• Silver prices are reaching new heights and are predicted to keep climbing
• Record industrial and investor demand are far outstripping supply, supporting high prices
• With safe haven benefits and a lower entry point than gold, now is an opportune time to add silver to your Gold IRA

Silver Prices on the Rise

As gold shatters records week to week, silver is carving its own upward path. Individuals and hedge funds are flocking to silver to protect their wealth from rising inflation. Silver’s role as an industrial and monetary metal is creating a “perfect storm” to drive prices higher.

Because both metals are seen as safe investments during economic uncertainty, silver typically rising along with gold. And now is no exception. Silver is seeing its best prices in 11 years, trading at over $32 an ounce. Silver outperformed gold in recent weeks. It gained 35% this year against gold’s 18% rise. It is finding support to stay over $31 an ounce with room to move higher. A Commodity Futures Trading Commission report showed traders are betting on silver to keep rising. Bullish positions are expected to increase now that silver has broken $30 an ounce. ¹

Market conditions have been building for silver’s breakout for a while as industrial demand fuels part of the spike. Used in solar panels and electronics, silver is an essential component of the global green technology push. Industrial demand hit a new high in 2023, for a third consecutive year, according to the Silver Institute.

Prices are being forced up as supply cannot keep up with demand. There are notable shortages in the supply of silver. Based on this, TD Securities predicts silver may break $50 an ounce. ²

The “Silver Squeeze”

There is now talk of a potential “silver squeeze.” A “silver squeeze” refers to a rapid increase in demand for physical silver that outstrips available supply, causing prices to surge. This phenomenon is often driven by coordinated buying efforts from retail investors or speculative traders. They aim to create an artificial shortage and force up prices.

The term gained prominence in early 2021 when a group on Reddit’s WallStreetBets forum attempted to replicate the GameStop short squeeze by collectively buying silver. Their goal was to force large institutional short sellers to cover their positions, theoretically sending silver prices skyrocketing. Their efforts had a temporary impact, driving prices up around 9%. However, the recent surge in silver prices has reignited talks of another potential squeeze in 2024.

Investor Demand – $50/oz silver?

Barring a silver squeeze, there’s still a rapid swelling of investor demand alongside industrial demand. Together, they can support higher silver prices. TDS Securities said growing demand could wipe out the above ground stocks of silver within 12 to 24 months.

A senior commodity strategist at Canadian Bank said, “The last time silver prices broke through $30/oz, it traded to $50/oz in less than ten weeks.”³ They think that if silver breaks above $30 per ounce, it could trigger a lot of ETF buying. This would reduce the available silver stocks at the London Bullion Market Association. The last time there was a big push to buy silver, it led to a huge demand of about 110 million ounces in a few days. That would cut the available silver by 35% if it happened again.

Gold/Silver Ratio

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Analysts point to the gold/silver ratio to say that silver is just getting started as it plays catch up to gold. Silver’s recent rise has pushed the gold/silver ratio to 75 points. Its lowest since December 2022.⁵

The gold/silver ratio is a simple way to compare the prices of gold and silver. It tells you how many ounces of silver you need to buy one ounce of gold. For example, if the ratio is 80, you need 80 ounces of silver to get one ounce of gold.

When the ratio is high, like 80, silver is relatively cheap compared to gold, which can be a good time to buy silver. When the ratio is low, like 50, silver is more expensive relative to gold, making it a better time to buy gold instead.

The average gold/silver ratio over the past 20 years is approximately 68:1. Which means today’s ratio indicates that silver is relatively cheap compared to gold. It suggests that silver might be undervalued.

Silver in Uncertain Times

Silver’s rise is not surprisingly from a historical perspective. There is a correlation between spikes in silver prices and economic downturns. Recessions have historically been “ramp up” periods for silver prices, setting the stage for significant gains after the economic downturn.

