a powerful buy signal. The gold to silver ratio represents the number of silver ounces it takes to buy a single ounce of gold. Historically speaking, the gold to silver ratio has rested somewhere between 15 and 10 to 1, reflecting the average supply of each metal.

The ratio now is like what it was just prior to the 2008 financial crisis and recession, when it also hovered around 80. Following the financial meltdown, silver rallied 400% over three years.⁷

Unstoppable demand and limited supply are combining with inflationary pressures to create a perfect storm for silver prices to erupt. You can easily add silver to a self-directed IRA like our Gold IRA. Contact us today to learn more.

Notes:
1. https://investingnews.com/daily/resource-investing/precious-metals-investing/silver-investing/silver-forecast/
2. https://investingnews.com/daily/resource-investing/precious-metals-investing/silver-investing/silver-forecast/
3. https://investingnews.com/daily/resource-investing/precious-metals-investing/silver-investing/silver-forecast/
4. https://capital.com/silver-price-predictions-for-years-ahead
5. https://capital.com/silver-price-predictions-for-years-ahead
6. https://investingnews.com/daily/resource-investing/precious-metals-investing/silver-investing/silver-forecast/
7. https://www.kitco.com/Gold_Silver_Ratio_Charts/gold-silver-ratio-charts.html

• The Federal Reserve raised interest rates .5 percentage points
• Smaller than the previous four increases, this hike signals the inflation fight is far from over
• Investors will need to contend with inflation, high interest rates and recession for years to come

 

Fed Raises Interest Rates

The Federal Reserve raised interest rates .5 percentage points. Only in these twisted times is that considered an easing. True, it is smaller than the four previous .75-point increases. But it is still double the customary quarter-point hike. Prior to this year, the Fed hasn’t raised rates by more than a quarter of a point at a time in 22 years. The Fed has hiked rates six times this year to tame record high inflation. Even though it is smaller, this latest hike will cause pain for millions of American businesses and individuals.¹

This rate hike will bring the overnight borrowing rate for banks to a range between 4.25% and 4.5%. That is the highest it has been since 2007.²

The Fed may be reducing the intensity of the hikes, but the effects will continue long after they stop. The average period between peak interest rates and the first rate reductions by the Fed is 11 months. If the bank stops actively hiking rates, they could remain high well into 2024.

Inflation, as measured by the Consumer Price Index, was up 7.1% on an annual basis. That was below expectations and well below the 7.7% in October. Traders became hopeful that the Fed would pivot on this news. They were therefore disappointed by comments from Fed officials.³

Fed Chairman Powell stated that while the reduction was welcome, he needs substantially more evidence that inflation is being tamed. He continued, “Historical experience cautions strongly against prematurely loosening policy. I wouldn’t see us considering rate cuts until the committee is confident that inflation is moving down to 2% in a sustained way.” He also said that Fed policy is not “sufficiently restrictive”, and more hikes are appropriate.⁴

No Relief in Sight

Federal Reserve officials expect inflation to prove more stubborn that predicted. It could stay doggedly high for years to come. They anticipate having to raise rates next year more than planned. Their economic projections show they will need to inflict more economic pain to get inflation under control.

Officials expect to raise interest rates to 5.1 percent by the end of 2023. They plan to keep rates higher for longer as well. You can count on rates staying elevated into 2025. Unemployment is predicted to jump and remain high for years. Growth will be much weaker in 2023. A recession is almost guaranteed.

Retirement funds will continue to be squeezed by the triple threat of inflation, high interest rates and recession. The Fed admits that bringing inflation down from 40-year high levels will be a long, hard slog. Investors can hope the Fed pivots away from their policy. Or they can face facts and prepare for an extended downturn. A Gold IRA can protect your wealth from all three threats. Contact us today to learn how.

Notes:
1. https://www.cnbc.com/2022/12/14/heres-everything-the-federal-reserve-is-expected-to-do-wednesday.html
2. https://www.cnn.com/2022/12/13/economy/federal-reserve-december-meeting/index.html
3. https://www.cnbc.com/2022/12/14/live-updates-fed-rate-hike-december.html
4. https://www.cnbc.com/2022/12/14/live-updates-fed-rate-hike-december.html

• The price of gold rose alongside fears of a global recession
• Both increases are fueled by lingering inflation, interest rate hikes and global uncertainty
• Gold demand is being amplified by central banks looking for safe haven assets

Recession Fears Increase

The price of gold is rising along with concerns about an incoming recession. Persistent inflation, aggressive interest rate hikes and global instability are fueling both increases. Economic leaders are preparing now to make the best from both situations.

