As anyone who reads these articles know I am a major bull when it comes to hard assets, and in particular, gold, silver, and the mining companies. I saw an interview where the host asked a great question: Why has gold vaulted to all-time highs, but silver and the gold mining companies have not followed suit?

While silver and gold mining companies have made some major strides this year silver is still 40% below its all-time closing high. Remember, if inflation were factored in the $50.00 high in price would have to be SUBSTANTIALLY higher. It reached $50.00 in 1980 and again in 2011. How much “printing” and inflation has taken place since then?

If you look at gold stocks they are trading FAR below where they were when gold was trading at $700.00 lower than today.

While many look at this as a reason to shun these assets (most of Wall Street in particular) I believe that those looking at this objectively would have to think that these assets are just two of the few things we can look at and believe that they are really undervalued. There are not many other things that we can look at and think they are undervalued. Remember the saying: BUY LOW, SELL HIGH.

I believe that many are still stuck in the old paradigm that the major banks will always be able to suppress the price of metals, etc. utilizing their futures contracts and other means that have been exposed in court cases that have led to large fines and unfortunately, VERY little jail time.

The main difference now appears to be that almost all central banks are shunning the US dollar and debt and buying gold. The manipulation that has been on my radar since at least 2011 has not stopped as the charts clearly show efforts to cap the price throughout the day. Just a few years ago the same tactics were used, and it was once or twice a day. At that time there were large drawdowns as paper gold was sold into the “market” and rammed the price lower. Today, as I look at the daily charts on Kitco.com it is obvious that MANY times during the day major sells are taking place. The good news for those of us on the long side- Most central banks are buying just about every dip and are using the price suppression to get as much gold as possible at the lowest possible price.

There are many reasons for this, but it comes down to a lack of faith in the full faith and credit of the USA, a weaponizing of our currency and bond “markets” and the monstrous outperformance of gold vs. those paper assets being sold.

As I wrote a few weeks ago, according to the World Gold Council and the US Treasury, central banks have SOLD $1 TRILLION in US Treasuries and have BOUGHT $1 TRILLION in GOLD since 2022.

That explains gold- but what about silver and the miners?

Silver is not a tier 1 asset for central banks. Tier 1 asset means virtually “riskless”. Only US Treasuries and gold are Tier 1 assets on the central bank balance sheets. Tier 1 assets must be SETTLED with physical gold or the treasuries. This leads to a supply constraint and appears to be overwhelming the price suppression scheme. With silver, the paper scheme appears to still be working- at least better- as they can better manipulate the illusion of FAR more silver being available than exists. They do this by conjuring up paper contracts that masquerade as physical silver and are sold into the “markets” fooling other traders and algorithms into selling also.

So, what will be the catalyst to change this?

My best guess is that there will be a supply crunch that will be impossible to disguise. What will likely cause this is that silver is used in MANY industries. Today, the biggest uses come from solar panels, most electronic devices and, unfortunately a massively growing industry- bombs. As an illustration each Tomahawk missile has 500 Ounces of silver in each bomb according to Keith Neumeyer (CEO of First Majestic Silver Mining Co). Prior to the wars there was a supply and demand imbalance with demand FAR outpacing supply.

Once this is exposed, we could see moves in silver that could be explosive.

The mining companies are a different animal. There are many variables that go into the price of a mining stock. There are risks that do not exist with the physical asset. The largest cost in mining is energy. If oil and gas prices are higher, it will impact the bottom line. In addition, many companies mine in countries that can be difficult to deal with and see taxes rise or even see mines seized.

AS I look at many of these companies, I see massive cash flow and great bottom lines. Since most of the physical gold buying is taking place outside of the USA, Wall Street has not bothered to investigate this space. The only reason I see for the massive underperformance of gold shares vs. the price of gold is that the main stock buyers are still buying the index stocks and shunning most others.

This will likely not change until economic reality pulls the massively manipulated stock “market” lower and it is realized that the only assets that may hold up are those that produce real things. The fear that could be unleashed in this circumstance could launch gold higher as confidence in other assets dissolves. This could then be when the belief of lower gold prices going forward is recognized as incorrect. At that time, shares of the mining companies would finally get noticed. The importance of this cannot be overstated. This is a SMALL market that would fly higher with just a miniscule amount of invested assets seeking a place to be reinvested.

I do not think that it is possible to put an exact time on any of this, but it appears that we are VERY near the end of this latest fiat experiment which appears on the same track as the hundreds of examples in history. This would be a destruction of the currency and society that leads to a new financial system being installed.

On purpose? Watch the BRICS meeting in Russia on October 22nd for some clues!

Be Prepared!

Any opinions are those of Mike Savage and not necessarily of those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information in this report does not purport to be a complete description of securities, markets or developments referred to in this material. The information has been obtained from sources deemed to be reliable but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.

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