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Peter Krauth: The Silver Bull Is Not Transitory

Source: Peter Krauth for Streetwise Reports   07/06/2021

Peter Krauth of Silver Stock Investor delves into the silver market and discusses…

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This article was originally published by Streetwise Reports

This article was originally published by the Streetwise Report.

Source: Peter Krauth for Streetwise Reports   07/06/2021

Peter Krauth of Silver Stock Investor delves into the silver market and discusses why it “looks primed to rally strongly on the back of multiple drivers.”

Transitory. That’s something we’ve been hearing a lot lately.

At its latest FOMC meeting the Fed naturally decided to keep the fed funds rate target at 0.25%.

It also decided not to mess with the $120 billion monthly bond buying program to help “support the flow of credit to households and businesses.” Par for the course.

Meanwhile inflation numbers of the previous four months have been anything but typical. The Fed’s favored Personal Consumption Expenditures Price Index has soared: in February it was 1.6%, March 2.4%, April 3.6% and in May 3.9%.

But headline CPI recently came in at 5%, reaching a 10-year high.

These recent months of elevated and increasing prices may have been exacerbated by price plunges due to the COVID-19 pandemic. But those were for a few months, and their effects should already have dissipated. And yet, they haven’t.

In fact core inflation, which excludes volatile energy and food prices, recently touched 3.8%, its highest in 30 years.

The Fed is looking increasingly wrong in its assessment that the inflation numbers we’ve been seeing are transitory. That means investors would do well to seek shelter from inflation-protection assets. And as I’ll show, for multiple reasons, chief among them is silver.

Silver is Cheap Vs. Stocks

It’s always informative, and sometimes eye-opening, to look at asset prices in relation to other assets. It usually provides good perspective on relative pricing. In that vein, there’s little more surprising than to see just how cheap silver remains relative to the S&P 500 ratio.

The following chart shows the long-term ratio of silver to the S&P 500.

Silver SP500 Ratio

It’s currently sitting near its 50-year lows. For what it’s worth, silver would have to rise by a factor of 63 times just to match its level at its $50 peak in 1980. While this might sound sensational, my point is these conditions have existed in the past. This alone suggests explosive potential upside as the stock market matures and likely corrects, while silver continues to climb.

Physical Silver Demand Remains Elevated

Of course, protection from inflation and uncertainty are great reasons to buy and own silver. And as I described above, inflation appears to be coming back with a vengeance. In any case, many investors are hedging against the risk that it becomes entrenched.

In the past 15 months, prices for physical silver are higher than normal. That’s because demand for physical products has remained elevated, leading to sustained high premiums over the spot price. And that’s if you can even get your hands on them. Many of the most popular coins and bars have been persistently out of stock. Premiums are typically 40% or higher, which is nearly triple normal levels.

What’s more, in its recent World Silver Survey 2021, the Silver Institute is forecasting continued strength this year. It expects physical demand to climb by 26% after a very strong 2020. In fact, it foresees overall demand, from all sectors, to be up by 15%, nearly doubling supply growth of 8%.

One area of note is demand from flexible electronics. The Silver Institute indicates demand for silver in printed and flexible electronics is about 48 million ounces annually. It forecasts demand will rise to about 74 million ounces in 2030, absorbing 615 million ounces of silver in this decade alone.

As technology becomes increasingly commonplace in our daily lives the world over, printed and flexible electronics are likely to play a bigger role. Consider that wearable electronics like smartwatches, appliances, medical devices and a host of internet-connected devices are exploding in use. Sensors for light, motion, temperature, moisture and motion all make use of printed and flexible electronics.

So, it’s natural that the electronics subsector promises to be the fastest growing demand for industrial silver usage.

Silver’s Seasonal Outlook is Bullish

Another indicator that now may be a great time to be bullish on silver is its seasonal trend.

The following is a 45-year chart, from 1975 to 2020, which averages the annual silver price tendency.

Silver Gain/Loss

From this, it’s quite clear that silver tends to mark a mid-year low right at the end of June. And from that point on, on average, the silver price enjoys a strong third quarter.

