Date: 11/09/2022
Author: Mr. X
If you’ve been a subscriber to Rogue Investing Daily since the very beginning, you’ve heard my refrain over and over and over again.
Prioritize silver over gold.
For example, on August 24 I said to prioritize silver over gold. At the time, as I noted, the price was $19.12 an ounce.
As of this writing, it’s over $21.20 an ounce.
There are two reasons why I like silver over gold.
First, silver increasingly has industrial uses, particularly when it comes to solar power. It’s used in LEDs, semiconductors, touch screens, and many of the components that are practically ubiquitous today. Gold has some industrial uses too – but silver far outstrips them.
Secondly, silver has been separated from the modern financial system since 1964. The United States hasn’t been minting 90% silver coins since that year – which is why there is a demand for older coins. If you believe the gold price is somewhat manipulated or controlled, silver is a more “objective” store of value outside the financial system.
Cryptocurrency was supposed to be the major check on inflation. However, cryptocurrency has fallen over the last few days. Increased regulation from the SEC, a major Department of Justice coup in reclaiming billions in bitcoin from a fraudster, and the general collapse in the speculative markets could all be part of this. Doubts about whether tether coins actually have enough backing also linger in the background here. Without tether coins, you can’t really have a cryptocurrency trading market, and there have always been doubts about whether sufficient backing really exists. Dr. Kent Moors was warning about this all the way back in July 2021.
Binance is buying FTX, which is especially ironic given the social media feud between the two cryptocurrency exchanges in recent months. FTX falling had some people comparing it to the Lehman Brothers. Now, we will have one absolutely dominant crypto exchange. With that, a lot of the flexibility and decentralization that has been core to the crypto project has been lost.
Bluntly, while bitcoin and Ethereum have their uses, they are not delivering as a store of value. Bitcoin is worth something, and given hyperinflation in countries like Turkey, it has a real role. I would consider buying a little each week and forgetting about it as a hedge. Ethereum is in different situation because it’s creating an entirely new marketplace for decentralized apps. Yet ETH is used for making these apps work – it’s not really intended to be a store of value. It may simply increase in value because, long term, the Ethereum space will grow more important.
The dollar remains the store of value for the entire world. Yet it is not unchallenged. Russia and China are both deliberately trying to create an alternative. BRICS (known by its core five members of Brazil, Russia, India, China, and South Africa), the loose economic bloc meant as a counter to the G-7 is growing, with several other nations now applying for membership. Even countries that are core to American economic hegemony, notably Japan, are slowing their purchases of Treasury holdings. Sanctions against Russia have hurt Moscow’s economy, but they’ve also hurt Europe. Russia’s trade with China, Turkey (a NATO member), and especially India are all up, with the latter having grown more than 300% after the invasion of Ukraine.
The dollar will remain king for some time and the “multipolar” world order Vladimir Putin (and the suddenly very relevant philosopher Alexander Dugin) keep talking about is but a dream. That said, you can see the cracks forming. You can see the exact way American economic hegemony will fall apart. It’s just a question of when. That’s not particularly useful for investors because when could be a very long time – potentially decades.
Still, at the margins, things are moving. Once again, nations and blocs are competing over access to raw materials – oil, lumber, copper, and rare earth elements. Precious metals are also filling a gap as nations trying to subvert the world order are turning to it as a basis for new trade relationships. China’s gold imports are particularly interesting – hitting a four-year high in August.
Some technical factors suggest that silver has more momentum behind it. Silver is testing the 200-day Exponential Moving Average while gold is not. In simpler terms – while Treasury yields are declining and the dollar is wobbling, silver is increasing. If it can break the $22 resistance level, it may get a true rally.
There’s also a deeper reason why some people prefer silver. Some argue that silver’s price is artificially low considering the amount that is actually mined in the world. Similar to the “meme stocks” of GameStop [GME] and AMC that rewarded investors in 2020, the theory is that eventually the Fed/the World Economic Forum/the “elites” won’t be able to suppress the price forever. The result will be a short squeeze and silver will surge. Silver Ends The Fed, as some say.
I don’t buy that happening anytime in the short-term. More importantly, as we’ve seen with meme stocks, those who are telling you to buy and hold something as a moral commandment often have a personal stake in it. After all, the massive short-squeeze on AMC never happened – the company simply created new APE shares to take advantage of new capital. AMC shares have plummeted this year, they haven’t gone to the wild prices many were predicting. Markets can’t be “wrong” or “right” in the way they respond to prices – the market is just the collective of all trading action on a given product. You can’t simply expect that precious metals will increase because you think it’s moral.
That said, the theory isn’t entirely without foundation. The price likely is being suppressed. The error is that the System will lose its ability to do this anytime soon.
Still, there are reasons to believe precious metals are about to make a run. The unexpectedly strong Democratic performance in the recent elections suggest that federal spending will continue unabated. We will get more data on inflation on Thursday, and there is a possibility that we may find the Fed simply does not have the ability to contain inflation, regardless of more interest rate hikes. The deliberate attempt by other nations to move towards a different international currency will also accelerate as long as Russia can keep its armies in the field.
I’ve been saying it from the beginning and I’ll keep saying it. Hedge with silver, preferably with physical ownership. Other nations are quietly moving to accumulate more precious metals, the price is starting to show real action, and we’re moving towards a world where raw materials are important, not imaginary goods in a “metaverse.” As crypto falters, silver becomes the best way for Main Street investors to hedge against a potential crisis for the dollar. While I don’t think that crisis will happen soon, it’s criminal not to at least be prepared for it – especially when men like Vladimir Putin are working as hard as possible to make it come about.
And it looks like silver’s next run is already underway.
Mr. X is an investment analyst working in the Washington DC area who specializes in the intersection of business and public policy. After fifteen years working in politics, he writes on a classified basis for RogueInvesting.com to bring you news on what those with power are debating, planning, and doing.
