$100 silver price: when and why we will see it – David Morgan

[Music] david morgan of the morganreport.com joins us today to talk about silver david gold has hit all-time highs this year why hasn't silver why haven't we seen 50 silver oh you're gonna put me right on the spot david well thank you for having me silver's been lagging gold it varies from time to time which metal leads actually at times silver can leave gold it's not always gold leaving silver but under the current conditions economically gold is basically a mainstream investment even though most people don't think of it that way central banks have been net buyers of gold since the 2011 for 2011. so for the last nine years they've been net buyers of gold recently in this year we've seen a huge input to the etfs in silver so silver's just hasn't had the safe haven status that gold enjoys until recently and so there's just been basically the bifurcation i called of silver where sometimes it's just oh it's just an industrial commodity and there's other times where it's never just a monetary metal but it has that component to it and we established that in march of this year david so it's playing catch-up as you well know we saw the all-time high for a gold silver ratio that was probably hit once again once in the 30s again in this year of about 125 ounces of silver to buy one ounce of gold now we're around 80 or slightly less which means silver has outperformed gold this year and expect that to continue and to repeat myself for the only reason that there's a large monetary demand in the silver now and will continue we're going to talk about your monetary uh policy outlook in just a bit but going back to 50 is silver when was the last time that happened and were the drivers of that run up then still in place today great question because it happened in 1980 and it was you know blamed on the hunt so i don't have time to go into it but it did spike to that level intraday it reestablished near that level didn't actually hit the 5-0 but very close to it or if you want to do in the futures it did and that was the end of april early may 2011. and will it do it again the answer is yes in fact i think we'll go through it the next time and what was in place in 2011 was that qe2 was announced david and so silver had gone from the 19-level channel formation that i traded uh futures contracts on and gave it to my paid paid subscribers that get to look over my shoulder and on that breakout we drifted all the way up to 26. so we had a seven dollar profit on a leveraged uh position which was pretty healthy and i was going to stop out at 26. i factually took profits and then qe2 was announced and i got right back in because the market knows more than i ever and then we wrote it from 26 and i called it within a couple days of the talks we went from 26 all the way up to 48. so that whole move was 19.48 on a leveraged position and i had people that left the report retired so i got that one right i wouldn't say get them all right but if you're going to get one right you want to get a big one right so what was in place was that people thought this inflation was going to come in the main street it said oh my goodness qe2 they're flooding us with paper inflation everywhere but that's not what happened and that's why silver went to that peak and came back down and really went nowhere except down for the ensuing several years because that money was static it only went to help the banking system it never hit main street only wall street and because of that fact and the subsequent qes operation twist and everything else they did to purchase one end of the bond curve to try to quote unquote help the economy only help the rich didn't go into the actual physical economy once that was realized then people backed off the silver because the inflation really wasn't there uh in in their you know in their domain main what i want to say is it didn't materialize the way people expected it to is silver as much of an inflation hedge as gold is you brought up inflation so what's your take on silver's role in mitigating inflation it's really not my take i did a lecture in vancouver at the cambridge house years ago probably the most boring lecture i've ever done but it was based on two books the golden constant and silver the restless medal by professor royce jastrom and he looked over centuries on both the metals on what do they do under inflation and deflation and the bottom line is gold is the best in a deflation silver has mixed results but inflation there's nothing better than silver market right so what's your outlook then on inflation over the next year and a half yeah well you said what are all the factors in place the answer is yes and this time it's different because this time the money is going into the into the main street you've got basically a ubi going on they don't call it that yet we all know what universal basic income is but you've got forbearance where you don't have to pay your mortgage or your rent payment you're getting these unemployment checks that are basically buffered up some people are making more unemployment as than they were when they were working and so basically seeing the money come into the people at this point in time and i think that will continue under different subsidies and different programs we're talking about this you know fed coin or this central bank digital currency where basically you're going to get a wallet you're going to get you know free money more or less and this has been tried over and over again in monetary history not quite as in a sophisticated way where it's on your phone and you you know just basically floats in the neurosphere through the through the web and you know magically lands in your account nonetheless they've tried printing wealth or mitigating the economic anomalies by just you know papering over it or printing their way out of it it doesn't work it won't work again this time but what will happen is it's going to be inflationary at all levels especially on main street and people will start to react to that a lot of economists have spoken to have agreed with you on that point they all think that inflation is coming well not all but a lot of people think that inflation is coming short and long term and as a result gold is going to go a lot higher i wonder when you make your silver forecast do you base that at all on your outlook on gold do you just apply a multiple of where gold's going to go to silver or are they completely independent studies no they do correlate silver is 85 correlated to the price of gold so you have to look at gold if you're going to analyze it properly but they do have different functions as i said gold's best for preserving wealth i mean if you're a gold holder and you have the right percentage in your portfolio you can rest better at night silver can beat you up both directions especially if you're short when it's rocketing up or vice versa so silver is an adjunct to gold it's sort of like buying the blue chips and then putting something into the nasdaq you're going to get a lot higher rate of return