Yesterday, silver broke above $17/ounce. This is a critical bullish sign, since silver money managers are holding a record short position last seen in 1997, when even Warren Buffett betted on higher silver prices.
As it stands, the gold/silver ratio has averaged 81 to 1 for the month of April, which, as I pointed out a week ago, is extremely rare.
When we spoke with Keith Neumeyer last week, he showed us that global silver production has seen five back-to-back years of supply deficits. This is occuring at the same time as investment demand is declining. As you know, investors are mostly responsible for the spot price, so the fact that supply is tight, even tough retail buying is weak shows how accute the situation can be when Asian and American buyers start stacking again.
Donald Trump’s election and his rising approval ratings have convinced many gold bugs that the financial crisis has been avoided. Other gold buyers switched to cryptocurrencies, so silver has been left for dead.
Yet, silver is the key.
In the 4 prior times that gold equities rallied big and beat the markets at a substantial gap, silver was the closing the ratio with gold – this is a MUST.
In other words, when silver is outperforming gold meaningfully, the mining shares outperform both the physical metals and the general stock markets around the globe.
Both the USD index, called the DXY, and the gold spot price are toying with their support and resistance levels, respectively.
The Dollar is at 89 on the index, which is its long-term support, and gold is around $1,350, which is his long-term resistance line. This is an inflection point, and one month from now, these two numbers will look incredibly different than today’s prices.
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Their ability to meaningfully raise rates is limited, which means that real rates (Fed Funds Rate minus inflation) will stay at the negative to zero levels for many years.
We are experiencing growth at the same time as interest rates and inflation levels are rising, which means that silver prices have a 10%-20% room to grow in the short-term.
Oil is already above $70. Energy costs are the most determining factor in the production cost of silver, which means miners are about to pass the added expenses to the consumer.
These processes can take weeks to months to unfold, but the trend is clear.
First Mining Gold (TSX: FF & US: FFMGF) is already up 20.4% since Monday, and the reason is that when gold prices are rising, investors realize that with Jeff Swinoga (CEO) and Keith Neumeyer (chairman), they’ll be able to attract institutional money and retail investors. Also, they’ll be able to raise capital and move to advance all five of their world-class properties simultaneously.
There is no other gold company on the planet, trading in the CAD$300M range, which is incredibly cheap, which owns five projects the size of Springpole, Goldlund, Cameron, Hope Brook, and Pickle Crow combined.
Check out the latest two analyst reports, giving the company price targets of CAD$1.30 and CAD$1.40 and the interview we just conducted with the CEO, Jeff Swinoga, where he explains why he is buying shares using his salary!
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