CEOs across industries are getting ready for the economic slowdown. JP Morgan CEO Jamie Dimon said inflation is eating up consumer savings. People are running out the money they stockpiled during the pandemic. This will put a damper on consumer spending and slow the economy. In addition, he thinks the Fed’s interest rate hikes meant to curb inflation will push the economy into recession. “It could be a hurricane. We simply don’t know.”¹

Mary Barra, CEO of GM, is also preparing for a collapse in demand. GM will move forward conservatively in 2023 cost-wise. She believes the economy will be plagued by chip shortages and strained supply chains through 2023. And Union Pacific Railroad CEO Lance Fritz says shipping is slowing down and the economy is tightening. “The Fed is trying to hit all of us in the line of fire with a slower economy and hurting demand. It’s not good,” said Fritz.²

Gold Demand Increases

The economic downturn is amplifying the demand for gold. A Kinesis Money market analyst said, “A global recession with a subsequent flight to haven assets should benefit gold, as should a [Federal Reserve] forced to be less aggressive with its rate hikes to avoid tipping the U.S. economy into recession.”³

Saxo Bank made a bold gold prediction. They think a return to a pre-inflation, pre-pandemic world is impossible. According to them, we have entered a global war economy. Countries are scrambling to shore up their military and economic security. They predict gold will rocket to $3,000 an ounce on unstoppable inflation.

In pursuit of that security, central banks are purchasing gold as global recession fears and international instability mount. They bought 400 tons of gold in the third quarter. The World Gold Council said this was the largest single quarter of demand ever. “What we have seen and expect to continue to see is that central banks continue to diversify their reserves and hedge against risk with gold,” said a World Gold Council representative.⁴

China bought 32 tons of gold in November. Analysts think China has been building its reserves throughout the year. China, along with many other non G-10 nations, are preparing for ‘deglobalization’. The global economy is heading toward dedollarization. Countries are acquiring gold to protect their economies as the new economic order takes shape. Central banks want the safe haven qualities of gold to diversify their foreign reserves.

Gold futures climbed on projected increased demand. Current prices lifted on a weakening US dollar and US Treasury yields. Weakness in the dollar tends to decrease the opportunity costs for investors considering dollar-priced gold as an option versus other havens. Meanwhile, lower bond yields can raise the prospects for gold against government bonds.

Central banks to CEOs are preparing for a recession and global instability. A key component of that preparation is moving assets into safe havens that thrive in bad conditions. Gold is a proven safe haven asset that can protect country, corporation and individual. Contact us today to learn how our Gold IRA can safeguard your financial future.

Notes:
1. https://www.cnbc.com/2022/12/06/recession-walmart-jpmorgan-gm-ceos-talk-about-possible-slowdown.html
2. https://www.cnbc.com/2022/12/06/recession-walmart-jpmorgan-gm-ceos-talk-about-possible-slowdown.html
3. https://www.marketwatch.com/story/gold-futures-eye-back-to-back-gains-11670427092
4. https://www.kitco.com/news/2022-12-07/China-buys-32-tonnes-of-gold-in-November-first-increase-in-reserves-since-2019.html

• Housing market demand continues to decline as mortgage rates soar
• Current inflation rates don’t reflect the drop in housing prices due to a lag in data
• The Federal Reserve is highly unlikely to pivot on rate increases and help real estate

 

Interest Rates Cause Drop in Housing Demand

The once booming housing market continues to deflate. The housing industry is seeing a slowdown in sales. Mortgage applications to purchase a home were down 41% from the same week a year ago. They have been decreasing week over week for the past few months. And it looks like it is only going to get worse as interest rates continue to climb.¹

Brian Moynihan is CEO of Bank of America. He said there are tough times ahead for the housing market. Mortgage rates are skyrocketing due to interest rate hikes. “This is the toughest thing. You have to slow down the economy. You have to slow down inflation. And the way you do that is raising interest rates,” Moynihan said. “The intended outcome of [the Fed’s] policies doesn’t feel good when you are trying to buy a home.” He says it is almost impossible for many younger Americans to buy a first home. He foresees two years of pain in the housing market before activity returns to normal. ²

Jeremy Siegel is a Professor at Wharton. He predicts the housing market will see negative growth in 2023 due to interest rate hikes. The average rate for a 30-year fixed mortgage has more than doubled this year. As a result, Siegel forecasts housing prices to fall 10-15%. The median home price would fall from $440,000 to $375,000.

Siegel joins other economists in saying that the Fed acted too late on inflation. The problem now is that they are basing their decisions on trailing data. There is a lag between hikes and results. The Fed is not capturing the effects their rate hikes are having. The data they are using doesn’t reflect the real state of the economy.

