Silver Has Joined The Gold Bull Market And Is Helping To Load Up The Gold And Silver Stocks With Rocket Fuel
We are at an exciting inflection point for the gold bull market. Until recently, gold was in a stealth bull market that wasn’t on the radar screen of generalist investors. But, lately it has gotten less stealthy as silver and the gold stocks have entered the gold bull market party.
It is somewhat surprising that it took so long for the silver and gold stocks to finally confirm the gold bull market is underway. Bull markets in gold don’t really get started until silver and the gold stocks join in. Which hasn’t really happened until recently.
Gold had its important breakout above $2000 in late 2023 and early 2024. Since then it has gone from the lower left of the chart to the upper right. Making a series of record highs along the way.
In early 2024, silver was around $22 and has been improving since, but still remained well below its record highs. The recent breakout above $35 reminds me a lot of when gold broke out above $2000 and I think it is now on its way over $40 this year and very well could reach its record highs this year or early in 2026.
After that, I expect to see a series of record highs as the fundamentals are very powerful and silver has been a coiled spring for a long time. A lot of silver bulls talk about the gold-to-silver ratio which to me is pretty meaningless and is not why I think silver will move to record highs.
In addition to silver being a monetary metal, nothing like gold that is the monetary metal of choice for central bankers, it also has impressive demand coming from solar panels. So much so that it has been in a significant deficit when considering demand and annual mine production for the past four years.
Some of that demand has been fed by recycling of silver. But that is a limited source. When considering the supply from mining and recycling, it won’t be able to keep up with the demand now, or in the near-term and long-term for solar panels.
As much as I think the fiat currency and debt system is broken and very bullish for gold, I see a similar problem when it comes to sources of energy. Even before electrical vehicles (EVs) came along, sources of energy were strained and the world needed more energy.
EVs have started to put added strain on sources of energy as they are gaining more global adoption. Cloud computing and other computing needs a lot of energy as does crypto currencies. Put AI into the mix and the energy problem is even more severe.
Sure nuclear energy can make a difference, but that is extremely expensive and takes a long time to permit and build. It certainly isn’t a short term fix, when the world absolutely needs a short term fix.
Meanwhile, the cost of solar panels are dropping dramatically and they are the only serious short-term fix to the growing energy problem.
People love technological advancement, but they don’t really see the problem that it all consumes a rapidly growing amount of energy to make it all happen. Plenty of the AI folks get it, which is why they want to turn on mothballed nuclear reactors, build new ones and innovate with small modularized reactors.
This will undoubtedly cause a nuclear renaissance, but again that takes a lot of money and time. But time is of the essence because the technological dreams just keep growing exponentially. The way they are growing, important sources of energy will as well.
The net result is that while waiting for the nuclear renaissance, solar energy will also keep growing rapidly. In fact, at the rate of technological change, the world is going to need every major source of energy to be humming perfectly.
When I think of solar panels and solar energy it reminds me a lot of Moore’s Law. Which predicted that the number of transistors on a circuit board would double every couple of years. It was a prescient observation made decades ago that for the most part has proven to be spot on. That growth is what has fueled the technological advancement that we have seen over the past several decades.
But now, technological advancement is hitting a wall when it comes to energy and the result will be a boom for nuclear and solar energy. With the rate that the cost of solar panels are dropping and that big energy source in the sky, solar panel demand will grow exponentially. In a fashion similar to Moore’s Law. Which will take a lot of silver to make happen.
These factors are why I think the gold-to-silver ratio is pretty meaningless and certainly not the most compelling reason to be bullish on silver. Another issue that silver has to close the multiple in the gold-to-silver ratio is that gold has a big headstart and due to the Death Spiral of Debt and broken fiat currency system, will drive it much higher.
I don’t really care which goes up at a higher percentage because the trends are extremely bullish for both.
Those trends are even more bullish for the gold stocks and silver stocks. The gold miners, low-cost and high-cost miners are making money hand over fist. Which means that as gold goes higher, they will continue growing their free cash flow at a rate that few other industries can compare to.
It won’t be long before the silver miners can say the same thing, they can’t yet, but that is just around the corner as silver is now significantly above the average cost of mining silver. They too are going to be making money hand over fist, especially as silver makes a run at its record highs.
Since gold broke out above $2000, the gold stocks hadn’t really joined the gold bull market, especially when you look at the junior gold miners, gold mine developers with high-quality projects and gold explorers with important discoveries.
Lately, that has been changing as well. In the past couple of years, on red days for gold, almost every gold stock was down. Recently, I have looked at my gold stock screen with a smile on red days for gold as there were several in the green. That hasn’t happened until very recently and suggests that generalist investors are starting to get into gold stocks.
They don’t have the same scar tissue as long-term gold bulls, so their enthusiasm doesn’t get tested the same way on red days for gold.
Plus, institutions that have exposure to gold and gold stocks are leaving their peers in the golden dust. I wouldn’t want to be a money manager getting calls from their biggest clients asking what their exposure is to gold and gold stocks. If they say none or very little, they will lose the clients very rapidly.
The recent action in gold is telling me that retail and institutional generalists are starting to like gold and gold stocks a lot. I can also see a similar trend as silver has made an important breakout above $35 per ounce.
That price is very crucial as ever since the Hunt brothers tried to corner the silver market and the metals bull market from 2001 to 2011, silver has spent very little time above $35. When it busts through $40 it will have clear sailing beyond $50 and send it toward triple digits.
There has never been a better time to be a gold and silver bull and really the game is just getting started. Silver and the gold stocks are finally stepping up the plate.
The out of the park homeruns will come from the gold and silver miners, developers with high-quality projects and explorers with important discoveries. Those kinds of stocks have been left for dead for a long time, especially down the food chain.
Which means that generalist investors don’t have a big menu to choose from which will put rocket fuel in their engines.
All the best,
Allan Barry Laboucan
