The metals world is abuzz with the news that Silver hit $100/oz and closed at $103.21, a new ALL TIME HIGH. Indeed, I celebrated too as a silver lover. But…
The hope for Silver and Gold owners is always higher and higher prices. Is it really any different than Bitcoin, or ETF and stock owners? Of course not. But when a stock rises it more or less brings with it the idea that the product or service is represents is doing well and in that supports the economy. That could easily be argued but let's say it is that way. But when Silver and/or Gold rise they speak a little different dialect. They are telling us that the value of our Fiat currency, the USD is going down. What you say? YES, the USD purchasing power is going down and thereby the price to buy an ounce of Silver goes up.
When an ounce of Gold or Silver is stored, it doesn't change as its price expressed in USDs changes. It is always just an ounce of Gold or Silver. These are metals with physical characteristics and one major characteristic is duration though the clear winner between the two is Gold on that front. However, Silver is a unique metal having special properties useful in many industrial applications and as money. History gives us many many Silver coins like the infamous pieces of eight, the fave in Kipling and Stevenson tales. Arrrr!
The nature of Fiat currency is that is declared the coin of realm to use the expression and made the legal tender. It is backed by nothing other than confidence. That confidence is an expression of trust in the fact that others will accept it when presented. In some instances like for the USD being the world's reserve currency, it is highly desirable and sought after. The way many get ahold of USDs is to buy the US Bond which is denominated in USD so for all practical purposes is holding the currency. The US Bond has been a trusted safe haven asset for years though not static. At present, the USD is still a needed currency for trade settlements and reserves held by Central Banks. BUT, Central banks have been buying Gold, not Silver to my knowledge, as their Tier One preferred reserve replacing the USD. Not in full but substantially enough to now make Gold the higher percentage of their reserves over the USD. THAT is a huge shift is confidence and trust. Why the shift? Well, when the US and Euro folks confiscated Russian assets held in Europe's Euroclear it said to the world that the USD is NOT safe and confiscation could happen to anyone who displeases the US. I see that as the defacto logic. In addition, the US Debt level being at 130% of GDP when 90% is considered dangerously high, reduces the concept of getting paid back to a notional one. The debt will continue to rise at a fast pace and the interest paid on US Bonds to finance that debt will rise out of necessity as the risk rises. That is a debt doom loop. Eventually, and I am fast forwarding here, the currency's value goes down and can and does go to zero in a total currency collapse. This has happened again and again to Fiat currencies worldwide. That the USD has survived so long is actually an exception to the rule. So when Gold and Silver rise, what is happening? The USD is failing. How long does it have? Probably years but there is no genius out there who knows, other than perhaps those who pull the big strings. I think Bessent and Trump know, and also many Central Banks know. The last to know will likely be the average Joe and Jane in the US population but they will feel something is off along the way. They see it in their daily food purchase etc. because Inflation goes along and in hand with the necessary money printing the Fed must do to shore up the system in particular by expanding its balance sheet buying US Bonds to hold interest rates down. The magic number for real trouble is said to be 5% and the 30 year US Bond is knocking on that door loudly currently demanding 4.8%. When the US Bond fails to sell at its auctions the Fed will step in and Inflation will begins its ascent again. The Fed's target for 2% has been abandoned and seems to now suggest 3-4% is acceptable. FOR WHO? Well, I'd say the political class and elites…the 1-10 percenters do not suffer like the rest of us plebes. They own assets that benefit from Inflation like Gold and Silver, some RE and commodities. In fact the world is on a commodity adventure wherein the Governments of the world, the big players, US, China and Russia are actively trying to lock up supply chains for the most needed commodities, among which Silver is one.
So as the title says, careful what you wish for because a rising Silver price brings along with it a whole host of circumstances that are unwelcome to most. So, is it better to own Silver than not. Of course!
Consider owning some Gold and Silver but be aware that at already inflated price levels there is risk in the price volatility. In the end, Gold and Silver will win the Fiat currency race to the bottom by being the only man left standing. Gold and Silver again will be central to a new monetary system and if you own some you will have a seat at the reshuffle table. Those without any Gold or Silver will have a very rough time of it. The throngs in this latter class with be squeegeeing a lot of windshields pretty soon.
Best,
Donn Marier
DM-Your Own CFO