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Is silver gearing up for another major move?

Sean Brazney & Jeffery Christian
April 13, 2022
Video Transcript

Sean Brazney: My name is Sean Brazney, Sales Director for Monex Deposit Company. I have the pleasure to be here today with Jeffrey Christian who is Managing Partner and Founder of CPM Group, one of the many research analysts over there at the CPM Group, joining us today. Thank you for being with us today Jeffrey.

Jeffrey Christian: Yeah, it’s good to be here. Thank you. It’s always a pleasure to be with Monex.

Sean Brazney: I really want to talk about silver today and be somewhat specific with silver, and before I get into too much with silver, I just wanted to cover some ground with you on some information that I point investors to quite often through CPM Group. When it comes to silver, you really should know why you want to buy silver and have a really strong why. It’s one of the main reasons why we’re here with Precious Metals For More Than Just Inflation report, as well as, of course, all of the reports that are authored by CPM Group for Monex, but also that you can find through cpmgroup.com and the reports that they have available to them is trying to get you as much data and research as we can. So that you can really, find out a good why…why do you want to buy or hold precious metals. When we talk about silver, there’s a lot of wild opinions that kind of can come into the light when we talk to investors or potential investors on silver. I really want to bring up the long-term data that Jeffrey has and that I like to reference. Now Jeffrey, you talk about a 40-year history of data there in the precious metals market with your background all the way pre-1980, which is amazing. Amazing experience that we have here with us with that kind of a timeframe, but you mention a 40-year timeframe holding a core position, and I really want to talk about how important that core position was before we get started on silver. If you can kind of share some of that data with us.

Jeffrey Christian: Our view has always been that we’re very big on diversification—diversification of assets. So, you don’t go heavily into stocks and heavily into bonds, you have a diversified portfolio that includes some stocks, equities, bonds, but also includes precious metals, and gold and silver are excellent portfolio diversifiers. They’re correlated with each other, but they’re not correlated with stocks and bond markets. So, they are excellent portfolio diversifiers and what that means is that they help smooth out the value of your portfolio or the value of your wealth over time. So, there might be periods of time when stocks or bonds or both are weak and precious metals may be doing well. What happens is they… take out the lows, the spikes down that you would have in your portfolio’s value if you were only in stocks and bonds. That’s one of the reasons. Within the precious metals complex, we like diversifying and silver is diversifier for gold. It’s a little more volatile price wise in terms of history. It is, I sometimes say it’s a schizophrenic metal, because it is a financial asset, it trades like and it is a currency, it trades like a currency or a bill. If you look at the way gold and silver trade and the relationship between annual new supply of physical metal compared to the derivatives that’s trading, they don’t trade like commodities. They trade like the dollar and treasury bills and treasury bonds. There’s… people treat them as financial assets and as quasi-currencies and that’s as it should be, but silver also has a very heavy industrial use component and that helps change its dynamics relative to gold. So, it’s a good compliment to gold. There are periods of time when it outperforms gold. There are periods of time when it underperforms gold. If you study the fundamentals and you keep on top of it and you don’t get distracted by various conspiracy theories and paranoid ideations, you can actually do very well with your silver over time.

Sean Brazney: Great and then I kind of want to talk about that… point of where we are now and what we’ve seen in silver and just going to go back recently, back to 2020. It seems like our entire world is different since March of 2020. We saw silver trading between $18 and $15 at that time. The March issues hit into the marketplace and we saw it trade all the way down into the $11’s and from that $11.64 low in silver, we ripped to the upside in July of 2020. We were testing almost $30 per ounce silver, I think $29.91. We saw it pull back and put in, it seems to be a base or support right around $22. The WallStreetBets came in in February of 2021 and pushed it to silver again. From those re-tests, we’ve seen $28 in the highs, we’ve seen $27 and we’re in a down trending market, but recently silver broke above the $24.40s area. It looks like it’s broken above a daily down trending trendline. I know we have a weekly and monthly chart to think about between $22 and $28 in silver has kind of been our zone we’ve been in since July of 2020, but this recent downtrend we seem to have broken over, got into the $27s, and have come back and re-tested this $24 level. Looking out over the near to medium term, is this a breakout you think might take us back to $28 to $30 or potentially higher or you think we have some opportunities to have more accumulation back down in the $22 to $23 range?