How to Play Silver Now

In my view a basket of silver stocks is a great way to approach the high potential of this sector right now. One of my favorite options to accomplish this is the ETFMG Prime Junior Silver Miners ETF (NYSE:SILJ). With over 1 billion in assets and average daily volume over 1.5 million shares, SILJ offer plenty of liquidity to enter and exit at will.

Its top ten holdings represent over 63% of overall assets. And these include Hecla Mining (NYSE:HL), Pan American Silver (TSX:PAAS; Nasdaq:PAAS), First Majestic Silver (TSX:FR; NYSE:AG), MAG Silver (TSX:MAG; NYSE:MAG), Yamana Gold (TSX:YRI; NYSE:AUY), Hochschild Mining (LSE:HOC), SSR Mining (TSX:SSRM; Nasdaq: SSRM), SilverCrest Metals (TSX:SIL; NYSE:SILV), Turquoise Hill (TSX:TRQ; NYSE:TRQ) and Endeavour Silver (TSX:EXK; NYSE:EXK).

In the end, the Fed is all about managing expectations, not about tell us what we should really expect. Therefore, actively hedging for inflation with a silver miners ETF such as SILJ looks like a great option with a lot of potential upside.

One thing is certain; silver is in the early days of a massive bull market. That’s why in the Silver Stock Investor newsletter I provide my outlook on which silver stocks have the best prospects as this bull market progresses. One stock in the portfolio is up 50%, and several more are up over 30% since the start of 2021 alone. Many offer 5x to 10x return potential in just the next few years, especially as silver heats up.

Remember, silver’s been rising on balance for the last couple of years, and looks primed to rally strongly on the back of multiple drivers.

The key takeaway is that silver’s bull market is anything but transitory.

–Peter Krauth

Peter Krauth is a former portfolio adviser and a 20-year veteran of the resource market, with special expertise in precious metals, mining and energy stocks. He is editor of two newsletters to help investors profit from metal market opportunities: Silver Stock Investor, www.silverstockinvestor.com and Gold Resource Investor, www.goldresourceinvestor.com. In those letters Peter writes about what he is buying and selling; he takes no pay from companies for coverage. Peter has contributed numerous articles to Kitco.com, BNN Bloomberg, the Financial Post, Seeking Alpha, Streetwise Reports, Investing.com, TalkMarkets and Barchart, and he holds a Master of Business Administration from McGill University.

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Disclosure:
1) Peter Krauth: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: ETFMG Prime Junior Silver Miners ETF, Pan American, First Majestic, MAG Silver, Yamana, SSR Mining, SilverCrest and Endeavour Silver. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: None. I determined which companies would be included in this article based on my research and understanding of the sector.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: MAG Silver. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
4) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Pan American Silver, a company mentioned in this article.

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Precious Metals

BMO Reiterates Ratings On Osisko Gold Royalties After Preliminary Results

On January 10th, Osisko Gold Royalties (TSX: OR) reported its preliminary fourth-quarter deliveries and portfolio update. Osisko received 19,830 gold
The…

On January 10th, Osisko Gold Royalties (TSX: OR) reported its preliminary fourth-quarter deliveries and portfolio update. Osisko received 19,830 gold equivalent ounces for a total of 80,000 equivalent ounces in 2021. This is at the higher end of their 78,000 – 82,000 guidance. The company says that preliminary revenue for the fourth quarter is C$50.7 million and cost of sales came in at C$3.7 million.

Osisko Gold currently has 13 analysts covering the stock with an average 12-month price target of C$22.88 or a 51% upside to the current stock price. Out of the 13 analysts, 4 have strong buy ratings, 8 have buy ratings and 1 analyst has a hold rating on the stock. The street high sits at C$27, representing 78% upside, coming from Haywood Securities. While the lowest price target sits at C$19, representing a 26% upside to the current stock price.

In BMO Capital Markets’ note, they reiterate their C$20 12-month price target and market perform rating saying that the preliminary results were consistent with consensus expectations.

On the results, BMO says that all the results came in line with consensus expectations. The consensus estimates were 19,700 equivalent ounces, C$53.3 million in revenue, and C$4.2 million in cost of sales.