Housing makes up 50% of the core inflation rate. The price lag is therefore distorting the true rate of inflation. October inflation data showed Shelter climbed .8% after climbing .7% in September. But housing prices are going down, so the real rate of inflation is lower. The Fed should be easing up on rate hikes, not increasing them.

Siegel says a recession is ‘virtually 100%’ assured if the Fed keeps raising rates into next year.
He joins other analysts in thinking the Fed will pivot once they see inflation beginning to relent. Data last week showed a seventh consecutive month of declining money supply. That is the biggest drop since World War 2. The longer the Fed delays a pivot, the deeper the recession will be.

Fed Unlikely to Pivot on Rate Hikes

Siegel shouldn’t count on that pivot. John Williams and James Bullard are two of the Fed’s regional presidents. They warned that the inflation threat hasn’t faded. The US central bank may have to lift rates higher and keep them there throughout next year to curb soaring prices. Williams said, “My baseline view is that we’re going to need to raise rates further from where we are today. I do think we’re going to need to keep restrictive policy in place for some time. I would expect that to continue at least through next year.”³

The Fed has already raised rates by 75 points four consecutive times. Even if December’s hike is lower, it will still be the most aggressive tightening since the 1980s. The housing market will continue to contract, along with the rest of the economy. A home has long been a traditional store of wealth that people relied on to help fund their retirement. As the market collapses, safer assets should be sought. Our Gold IRA can preserve your wealth during this economic downturn. Contact us today to learn more.

Notes:
1. https://www.cnbc.com/2022/11/30/mortgage-rates-fall-for-the-third-straight-week-but-demand-still-drops-further.html
2. https://www.cnn.com/2022/11/29/economy/bank-of-america-brian-moynihan/index.html
3. https://www.foxbusiness.com/economy/inflation-fight-could-last-until-2024-fed-official-warns

• While retail industry groups predict record sales, consumer surveys say otherwise
• Holiday spending habits are reminiscent of those seen during the 2009 Great Recession
• Stocks show an inverse relationship between Black Friday sales and end of year performance

 

Black Friday – Boom or Bust?

The day after Thanksgiving is another American tradition – Black Friday. The ‘Black’ normally refers to retailers trying sell enough goods, so their income statements are in the ‘black,’ or profitable, for the year. This year the color may refer more to consumer’s moods.

Retail industry groups are predicting another record year of sales. The National Retail Federation forecasts a 6-8% jump over the $890 billion people spent last holiday season.¹ However, according to surveys, consumers are going to reel in their spending this winter.

People are concerned about high prices, rising borrowing costs and a recession. A recent survey showed 62% of consumers are worried about job security. And 35% said they are worried about their financial situation.²

Researchers have noticed several behaviors last seen in 2009 during the Great Recession. People are spending less. They plan on spending 20% less this holiday season compared to the last 3 seasons. The main reason given is inflation. And when they do spend, they are buying gifts for fewer people or less expensive items.

Impulse buying is being avoided. Consumers are planning their purchases. They are searching for the best deals and prioritizing necessities. Cash is being used as a primary form of payment. Fewer people are using buy-now-pay-later options as they try to avoid debt.

Finally, shoppers are much more sensitive to price. 90% of those surveyed said price is the major factor in holiday shopping. People are choosing value brands with decent quality over premium brands.³

Black Friday and the Stock Market

Who will be right this Black Friday – the retail industry or the researchers? Will it be a boom or a bust? When it comes to the stock market, the impact isn’t what you might expect.

Analysts looked at the post-Thanksgiving behavior of the S&P Retail Select Industry Index SPSIRE. The index shows that if stocks fell on weak holiday sales, they would then rise through to the end of the year. Just the opposite tended to happen when initial reports show stronger-than-expected sales. This was the case in 73% of the years since the index was created in 1999. The direction of that initial two-day post-Thanksgiving window was the opposite of its direction from then until the end of the year.⁴

Researchers believe this inverse correlation is caused by investors overemphasizing Black Friday sales reports. When sales go well, investors overreact and conclude that happy days are here again. When reality sinks in over the next few weeks, as it almost always does, the market corrects itself. Investment analysts concluded that the best advice is to pay no attention to Black Friday sales reports and enjoy your Thanksgiving weekend.

What economists are concerned about is people behaving like the recession is already here. This could become a self-fulfilling prophecy. Reduced spending leads to reduced sales. Which, in turn, reduces business earnings, lowers stock prices and tax receipts. Businesses then slow production and lay people off. With less money to spend, consumers continue to fuel the downward spiral. This economic uncertainty calls for stable safe haven assets. A Gold IRA can give you the gift of peace of mind this holiday season. Contact us today to learn more.