Jeffrey Christian: You know, it’s quite possible that the price will spike higher, but I do agree with you that this $22 to $28 range looks pretty sustainable for the near term. If you go back to 2020, but if you go back a couple years before that— for two or three years before 2020— you saw silver trading in say the $14 to $16, $14 to $16 to $25 range. What happened was in 2020, a lot of things were changing and you saw silver move and break above that $16 level, and then it made a run and it got up to $18, and then $20, and then $24, and as you said it got up to $30 in early August. That was in conjunction with a gold price move and a few other things that were going on at the time. It then subsided and it has been basically trading in a broad range of $22 to $28. You mentioned the WallStreetBets guys and it’s interesting, because they were talking about $30, then $50, then $100 silver, but the reality is that if you look at the trading data and the price information, their effort to quote, “squeeze the silver market,” had a one-day effect on the price and it drove the silver price up to about $28. It came down the next day. We have seen the price trade up toward $27 - $28 again since then, not because of anything that they’re doing or saying, but because of the fundamentals in the silver market and the investment market. Back when silver was trading $14 - $16, investors were kind of disinterested in silver. They were buying 40 million ounces of silver, physical silver, in 2019, on an annual total silver purchases of physical silver by investors. They doubled that in 2020 to 80 million ounces and the price went from $14 to $30 briefly and it averaged probably around $24 to $26. Then in 2021, investors backed off a little bit from that bullishness, but they continued to build stocks and you saw another 50% increase in the amount of silver that investors were buying. So, investors bought 40 million ounces in 2019, 80 million ounces in 2020, 119 to 120 million ounces in 2021, and the price…the consequence of that sharp increase and investment demand was to keep the price in that $22 to $28 range. Our short-term expectation is that we’ll continue to trade in that range, perhaps on the high end, middle to high end of it. There’s a war premium, because of the Russian invasion of Ukraine. There’s an inflation premium. We wouldn’t be surprised to see the price soften a little bit in the second half of this year, but we think it’s going to stay in that range, and then start to move up in 2023, and as I think we’ve talked about in past videos, we still think that the price of silver can move sharply higher at some point between 2023 and 2026, based on a resurgence of investment demand once again.

Sean Brazney: And based on this longer-term channel, it’s almost been two years between its $22 and $28 and focus on that core position. If you’re building your core position up, down, near $22, and you go a little bigger into 10%, 15%, 20%-25% of what you think you want to hold onto. When it gets back to $28, maybe you pare that back again. So far, over the last couple years, that seems like a pretty good trade.

Jeffrey Christian: I don’t see any reason for an investor to sell silver in the current range, $22-$28. I think… unless you’re a really short-term type of person. What I really think is that this is a great base building period. It’s sort of like, you know… we’ve made this big advance from $14, $15, $16, to this level, and I think that we’re consolidating here and the silver market will wind itself up for another major move. Now, the last time, let’s say it went from $15 to $30 that’s a 100% increase, a $15 move. Is that kind of thing possible again in the next leg up? Absolutely! In fact, that’s pretty close to what we’re projecting.

Sean Brazney: Such amazing information as always Jeffrey. We remind our viewers and our listeners that we have the Precious Metals For More Than Just Inflation report, of course, authored by CPM Group. Also, take the time to go to cpmgroup.com and get their quarterly and their other reports that they have available there. I know a lot of us still rely on some of those as well. When we talk about these numbers and these ranges that’s a pretty good resource for information like that. Thank you again for being with us today Jeffrey.

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