BMO says that in the news release, the company outlined a number of expected 2022 catalysts which include further expansion to Mantos Blancos, ‘imminent production’ at Santana, Ermitaño, and advancing Tocantinzinho under new ownership.

BMO says that they have not updated their estimates for the companies outlook and keep their estimates tied to their models of the mine operators under their coverage so there is a potential upside to their price target.

Below you can see BMO’s updated fourth quarter, full year 2021, and 2022 estimates.


Information for this briefing was found via Sedar and Refinitiv. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

The post BMO Reiterates Ratings On Osisko Gold Royalties After Preliminary Results appeared first on the deep dive.


Author: Justin Young

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Precious Metals

Confessions of a Day Trader: Pump up the volume, this one’s in the bank

This week saw the day that APT traded with a 6 in the front. Amazing to think that once they … Read More
The post Confessions of a Day Trader: Pump up…

Each Monday, Stockhead’s resident day trader gives us a peek at the highs and lows of his trading diary and hints at what might be coming this week.

Platform used: Marketech
Round Trip: A round trip is $10 up to $25,000 and then above $25,000, commission is at 0.02% in and at 0.02% out.
Rules of engagement: Never hold any positions overnight (unless forced) and try to avoid any suspensions (if possible). No shorting.
 

Monday January 10

Mmmmm is all I can say about today. Mmmmmm!

Volumes very low. Hard to find anything, though CBA made a classic 11am move and everything else was just bland.

Both APT and FMG allowed me out with just a couple of minutes to go. The results of no profit and $12.00 profit sum up the day.

So, that’s $172 for the day and put in a bit of time and energy to produce that. Mmmmm. Off for a swim and a beer.

Image: Marketech

Recap:
Bought 500 CBA @ 102.66
Bought 600 APT @ 72.27
Sold 500 CBA @ 102.98 ($160.00 profit)
Bought 2,500 FMG @ 20.63
Sold 600 APT @ 72.29 ($12.00 profit)
Sold 2,500 FMG @ 20.63 ($0.00 profit)

Got a text off a mate and this was my reply in blue:

Bitcoin (which I don’t trade but watch) hit $39,500 that night (inflation hedge vs gold, had gold up Bitcoin down) and Friday APT traded down to $69.03.

 

Tuesday January 11

After yesterday’s effort, decide to be a bit more aggressive on size today. CBA broke down below $101.00 a few times today and gave me two opportunities.

Both times left sell limits at $100.98 because if they were going to push back above $101, they would need to take me out first, so for the sake of 2c it is a good strategy to have.

Just put sell limits below key breakout figures as sometimes they can reach that figure and fall back.

Then as I’m laying down with a nice sea breeze blowing through I noticed FMG getting sold down with not long to go. Made a 3c turn on 5000 and could have gone either way, so was a ‘heads or tails’ trade and heads came in!

Up $645 and spent a bit on brokerage but this allowed for smaller turns required to get a profit.

Image: Marketech
Image: Marketech

Recap:
Bought 1,500 CBA @ 100.98
Sold 1,500 CBA @ 101.15 ($255.00 profit)
Bought 1,500 CBA @ 100.82
Sold 1,500 CBA @ 100.98 ($240.00 profit)
Bought 5,000 FMG @ 21.04
Sold 5,000 FMG @ 21.07 ($150.00 profit)
 

Wednesday January 12

Back to finding my ‘zone’ a bit today.

Working out that volumes are not as big as they could be but there’s still some volatility going on.

For example, CBA’s day range was $102.48 to $100.82 and FMG’s was not as dramatic at $21.20 to $20.68, but both have support(ish) levels. CBA $101.00 and FMG $21.00.

Doesn’t really mean anything in the real world but in the stock market world, they get sold down and bought back up.

FMG trade went on longer than I thought and CBA again gave me two opportunities. Go to bed thinking ‘should I up the size even more or will that bring me undone?’

Sipping a nice single malt as I type and contemplate my movements for tomorrow and asking my trading ‘God’ for guidance. Up $775 for the day.