Notes:
1. https://theconversation.com/retailers-may-see-more-red-after-black-friday-as-consumers-say-they-plan-to-pull-back-on-spending-acting-as-if-the-us-were-already-in-a-recession-194978
2. https://theconversation.com/retailers-may-see-more-red-after-black-friday-as-consumers-say-they-plan-to-pull-back-on-spending-acting-as-if-the-us-were-already-in-a-recession-194978
3. https://theconversation.com/retailers-may-see-more-red-after-black-friday-as-consumers-say-they-plan-to-pull-back-on-spending-acting-as-if-the-us-were-already-in-a-recession-194978
4. https://www.marketwatch.com/story/what-retailers-black-friday-and-cyber-monday-sales-tell-you-about-retail-stocks-recession-and-the-economy-11669105931?mod=home-page

• Jeff Bezos told Americans to prepare for a recession by cutting their spending
• Economists now see a recession as inevitable
• Some Fed members consider a recession necessary to tame record inflation

 

Prepare for a Recession

Amazon Executive Chairman and 4th richest person in the world, Jeff Bezos told people to prepare for a recession. He advised Americans to hold off on big purchases. They should save their cash for a rainy day. Good advice, especially if you are one of the 10,000 Amazon employees he is about to layoff. Bezos didn’t say how long he thinks the downturn will last. But he believes the US will be in recession soon, if it isn’t already.

Inflation is eating away at American’s savings. We are now tapping into our credit reserves. New data showed that household debt surged to $16.5 trillion last quarter. The number of mortgages and car loans is on the decline due to higher interest rates. But credit card debt is swelling quickly. It is rising at its fastest pace since 2008. Personal savings swelled during the pandemic. Today, those savings have plunged in half.¹

Most economists see a recession as inevitable. A Bloomberg economic forecast projected the probability of recession by October 2023 at 100%. The risk of recession is increasing alongside rising interest rates meant to combat inflation. The US economy did meet the informal definition of recession by contracting for two straight quarters in 2022.²

There was growth in the third quarter. But economists said that it was more accounting than actual growth. “If this constitutes improvement, we’ve set a very low bar,” said Bankrate chief financial analyst Greg McBride. He added the “pervasiveness” of inflation “remains problematic,” particularly since shelter, food and energy prices “are still seeing large and consistent increases.”³

The latest Bank of America survey of fund managers found that 77% see a global recession occurring over the next year. Recession in the US will pale compared to elsewhere in the world. 92% of those surveyed predicted the economy will be marked by stagflation. High inflation coupled with negative growth is considered the worst-case scenario for markets. Stagflation would require the Fed to shock the economy with even more drastic rate hikes.⁴

The Federal Reserve May Require a Recession

One Fed official said that it won’t be possible to reduce inflation without a recession. Esther George is president of the Federal Reserve Bank of Kansas City. She said, “I’m looking at a labor market that is so tight, I don’t know how you continue to bring this level of inflation down without having some real slowing, and maybe we even have contraction in the economy to get there.” And in response to other Fed member’s hope for a ‘soft landing’, she replied, “I would love if there was that path, and I’ve seen people paint that path. I have not in my 40 years with the Fed seen a time of this kind of tightening that you didn’t get some painful outcomes.”⁵

Ms. George advocates slowing the pace of rate increases. But not stopping them. There is consensus among Fed members that stopping rate hikes prematurely could let inflation return. They feel that situation is worse than a recession. Ms. George and others don’t want to repeat the mistakes of the 1970s and ’80s.

She warns investors not to expect a pivot anytime soon. Inflation is here and recession is coming. Now is the time to reduce risk and find safe haven assets. Our Gold IRA is designed to protect your wealth through a downturn. Contact us today to learn more.

Notes:
1. https://www.dailymail.co.uk/news/article-11434349/Billionaire-Bezos-says-people-prepare-recession-holding-buying-TVs-cars.html
2. https://www.dailymail.co.uk/news/article-11434349/Billionaire-Bezos-says-people-prepare-recession-holding-buying-TVs-cars.html
3. https://www.forbes.com/sites/jonathanponciano/2022/11/15/recession-fears-hit-new-high-even-as-inflation-slows-heres-what-fund-managers-predict-for-2023/?sh=4dab2aeb7f4b
4. https://www.forbes.com/sites/jonathanponciano/2022/11/15/recession-fears-hit-new-high-even-as-inflation-slows-heres-what-fund-managers-predict-for-2023/?sh=4dab2aeb7f4b
5. https://www.wsj.com/articles/bringing-inflation-down-without-a-recession-might-not-be-feasible-fed-official-says-11668571133