potentially but you're also going to have a lot more volatility so i look at the gold as kind of a baseline kind of a trendsetter and see what the rhetoric is and see how often the wall street types or the mainstream financial channels talk about gold and that's going to give me some insight into what the longer term picture is going to look like and silver will come up behind it so there's a lot to think about but you don't have to make it very complex but we do need to see certain levels in silver technically before i can get real excited so let's assume that gold is going to go a lot higher which according to a lot of analysts it will in the long term i've heard four thousand dollars in three years i've heard ten thousand dollars in five to ten years let's just take four thousand dollars in three years and that's about a 2x times multiple from where we are now uh wouldn't that couldn't that multiple be applied to silver as well we're going to see at least two times growth in the next three years yeah usually you'll see silver outperform and i expect that i mean the last time we had that run in silver in 2011 that you and i just spoke about david we'll look at uh probably something similar so at that time it got to a ratio of about 33 to one so if we use four thousand dollars gold and we use a ratio of like 40 to one you're still looking at you know 40 in the 4 000 that says 100 silver is that out of the question i don't think so i actually forecast that price back in 2003 when silver is under five dollars so i think we'll see that i'm not saying next year but we'll see that you and you said what two years out or something 4 000 or 3 whatever it is i'm just doing the math in my head to tell you that's what what i expect it to do okay 40 to 1 gold to silver ratio is what you just brought up that's uh you're right that's nearly half of where we are today uh we're sitting right under 80. so what should be the fair gold to silver ratio in your opinion if it's a industrial commodity with some monetary value which is where we're at now it would be probably in the 30 to 1 ratio if it were treated like gold and i did some lectures on that as you know what if gold what if silver was treated like gold it was with its best performance is money if that were the case then a 16-1 ratio isn't out of the question or even a 10-1 ratio which would match pretty close to the natural ratio comes out of the ground so it just depends mostly on what the perception is as you said there is going to be inflation in a lot of necessary goods food and other areas but there's going to be deflation in like a lot of leveraged positions i mean you're going to see like some commercial real estate come down you're going to see some general real estate come down you're going to see a lot of this over leveraged situations and especially the bond market that's where i'm the most concerned so once the bond market starts to react to the basic overall economic positions that everyone's holding meaning that the united states debt is sancho synced there's nothing safer once it's realized it's really not safe and interest rates are really a reflection of not only return but also risk so right now if you're getting basically a zero percent return it's telling you the currency is worthless i mean if you have a negative interest rate in the future it's telling you the currency is worthless but no one is bold enough to come onto the mainstream financial press and make those statements but if it's worth zero in the future uh then what's it worth now and of course this is something that you know sounds preposterous that i'm not saying you know burn your dollars on your front lawn what i'm trying to imply is what the major trend is and the market hasn't recognized it yet but it's starting to gold is giving subtle clues silver's giving subtle clues the asset classes are giving subtle clues and the stock market in my view is on thin ice meaning that it's just a few handful of stocks that are overbought that tend to bring the industrial averages or the s p averages up but the on balance volume what the overall total stock market picture looks like is fairly bleak i've read some research reports that indicated that silver has not always performed well historically during recessions and i think that what the report implied is that the industrial component has kicked in and if industrial demand is down silver prices would also follow first of all do you agree with this analysis in a second if you do shouldn't you wait until after this current recession is over before you invest in silver well i agree with the first part of the statement i mean that's pretty much a fact but no i wouldn't wait because what's going to happen is the monetary aspect is going to kick in which i mentioned earlier that we've had more investment demand in silver this year than we've had in the last 30 years on a percentage basis we've had so much investment demanding silver this year that's pretty much matched industrial demand so industrial demand accounts for about 50 percent of the silver market has for the last several years and investment demand is usually only 10 percent of the silver uh demand this year the industrial demand is down about 10 percent we guess we don't know until you know the numbers are tallied but let's say it's off to uh 45 well about half of silver's demand this year has been monetary demand and we're just getting warmed up because as we've discussed i think next year we're going to see more pressure on currency inflation or destruction devaluation more printing more basically destroying the currency the currency crisis that we're already in this reset that's going on and there'll be a lot of investors that will be waking up and seeking an asset to protect them as we discussed between uh earlier with professor jastrom that the best place to be in those conditions are going to be in silver for a high inflation rate so i think that uh yeah you could have a recession but the monetary man will definitely overwhelm it facts are on my side so far because that's been the case this year there's no disputing that okay that was my next question excellent point so let's assume for the sake of argument that we're going to have a continuous recession maybe things will be even worse demand for industrial metals would be even lower than it is now let's just make that assumption but at the same time we're going to get a lot of monetary stimulus in that case what would be a stronger force on silver the upwards monetary stimulus from money printing or the downwards force of a recession and to drag down on industrial demand what a great question what will happen is if i'm right and the monetary or investment demand continues as strong as it was this year next year even though industrial demand is off and measurably off it will put a squeeze on the remaining physical supply which means that these industries even though they're not producing as many iphones or laptops or dvd players or heaters on the back element of your window or the ev cars that use a lot more silver than a conventional