“Silver Breakout Are You Positioned?” Peter Krauth presents at Metals Investor Forum on May 11, 2024

“Silver Breakout Are You Positioned?” Peter Krauth presents at Metals Investor Forum on May 11, 2024

[Music] my talk today is going to be about silver breakout so Jordan certainly uh uh gave a great intro and I’m going to uh to elaborate on that um silver breakout but again are you positioned for it um here’s a quick thought there decades where nothing happens and then there are weeks where decades happen now that’s attributed to Vladimir Lennon not exactly my hero but um the question mark is next to his name because I can’t find any conclusive proof that he said it someone’s apparently has said it but it’s it’s appropo so I’m repeating it um I feel like that’s what the last couple of months have been like uh it’s just been incredible ride and I think uh like Jordan said there’s a lot of a lot more of that ahead of us now the serious stuff um debt globally and the kinds of things that are going to drive precious metals and I think that are really really uh at the root of what’s going on global debt is despite High interest rates um that making borrowing more challenging of course central banks letting their purchases of of treasuries over the last few years to stimulate roll off off the balance sheet and and not renew them and just sit in cash when they um when they mature still has us at debt levels globally that are above um pre-pandemic levels so that says a lot about where we stand right now debt to GDP levels are still Rising that’s certainly a function of uh interest rates High interest rates and so if you if you notice on this chart you’ve got um the lighter blue and the lighter red and that’s the projections that we had um uh the world economic Outlook projections in 2019 is where we would be at this point in time um and then the darker red and the darker blue are what really happened so needless to say we’ve blasted right through these debt to GDP ratios and give you an idea in the 1970s the debt to GDP ratio was about 35% in the us and we’re at about 12 20% right now so to think that you can keep these high interest rates for extended periods is just dreaming um the advanced economies see their debt to GDP ratios climbing not quite so quickly as emerging Emerging Markets I’m going to talk a little bit about the implications of that in the next couple of slides um what we see too is that uh growth is slowing um that’s so there is growth but that’s come from a lot of stimul Emerging Market debt uh I’m sorry emerging market growth has slowed the most um you’ve got developing markets or sorry developed markets that have seen their their um their economies grow but that’s on the back of a ton of stimulus overall worldwide growth has clearly been slowing certainly High rates have had a lot to do with the slowing and um you know this leads into something called uh uh black swans by definition of course they’re uh they’re not predictable but if you think about what could be the next Black Swan a couple of really obvious things come to mind you’ve got a banking crisis that has not gone away just a few weeks ago there was another bank in the US that went under a republic bank I believe out of Philadelphia so last year we had four three Banks three or four at least major banks in the US and then you had of course uh credit Swiss in in Switzerland um this is not over um a sovereign sovereign debt crisis is certainly something that is on the table the Council on Foreign Relations tracks this stuff and uh they have in fact uh about a dozen countries right now that are officially um in default including Russia Pakistan Sri Lanka Ukraine Venezuela and Egypt and they’re actually they so they track these the different countries that are at risk and very high-risk countries are at a record number right now with 12 countries making that list so it’s certainly not looking very uh very re reassuring on that side of things in the us alone debt is at $34 trillion and and Counting and um research by Bank of America strategist tells us that every hundred days the US is adding a trillion dollars to its outstanding debt it’s just incredible so that’s uh three trillion this year alone uh just probably even beyond that and now this is interesting as well if you look at um if if there is no if there is a cut in rates us uh the US deficit this year is going to reach $1.2 trillion if there is no cut in rates sorry uh yeah if there is no cutting rates it’s going to reach $1.6 trillion so there’s something called a debt spiral and that is when the deficit grows so much because there’s so much borrowing just to pay the interest on your debt that your deficit just adds so quickly to the size of the outstanding debt you end up in this debt spiral and that’s that’s basically Doom for for for a country facing that kind of situation and it’s leaded to this you’ve got a we’re in a at a point now where us treasuries are more volatile than gold it’s not it’s something that has not been seen for the last 45 years so naturally it makes gold a lot more appealing uh we know one of the big reasons that uh we’ve seen gold buying so much in the last few years especially by central banks and and Sovereign buyers is because of what was done when uh the US froze Russian assets and everybody s said to themselves I don’t want to be next so they looked at what was Liquid what was um easy to transact in and gold was the answer so you’ve got you know these last two bars are 2022 and 20123 that’s over 1,000 tons which is about or 1,80 tons I believe in 2022 around 1,37 tons in 2023 that’s about a quarter of the annual gold production so that means one out of every 4 ounces of gold went was bought by a Central Bank in the last two years and we haven’t seen that pace slow down at all so there’s some really interesting research done by a guy by the name uh Yan Newan heis I hope hopefully I pronounce that properly he’s with Gainesville Coins and um he maintains that there’s a lot of um unreported buying that’s being done uh by China in Gold so official numbers are much lower I think it’s around 200 and some tons uh by official buying in in China he says it’s actually more like 735 tons last year and by his estimates Chinese citizens bought 1,400 tons if you add those two together you’re at 2/3 of global gold production one