Here’s an excerpt of something I read a couple of days back:
“This isn’t just a chart breakout— it’s monetary prophecy.
While fiat inflates and digital hype burns, the ancient store of value returns to the throne.
$50 an ounce means something broke.
Trust. Supply. Illusion. Pick one—or all three.
They tried to bury it. Suppress it. Manipulate it. But silver doesn’t need PR. It just waits.
And when the system trembles— it rises.
Gold screams empire. But silver whispers revolt!”
Long Term View – more theoretical!
Rise of Gold & silver for past 1 year has been simply jaw-dropping, nothing short of a fairy-tale saga. Unequivocally this was a storm brewing up & waiting to catch the world by surprise. Rise of yellow & white metal is pointing towards a global system which is reeking of multiple fault-lines. Cumulative Global Debt is now $337 Trillion and the total debt-to-GDP ratio now sits at 324%. Theoretically, system depends on money that doesn’t exist, backed by faith that’s fading !
Out of this US alone now sits at $36 Tn worth of debt. Emerging markets owe $109 Tn with currencies debasing by the day! Real yields are mathematically unsustainable now, every 100bps increase leads to $3.4Tn increase in annual interest. Central banks across have very little option, but to inflate their way out i.e. print more currency and devalue the fiat currency. When and how that happens is simply a conjecture now. And the bullion frenzy doesn’t seem to wait for the right timing but is positioning itself well-ahead of the end game. Now, club this with the extant geo-political conflicts, US trying to bully the world around with Tariffs and consequently economies trying to wiggle their way out of Dollar hegemony. Heady concoction! Hard assets are the only feasible firewall – Gold, Silver, crypto, productive equity, energy infrastructure etc.
Mind you, we are not advocating a move away from Financial assets. These cycles can take generations to play out and being out of financial markets in an ever-inflating world could be more harmful. Only way out to shield portfolios is to consider Gold/Silver as part of core and long term allocations (reasonable size). Yes, that’s our long-term view – Keep Gold/Silver as a core and chunky part of your strategic portfolios, always!
Medium Term view – more mathematical!
Gold’s now past $4000/oz and Silver has made a new life high after 45 years breaching the psychological $50/oz mark!
Is Gold overvalued? – short answer is ‘No’.
Given the combined Money Supply (M2) of US + Euro zone and pegging it to the total mined Gold in the world, Gold seems to be fairly valued in dollar terms. We are not going into detail math here for sake of brevity. For anyone keen on nos, please reach out to us separately or write to us at support@moneyfront.in
Silver mostly behaves in a particular ratio to Gold. This Gold-silver ratio is extremely critical and average ratio in 21st century has been 69:1. Which is to say that price of 69 ounces of silver should be equivalent to price of 1 ounce of Gold. Currently the ratio is 80:1 ($4000/$50)
Two ways in which this ratio can correct:
- Gold prices fall
- Silver rises more
We are in the camp which believes Gold doesn’t correct dramatically and silver does moderate catch up from hereon. A ratio of 70:1 takes silver to $57 and a ratio of 75:1 takes it to $53, provided Gold does nothing from hereon. Primary thesis is Silver should continue to outperform Gold relatively, for the ratio to be more reasonable. Having said this, upside from hereon seems modest in the range of 10-15%. Cherry and the cream is already taken, the crust is still left in our view!
Short-term view – more liquidity driven!
In the short term, we strictly recommend everyone to be away from Silver. This is a 1-3 month view. Our reasons are as below:
Physical Silver is in short supply, owing to high demand for metal and ETFs both.
In India, ETFs are all backed by physical metal and hence, whatever one buys has to be necessarily supplemented by fund houses by buying equivalent physical silver.
There isnt enough physical supply of Silver to cover up this sudden surge in ETF buying.
Because of short supply, the prices of ETFs have shot up abnormally. Trading almost 5-18% higher than the actual NAVs (physical price of metal).
So, if you are buying silver ETF or FoF now – you are buying at 5-18% higher prices which wont sustain.
This is a short term phenomenon, and ideally should get over in a week or so as more silver is imported to cover up for deficit.
One more thing which is convoluted in the whole puzzle is, Silver future prices.
Surprisingly, Silver December futures are quoting at discount and were trading at $48.5 against spot price of $50
Now this is a peculiar situation called ‘Backwardation’ and should correct with time and with silver supply getting adequately restored.
But, till this situation persists, we strongly recommend to desist buying more into Silver.
Conclusion:
That’s our short story of Gold & Silver – Trust, Supply & Illusion! Long Term is all about broken Trust on a system which hinges on fiat promise. Medium Term is all about glut of currency supply which is fast outpacing the available Gold reserves. Short term is just an illusion of liquidity!
In a nutshell, we are bullish on Gold/Silver in long term, moderately positive in medium term. But extremely sceptical in short term (1-3 mths). All this comes with a disclaimer, that Gold/Silver are much more nuanced and sensitive to geo-political developments on a daily basis. Rapidly changing world-order can any day tilt the equations!
As always, we will try and keep you all updated @Ultima Wealth and @Moneyfront!