During the Great Recession of 2007-2009, silver prices initially spiked. They reached a high of $19.24/oz in February 2008 before dropping to a low of $9.09/oz in October 2008 near the depths of the recession. However, after the recession ended, silver prices surged again. They hit a post-recession high of $48.70/oz in April 2011, a 435.8% increase from the recession low. ⁶

Conclusion

Silver is breaching new highs and analysts think this is only beginning of a long bull cycle. Industrial and investor demand are soaring at the same time of record supply shortages. With safe haven benefits and a lower entry point than gold, now is an opportune time to learn if adding silver to your portfolio or Gold IRA is right for you. Contact American Hartford Gold today at 800-462-0071 to learn more.

Notes:
1. https://www.kitco.com/news/article/2024-05-21/silver-eyes-50-td-securities-predicts-major-breakout-after-31-support-holds
2. https://www.kitco.com/news/article/2024-05-21/silver-eyes-50-td-securities-predicts-major-breakout-after-31-support-holds
3. https://www.kitco.com/news/article/2024-05-21/silver-eyes-50-td-securities-predicts-major-breakout-after-31-support-holds
4. https://www.usatoday.com/money/blueprint/investing/silver-price-05-22-2024/
5. https://www.usatoday.com/money/blueprint/investing/silver-price-05-22-2024/
6. https://www.silverinstitute.org/silverprice/2000-2010/#:~:text=During%20the%20first%20half%20of,of%20generally%20firm%20fabrication%20demand.

 

• Personal and national debt are reaching epic, dangerous proportions
• Unchecked debt could drive the economy into deep recession
• Americans are protecting their assets from the consequences of runaway debt with Gold IRAs

Debt Skyrockets

Personal and national debt are both on a dangerously sharp upward trajectory. As auto loan and mortgage delinquencies rise, credit card delinquencies skyrocket. At the same time, Wall Street leaders are loudly calling for action on an unfolding national debt crisis. The unchecked debt of citizen and nation threatens to undo both.

Credit Card Delinquencies Hit New High

Americans are turning to their credit cards to pay for sky high prices. Now, the New York Federal Reserve data show a growing number of Americans are falling behind on their credit cards. Considered a sign of worsening financial distress, credit card delinquencies are at a 3-year high. Delinquencies have surpassed pre-pandemic highs. They rose from January to March and continue to go up.

The percent of balances in serious delinquency is at its highest level since 2012. The Fed admitted they don’t know exactly what is behind the increase in delinquencies. One theory is that excess savings are gone. And though the job market looks strong, Americans are losing their jobs and then getting new ones at a lower salary. However, nonstop inflation is the likely prime candidate. Cumulative inflation on necessities like food and rent is over 18%.

¹

Achieve is a digital personal finance company. Their survey showed the main reasons were inflation and a reduction in work and income. It cited high interest rates as making it harder to pay down debt. A quarter of consumers reported reducing their spending over the past three months. That doesn’t bode well for this economy, 70% of which is based on consumer spending.

Economists are worried because the rise in credit card usage is coming when interest rates are astronomically high. APR hit a new record average of 20.72% last week. Rates are high because of the Fed’s aggressive policy to try and tame inflation. ²

Household debt rose $184 billion the first quarter of this year and is now at $17.69 trillion. One in five credit card users are dubbed “maxed-out borrowers” because they used at least 90% of their available credit. One third of this group has gone delinquent in the past year.³

So Goes the Nation

As personal debt is wreaking havoc on individuals, the national debt is putting the country in crisis. The national debt recently surpassed $34 trillion. It is on course to exceed $45.7 trillion within a decade. That is more than 110% of the gross domestic product.⁴

Interest payments are the fastest growing segment of the budget. Interest on the debt has almost doubled to $659 billion in 2023 from $345 billion in 2020. The US has hit a worrying milestone. In the first seven months of this fiscal year, interest payments on debt cost taxpayers more than what we spend on defense and Medicare. Only Social Security costs more right now. But in less than 30 years, paying interest on the debt might become our biggest expense. ⁵