country alone and they just seem cannot seem to be getting enough of it um and then you’ve got not anecdotal uh this is true stuff it’s it’s reported Costco alone is now selling $200 million worth of gold and silver every month if you do the math on that a year that’s $2.4 billion Costco alone besides of all the other stuff that they sell so that’s impressive I mean people are really cluing in they’re realizing that they need to look for a hedge and uh there’s been nothing better proven for the last um several thousand years so we’re in a gold bull market um we know that uh Jordan talked about that he made it uh unequivocal there are other indicators as well if you look at gold in in multiple currencies major currenc around the world when you see gold hitting new all-time highs in in major currencies you can be quite sure that we are at the start of a new secular bull market this shows that six different currencies where where gold has has completely broken out um so now let’s talk about silver there’s been a a a clear breakout technical breakout if you draw a line from the N this is non inflation adjusted obviously but the 1980 High all the way down to recent levels silver has clearly broken out from from that downward trend line and if you look just in the last three to four years it’s been pushing up lately against the 28 to $30 level it hit that for the first time in mid 202020 in the covid pandemic it did that again in early 2021 when we had the silver squeeze we’re pushing up against those levels again now and that uh hopefully the third time third time is the charm um you know I think that once we get a cross the 28 to say $30 level certainly round numbers are are psychologically important I think once we get above 30 that’s going to become very quickly a new floor in the silver price and certainly very very helpful to uh Miners and explorers bottom line so a little bit of uh market supply demand fundamentals let’s get into that silver silver Institute put out its World silver survey a few weeks back demand for silver is certainly not letting down it’s expected to be 1.2 billion ounces this year just slightly below the all-time record of 2022 clearly being very very strongly led by solar um I’ll talk about the rate of growth in solar demand in a in a few more slides but it’s just been off the charts this is from Bank of America Global Research um they forecast that uh Demand right now it’s about 20% of all a silver Supply every year goes to solar alone the single largest application for silver they expect that within the next 3 years it could reach 35% of all silver Supply will actually go to this just this one application and there’s a lot of talk obviously about China China controls about 80% perhaps more of the world’s Global um manufacturing capacity in solar panels but India is starting to catch up and really becoming an important Market um this shows the growth in India in solar panel manufacturing their capacity is expected to to Triple between 2023 and 2027 really really aggressive growth and here’s an interesting uh perhaps reason for at least part of it uh there was a there was an announcement not long ago that they um are will building the world’s largest renewable energy Park in India it’s in garat state it’s a expected to be five times the size of Paris so that’s going to require a lot of silver needless to say and I think that we’ve started to see that silver flow into uh into India in February of this year 71 million ounces in 1 month alone were FL um were were uh imported into India that represents 23s of all of their last year’s Imports so chances are some of that’s going to this new uh um solar uh solar Park and um given the growth that is expected in India we’re going to see a lot more of this it’s forecast by the International Energy agency that India is going to see the the largest requirements largest energy demand growth of any country over the next 30 Years so as I say you know obviously a lot of eyes are on China for uh solar for renewable energy for energy period but India is not far behind and certainly growing very quickly and you know we’ve there’s something called thrifting in um in solar panels and that is the amount of silver that goes into each panel we haven’t had any uh recent uh data on this it’s been trending downwards so the manufacturers of solar panels have seen the requirement of silver in each panel drop uh pretty steadily over the last few years I suspect the next time we get some concrete data on this we’re going to start to see that Trend up and this is the reason the recent most recent technology in solar panels is something called um perk and that’s actually being phased out so now we’ve got something called topcon which takes up to 50% more silver per panel and Bank of America forecast that by 2026 or is that uh yeah 2026 they think that it’s going it’s should be about 50% already of solar panels this year are going going to have um this new technology and they forecast that by 2026 it’s already going to represent 90% so this takes more silver per panel so the amount of silver that’s why I’m saying the thrifting is going to have to go into reverse and and the amount of silver going to into each panel is going to start to Trend upwards something that we don’t talk about very much for probably good reason is that it’s almost impossible to get numbers on on uh silver requirements in defense applications uh I want to give a little shout out to someone who does some great research in this field uh Ryan Blanchett of the metals intelligence desk and he’s you know looked at this again you’ve got to make all kinds of assumptions but the the expectation is that one Tomahawk missile takes about 500 grams of silver sorry 500 ounces of silver there are all kinds of places within the missile things like batteries cells relays contact switches by that estimate it’s probably about 600,000 ounces that are in tomahawk missiles supplies uh of tomahawks are now going to Allied countries so they’re they’re selling these missiles to others producing them and selling them more requirement for silver some of the missiles are being upgraded then of course when you use the missile you’re not recovering that silver and so roughly the estimate is that about half a million ounces of silver go into just tomahawk missiles every year we haven’t even accounted