While gold prices continue to saunter along the $1,800 price level, silver could potentially have the most upside through the rest of 2021 and beyond.
As the Federal Reserve looks to taper off its stimulus measures and raise rates in 2022 amid an improving economy, silver might be the better option versus its more expensive precious metal brethren. Some analysts certainly deem it undervalued by current market standards.
“Silver is the cheapest metal on earth. And I will continue to buy it because it doesn’t deserve the sub $30 an ounce price tag. We’re going to see flows of capital coming into the space. It’s a very thin market, and I would expect to see an explosive move to the upside,” said Tavi Costa, Crescat Capital portfolio manager, in a Kitco News report.
As inflation worries persist, gold is typically one of the go-to assets as terms like “stagflation” and “hyperinflation” start to enter the capital markets vernacular.
“It’s a mix of the ’40s and the ’70s. The wage spiral growth like we saw in the ’60s and ’70s, with financial repression from policymakers, where you have very low interest rates relative to our inflation. This is the most aggressive interest rate policy we’ve seen in history,” Costa said. “Inflation will become psychological to consumers at some point. The genie is out of the bottle in terms of that.”
Costa also noted in the report that extreme valuations amid the pandemic recovery could be driving stock prices beyond their true value.
“We are at all-time highs in terms of valuations across any other decade or time in history. I’m very concerned about that. I don’t know how you will be able to justify that if the cost of capital begins to rise due to inflation,” Costa said. “We’ll have a rotation out of overvalued names.”
A Silver ETF That’s Worth a Look
Exchange traded fund (ETF) investors looking for flexibility in holding silver can give the Sprott Physical Silver Trust (PSLV) a closer look. PSLV is a closed-end trust that holds unencumbered, fully-allocated London Good Delivery bars of silver bullion, stored in the custody of the Royal Canadian Mint.
Shareholders of PSLV also have the ability to redeem their shares for physical bullion anywhere in the world (subject to certain minimum conditions), and such redemptions do not dilute the trust’s exposure for remaining shareholders. The trust intends to invest primarily in long-term holdings of unencumbered, fully allocated, physical silver bullion and will not speculate with regards to short-term changes in silver prices.
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