High interest rates are making the problem worse. As the debt reaches unsustainable levels, it will contribute to a negative cycle of even higher interest rates. Social Security and Medicare, the untouchable ‘third rail’ of politics, will see automatic cuts in the coming years if the government doesn’t act. All retirees would face a 21% cut in Social Security benefits in just nine years. Medicare will face similar cuts in 12 years. ⁶

The Government Non-Response

Goldman Sachs CEO David Solomon said the US policymakers need to focus on the ballooning national debt. He warned that the government’s “ability to spend without constraint is not unlimited.” “Ultimately,” he said, ” the market will challenge” the federal government’s free spending ways. ⁷

The Biden administration does not seem to be heeding such warnings. Biden unveiled a record $7.3 trillion election-year budget. It increases social spending while taxing businesses and high earners.

“Continuing to ignore these warnings puts beneficiaries at risk, creates economic uncertainty and adds to our fiscal challenges,” Michael Peterson, CEO of the Peter G. Peterson Foundation, said. “In fact, we haven’t been this close to the depletion of Social Security since the last bipartisan reforms done in 1983.”⁸

A Republican proposal for a bipartisan commission about the debt is dead in the water. Proposed over six months ago, it collapsed from left-wing fears of spending cuts and right-wing fears of new taxes. More than 100 Democratic lawmakers signed onto a letter opposing the commission.

Conclusion

Debt on a macro and micro level is posing a grave threat to individuals and the country. Both are sinking into a debt spiral where mounting interest payments and continued borrowing choke off beneficial spending. The mirror results of which end in a deep recession. And unfortunately, no one is taking measures to solve either problem. The bill for Americans and America is coming due and it looks like it is going unpaid. Economic volatility and recession are likely to follow. People interested in protecting the value of their retirement funds are investigating the benefits of physical precious metals. In particular, a Gold IRA is designed to safeguard funds from the consequences of runaway debt. Contact American Hartford Gold today at 800-462-0071 to learn more.

Notes:
1. https://www.cnbc.com/2024/05/14/credit-card-delinquencies-rise-as-more-gen-zers-are-maxed-out-ny-fed.html
2. https://www.foxbusiness.com/economy/credit-card-delinquencies-are-surging
3. https://thehill.com/business/4665135-credit-card-delinquencies-surge/
4. https://nypost.com/2024/05/13/business/goldman-sachs-ceo-david-solomon-raises-alarm-on-us-debt/
5. https://www.usatoday.com/story/opinion/columnist/2024/05/14/biden-national-debt-payments-social-security/73670903007/
6. https://www.usatoday.com/story/opinion/columnist/2024/05/14/biden-national-debt-payments-social-security/73670903007/
7. https://nypost.com/2024/05/13/business/goldman-sachs-ceo-david-solomon-raises-alarm-on-us-debt/
8. https://www.usatoday.com/story/opinion/columnist/2024/05/14/biden-national-debt-payments-social-security/73670903007/

• Gold prices are consolidating around an impressive $2,400 an ounce
• Gold demand is being fueled by geopolitical conflicts, strong central bank purchasing and safe haven demand from rising inflation and growing debt
• Gold is predicted to break $3,000 an ounce within six to eighteen months.

Gold Prices Consolidate at New Highs

Coming off a streak of record-breaking highs, the price of gold appears to be entering a consolidation phase around an impressive $2,400 an ounce. Gold’s momentum is overcoming traditional negative correlations. As it settles into this new price range, gold is poised to resume its upward trajectory.

Gold’s consolidation phase refers to a period in which the price of gold trades within a relatively narrow range. During this phase, the market is in a state of balance. It remains stable until new developments motivate more buying and selling. Consolidation phases usually occur after periods of rapid price increases. They are characterized by reduced volatility and trading activity. They can serve as a pause or breather in the market before the next significant move in either direction.