for all of the other defense applications Communications uh contacts relays you name it um communication it’s it’s just everywhere so again none of that’s reflected in in silver consumption well uh inflation has hit the industry as well um total costs for silver production are actually up 61% cash costs um all-in costs are up 25% and so margins have shrunk by about 30% last year for for primary silver miners reserves are down so there’s uh resource depletion uh sorry Reserve depletion not being replaced not finding silver not bringing it uh not proving up the uh the um deposits and then you have m&a that that is that is at its lowest level since 2006 so the silver survey expects that Silver Mine Supply is going to be down again this year and that’s despite considerable growth in in demand once again this chart I had back in March and I thought uh was worth repeating I’ve updated it a little bit but really hits home if you think about how silver forecast Supply forecast was expected to be up last year by 2% it was actually down 1% industrial demand was up was was expected to be up 5% it was revised at 14% solar here’s the big one solar was forecast to grow by 28% it grew 64% last year alone and the supply deficit was supposed to be 142 million ounces it actually turned out to be 184 million ounces so the deficits are continuing the for forecasts are for deficits to continue well into the future there were several charts where I looked at why the silver price looked like it was capped if if there was so much demand and this structural deficit and my theory was that the big industrial consumers were getting it somewhere and that they were getting it probably from the Futures markets that that have inventories from the ETFs that have inventories and you can see those charts those inventories have been dropping by about 40% in the last three years some of the registered inventories which is actually what’s available to for delivery have been dropping by 70% so that’s most likely where the silver has been coming from this is a bit of an anomaly apparently uh that started to tick up uh I think if anything this is investment demand probably in the last couple of months so globally silver ETFs have seen their Holdings I’ve seen other numbers that are a little bit different so take it with a grain of salt so really are you positioned for this silver breakout I’m going to have to uh step it up a little bit here um silver stocks are outpacing Gold stock so this is the S to GDX ratio sorry uh yes s to GDX so you’ve got a triple bottom which is like a reverse Head and Shoulders the neckline shows a clear breakout recently so that’s really interesting that’s good for both silver and gold stocks but it’s certainly very bullish for silver stocks then you look at the SJ to gdxj so the Juniors more most mostly Juniors we’ve got a double bottom and we’ve got a near breakout so this is going to be very telling I think that we could probably see this in the next few months silver stock stocks have really been outperforming silver silver in the last since late February is up 20% s up 40 SJ up 44% outpacing gold stocks GDX up 32 gdxj up 34 so the silver stocks have done even better and some explorers have been just exploding um one in the portfolio is up 167% since then one is up 67 one is up 72% and this is still these are still arguably very cheap so lots of room to move this looks back to 2016 the SJ to Silver ratio in 2016 silver Juniors absolutely exploded versus silver um it looks like we may have formed another bottom just recently if we do if we did and we get a same similar kind of move then you you could be looking at tremendous tremendous returns in silver juniors in the next few months and this is what that looked like back in in 2016 so silver was up 40% in about 7 months silver um medium to larger cap companies were up 240% silver Juniors were up 340% so more than eight times the the The Leverage on silver in early 2016 that kind of uh sums it up uh you know if you want to get an idea of the whole opportunity and silver the great silver bowl which I published a couple of years ago gives you that overview um my newsletter is the only one that’s focused exclusively on Silver you can uh follow that um silver stock investor.com is the best way to ATT track what’s uh what I’m doing um and if you were not here yesterday or if you missed it uh there’s some big news in the uh precious metals uh newsletter industry uh my partner Gwen Preston decided to hang up her hat and is no longer writing uh the maven letter but I’m very happy to say that have teamed up with Jeff Clark who is the gold advisor and has a paid service called paid art prospector so for my he will be taking over Gwen’s letter the maven letter um for my subscribers everything uh will pretty much look the same um no concerns there everything will be very smooth you’ll continue to get your letters all the same uh as as prior if you um would like to speak to Jeff um after this session he’ll be out outside and you can go up to him and ask him any questions about how the transition is going to take place and uh we can assure you we’re going to do our best to keep things as smooth as possible and so you get all the info that you’ve been used to um I’m offering a 30% discount on Silver stock investor if you uh decide to subscribe for myth investors you’ve got that code at the bottom on the right and I’m launching a financing service so anyone this is mainly for accredited investors if you um are interested in financings they are hard to come by sometimes uh they often well in the last couple of months I’ve heard multiple times where financings were way over subscribed it took a matter of hours in some cases to raise 510 million it’s not the case for everyone but that certainly has been a repeated story um and so hopefully if people are interested that’s a way to get into that space and I’m offering um a sizable discount on the offer for the first 10 subscribers if you’re interested I’ve got that link at the bottom and uh you can go there and uh and get that deal that includes the newsletter uh silver stock investor [Music] newsletters e

Peter Krauth of Silver Stock Investor presents “Silver Breakout Are You Positioned?” at the Metals Investor Forum in Vancouver on May 11, 2024.
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