Image: Marketech
Image: Marketech

Recap:
Bought 5,000 FMG @ 20.90
Bought 1,500 CBA @ 101.57
Sold 1,500 CBA @ 101.73 ($240.00 profit)
Bought 1,500 CBA @ 100.99
Sold 1,500 CBA @ 101.18 ($285.00 profit)
Sold 5,000 FMG @ 20.95 ($250.00 profit)
 

Thursday January 13

Pre-market, the news that USA inflation was at a 40-year high got me thinking about gold.

Then out of the blue, CHN opened down and I lined up 4000 to buy and then chickened out and made my order 2000. I thought there maybe something fundamentally wrong as a reason for marking it down.

As it turned out my timing was good but my size was not. Then later on, CBA gave me another opportunity when it fell below $102.00.

Good result for not too much effort today. Plus $585.

Image: Marketech
Image: Marketech

Recap:
Bought 2,000 CHN @ 8.34
Sold 2,000 CHN @ 8.55 ($420.00 profit)
Bought 1,500 CBA @ 101.98
Sold 1,500 CBA @ 102.09 ($165.00 profit)

 

Friday January 14

Well today was the day that APT traded with a 6 in the front. Can you believe it? Amazing to think that once they were par with CBA.

Just shows that a quality dividend payer will always win in the end. Not touching APT now until they become Block on the 20th.

Got a fix on CBA and also MFG. The range on CBA was $102.65 to $100.50. WTF is all I can say and today was all about patience.

Low volume and inflation scares and a Friday and an Australian holiday mode all adding to the volatility.

Up $2635 gross and $2089 net after brokerage (CBA the main culprit). Bring on Monday!

Image: Marketech
Image: Marketech

Recap:
Bought 1,500 CBA @ 100.59
Bought 2,000 MFG @ 19.58
Sold 1,500 CBA @ 100.81 ($330.00 profit)
Sold 2,000 MFG @ 19.65 ($140.00 profit)

The post Confessions of a Day Trader: Pump up the volume, this one’s in the bank appeared first on Stockhead.


Author: Bottom Picker

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Precious Metals

Lundin Gold Sees BMO Reiterate $14 Price Target After Production Beat

On January 10th, Lundin Gold Inc. (TSX: LUG) announced its 2021 full-year production results. The company announced that it produced
The post Lundin Gold…

On January 10th, Lundin Gold Inc. (TSX: LUG) announced its 2021 full-year production results. The company announced that it produced 428,514 ounces of gold, beating their own high range of guidance, which was 420,000 ounces. The breakdown was 289,499 ounces of concentrate and 139,015 ounces of Doré. The company processed 1,415,634 tonnes this year with an average throughput of 4,121 tonnes per day and a recovery rate of 88.6%.

Lundin Gold currently has 9 analysts covering the stock with an average 12-month price target of C$13.69, or a 36% upside to the current stock price. Out of the 9 analysts, 8 have buy ratings and 1 analyst has a hold rating. The street high sits at C$15.50, or a 54% upside from Stifel-GMP. While the lowest 12-month price target is C$11.75.

In BMO Capital Markets’ note, they reiterated their C$14.00 12-month price target and Outperform rating on Lundin Gold, saying that the company had strong fourth-quarter production.

For the fourth quarter Lundin Gold produced 107,900 ounces, beating BMO’s 104,600 ounces, and they note that the companies throughput and recovery rates have been steadily increasing each quarter in 2021.

Though the full year beat was unexpected by many, BMO believes that this was expected due to the strong production at Fruta del Norte with their throughput increasing 4,200 tonnes per day. Additionally, they expect Lundin Gold to come in at their own guidance for all-in sustaining costs.

Lastly, BMO believes that Fruta del Norte has started to accumulate high-grade stockpiles, which has only started in the last quarter or two. They believe that the building “of modest stockpiles as a positive for the mining operation.”

Below you can see BMO’s updated fourth quarter, 2021, and 2022 estimates.


Information for this briefing was found via Sedar and Refinitiv. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

The post Lundin Gold Sees BMO Reiterate $14 Price Target After Production Beat appeared first on the deep dive.



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