Right now, gold is consolidating around $2,400 an ounce – a new record weekly close for the precious metal. Gold’s rally to this price is breaking long held fundamental beliefs. It resisted downward forces like high interest rates and a strong dollar. Gold is benefiting from overall increased demand. That demand is fueled by the geopolitical conflicts in Ukraine and the Middle East. Gold is also fulfilling safe haven demand for investors as stocks struggle to maintain their near record highs. Central banks and individuals are rapidly acquiring gold as a hedge against inflation as it creeps upwards again. ¹

Go to Gold

Ryan McIntyre is a managing partner at Sprott Inc. He said during this economic cycle, investors should move away from the S&P 500 and into gold. He is looking past the normal headwinds brought by high interest rates. Instead, McIntyre thinks that the S&P 500 is very expensive right now compared to how much money companies are making (a measure called the Shiller Price to Earnings Ratio). Holding onto these expensive stocks might not be the best idea because it would require companies to make a lot more money in the future to justify these high prices. So, instead of investing in expensive stocks, McIntyre sees gold as a potentially better investment option.²

Gold is positioned to take advantage of any new changes in the economy. A rate hike from the Fed would increase holding costs for gold but it will hurt the value of stocks as well. “A rate hike will be bad for gold, but it will be a lot worse for the S&P 500,” according to McIntyre. ³

The rapidly growing national debt is also powering gold demand. US Treasuries aren’t offering the same wealth protection. Gold is still coming ahead as the easiest and trustworthy of safe haven assets.

Gold & Interest Rates

Gold is even breaking with its normal correlation to interest rates. Recently, Federal Reserve Chair Jerome Powell surprised markets with a hawkish comment. Inflation was coming in hotter than expected. Powell cast doubt on its readiness to cut interest rates. Gold prices, instead of dropping, were unfazed by the comment.

A softer than expected jobs report renewed expectations on potential interest rate cuts. “We continue to expect two rate cuts this year, in July and November,” Goldman Sachs wrote in a note. Gold climbed on the news. As a matter of fact, the forces holding gold prices down seem to be weakening. “The downside that we’ve seen over the last few weeks might actually be running out of steam, opening (the) door for gold prices to resume their upward trajectory,” said Daniel Ghali, commodity strategist at TD Securities.⁴

The Fed must ultimately lower interest rates at some point in time. And when that happens, gold prices could surge again in what is expected to be a protracted bull market.

Future Prices

Analysts from Citigroup have predicted that gold, “aided by geopolitical heat” and “coinciding with record equity index levels,” could surpass the price of $3,000 per ounce in the following six to 18 months. According to Citigroup, the demand is likely to be coming from managed money players who are catching up with central bank demand. ⁵

Bloomberg’s senior commodity specialist Mike McGlone is also certain that gold would hit the $3,000 price per ounce. He cites the combination of two financial indicators – the lowest CBOE S&P 500 Volatility Index (VIS) and the highest US Treasury bill rates since 2007.⁶

Conclusion

Gold prices are consolidating at a new high level. Demand is backed by geopolitical conflict, central bank buying, and rising inflation. Debt fears and potential interest rate cuts are also supporting gold. Analysts see this plateau as a springboard for gold to reach even greater heights. Now is an excellent time to learn how adding gold to your portfolio with a Gold IRA can protect and potentially increase your wealth. Call American Hartford Gold today at 800-462-0071 to learn more.

Notes:

1. https://www.americanhartfordgold.com/gold-price-charts/
2. https://www.kitco.com/news/article/2024-05-07/its-no-brainer-switch-sp-500-gold-sprotts-ryan-mcintyre
3. https://www.kitco.com/news/article/2024-05-07/its-no-brainer-switch-sp-500-gold-sprotts-ryan-mcintyre
4. https://www.cnbc.com/2024/05/06/gold-rises-on-fed-rate-cut-hopes-middle-east-tensions.html
5. https://finbold.com/heres-when-gold-price-could-hit-3000/
6. https://finbold.com/heres-when-gold-price-could-hit-3000/