automobile even though the production rate is down they still absolutely must have silver it's essential it's critical there's no substitute so what will happen is if the investors dry up all the physical silver the companies that are left to produce will have to buy it or they're out of business so that'll be a compounding effect that even in a recession they will pay anything if you've got two dollars worth of silver and a thousand dollar iphone if silver goes up 10 times it only cost you 20 bucks of worth of silver to produce a thousand dollar iphone they could care less what the price is but they have to have it so when you get that added pressure into the silver market under those conditions you're going to really see what i call double parabolic you're going to see a move pretty much straight up at some point i'm not saying next year it'll probably be 2022 or 2023 but once that kicks in and all of a sudden the physical supply is dried up to the point where the industrial users realize uh oh and this already happened david i think we recall off record we talked briefly one time about the palladium market and that's what happened when ford motor company switched from platinum to palladium in their catalytic converters they didn't know how tight the how small the market was they phoned up their logistics department says hey give us this much palladium it took the price from the hundreds of dollars an ounce to eleven hundred dollars an ounce so that's the type of thing that could happen in the silver market right well is there a risk of uh of of a complete drop off of industrial demand for silver in the long term look at what happened to uh photography post 80s when you know we had cameras that used to actually take film it required silver and did the advent of digital cameras kind of just kill that off completely do you see any such risks today i don't see them although graphene is something to consider but i have taken the big picture to heart because my predecessor was jerome smith and he made the big mistake of not looking ahead and seeing a technological change in the mining industry he said 200 silver by 1995 and if there wasn't this big technological shift in mining he might have been proven correct so i've always held that to heart that there could be something out there that i don't see that could cause such a shift in the market that i've proven wrong so yeah basis today and all that i know that's my projection if there's something that comes along like draft graphene i said it's essential it's a must you have to have silver there's no substitute well if there is a substitute then i have to check my premises and say hey david please put me back on for an interview i want to let everybody know that graphene is taking over the silver market and this you know the industrial demands gone to zero i don't see that happening but i am very cognizant of it and again i have to commend you excellent question you're really thinking deeply on this subject and not that many do so thank you well thank you let's take a look at the uh supply and demand balance here the silver institute is forecasting uh still a net surplus this year but down from last year so they're forecasting 14.7 million ounces of surplus versus 31.3 in 2019 so you know supply is still outweighing demand but less so why do you think there's less to less supply this year well i think we've discussed that off there i mean there's less supply because the mine closures so we know that uh that's the main reason and then as far as the surplus is concerned it depends how you account for it i mean it's really tough i mean there's another study by cpm group and i get them both when you pay for when you get for free and i pour into them pretty hard and usually have my own analysis but that's basically the best record that we we have and i think most of the numbers are pretty accurate no one knows to the ounce how much you might know what a mind produces to it through the ounce but you don't really know what the hedge books are doing and you know there's so many other factors but i think generally speaking you know supply and demand meet every year and if you go from 1990 to 2006 there was a deficit in silver but supply has to meet demand and that took the stockpile of above ground silver from 2 billion ounces down to 500 million over 15 years since that time we've been seeing the above ground stockpile of silver increase but most of it's held by long-term investors and as i said earlier the industrial side doesn't stockpile any silver it's just in time inventory but if they get scared because the supply gets you know taken up by the investment side they're going to have to go in the market they'll probably buy more than just just in time inventory they'll get concerned that they can't get it and they'll bid up the price even higher as i mentioned earlier okay uh finally let's take a look at short-term impacts on silver now uh the election's coming up that's obviously the big news driving the markets today do you think the election will have any impact on silver yeah somewhat i think if the democrats get in then you might see an acceleration in the price that's somewhat greater but really from the monetary aspect it matters little who's in office there's so many structural problems within the basic economy that regardless of monetary policy it's been uh it's been corrupted for so long in other words you know the idea of balancing the budget was passed in the law and in the united states and every year the congress critters get together and they vote in a new debt limit so what good is this law it's worthless and so whether we print you know 3 trillion more or six trillion more there's a point of no return and i think we've already reached that that's why you're starting to see gold and silver signal what's ahead and again it looks like currency destruction or at least the currency crisis doesn't mean the dollar's going to zero it's not the central banks are going to have the central bank digital currency they'll mitigate the problem as much as they can the reset will have something to do with how money is is transacted in the future you may even see a push toward uh zero cash and everything that's basically in the digital form perfect david morgan thank you so much for coming on the show today and uh giving us your insights i appreciate it it's always a pleasure thank you that was david morgan of the morganreport.com i'm david lynn stay tuned for more [Music] you

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Keywords: gold, silver, finance, news, investing, investing news, finance news, financial news, economy, precious metals, gold price, silver price, gold price today, david morgan silver, silver price forecast, gold price forecast, silver trading, gold trading, silver coins, gold coins, silver stacking, gold stacking, david lin kitco, gold silver ratio, silver investing, gold investing, monetary policy, jerome powell, federal reserve, industrial demand silver, recession

Id: CvvHKpLVLf4

Length: 21min 47sec (1307 seconds)

Published: Mon Oct 26 2020