History Is Pointing To These Prices for Gold & Silver

Key Concepts

Gold and Silver Outperformance: Precious metals are currently outperforming other major assets, including stocks and Bitcoin, despite new highs in those markets.
Monetary Revolution: The current market transformation is characterized not only by an AI revolution but also by a significant monetary revolution led by gold and silver.
Early Stage Bull Market: Both gold and silver are considered to be in the early stages of a bull market, with substantial room for growth.
Cup and Handle Pattern: Gold's breakout from a 13-year cup and handle pattern is a significant bullish signal, suggesting a prolonged upward trend.
Gold vs. 60/40 Portfolio: Gold's breakout against the traditional 60/40 portfolio (60% stocks, 40% bonds) indicates a shift of capital from conventional investments into precious metals.
Gold-to-Silver Ratio: A high gold-to-silver ratio (currently around 80) historically suggests that silver has significant upside potential to reach much lower ratios (around 15-16).
Mining Stock Volatility: Mining stocks are highly volatile and prone to significant drawdowns (60-65% or more) even within a bull market.
Prudent Allocation to Mining Stocks: Allocation to mining stocks should be based on an individual's knowledge and understanding of the sector, rather than solely on external recommendations.
Trimming Mining Stocks: It is advisable to trim mining stock positions before earnings announcements, as markets discount future performance.
Physical Silver Accumulation: Physical silver should be viewed as a long-term holding for accumulation, not for trimming.
Silver Price Targets: Potential upside targets for silver are discussed, with $100 being a realistic possibility, and even higher targets ($2,000-$2,500) if gold reaches significantly higher levels.
Mining Stock Promotion vs. Fundamentals: Caution is advised regarding heavily promoted exploration companies, with a preference for producers and developers with proven production or significant discoveries.
Education is Key: Thorough education on individual companies and the mining sector is crucial for success and risk management.

Gold and Silver's Dominance in a Transforming Market

The video highlights that gold and silver are currently outperforming other major assets, experiencing gains of over 3% and 4% respectively in the past week. Notably, despite new highs in major stock market indexes and Bitcoin, gold and silver maintained a significant 55% share of the top 10 asset list. This dominance has even slightly increased, indicating that these precious metals are attracting as much, if not more, capital than AI and related stocks. This suggests a "monetary revolution" is occurring alongside the widely discussed AI revolution.

Early Stages of the Gold and Silver Bull Market

Both the host and guest, Jordan from The Daily Gold, agree that the current bull market for gold and silver is still in its early stages, though their specific timeframes differ.

Host's Perspective: The host places the current market between 2003 and 2006.
Jordan's Perspective: Jordan compares the current bull market to the late 1960s and 1970s.

Jordan's Key Indicators for an Early Bull Market:

Gold's Cup and Handle Breakout: Gold broke out of a "super bullish 13-year cup and handle pattern" in March 2024. Historically, such breakouts in major markets (like the S&P 500 in 2013 or the Dow in 1982) have led to multi-decade bull runs. While gold's parabolic moves signal an end, the fact that it's only a year removed from this breakout suggests significant upside remains.
Gold vs. 60/40 Portfolio Breakout: Gold against the 60/40 portfolio (a conventional investment strategy of 60% stocks and 40% bonds) broke out of a 10-year base in March 2024. This breakout was driven by gold's breakout against the stock market (60% of the 60/40 portfolio) from a 4-year base. This signals a shift of money from conventional investments into gold. Historical precedents, like the 1971-1972 breakout of gold against the 60/40 portfolio, led to eight-year bull markets.
Low ETF Asset Allocation: Gold ETFs currently represent about 2% of total assets in ETFs compared to all other assets. This is significantly lower than the secular peak in 2011, which was around 8%.
Gold vs. Monetary Base: Historically, gold has peaked at over 100% of the monetary base (calculated as the value of Fort Knox gold divided by the monetary base). To reach 100% backing today, gold would need to be around $22,000. Currently, gold is just below $4,000.
Commodity Bull Markets and Stock Market Cycles: Secular bull markets in hard assets, including gold and silver, typically begin after the end of a secular bull market in US stocks.
- In the 1960s/70s, the US stock market's secular bull ended in 1968, and hard assets continued their bull run for another 11+ years.
- In the 2000s, the US stock market's secular bull ended in 2000, and commodities' secular bull ended in 2011 (11 years later).
- The current US stock market bull market has not yet ended. If it ends in, say, 2027, a secular bull in hard assets could extend into the late 2030s.
Long-Term Inflationary Cycles: Commodity prices and inflation tend to peak every 30 years, with major peaks every 60 years. Past major peaks include the Civil War era, 1920, 1980, 1951, and 2011. A 30-year cycle points to a peak around 2040, aligning with a potential 60-year inflationary peak. This suggests the current inflationary cycle could be prolonged. The early phase of this cycle is characterized by rising inflation impacting the economy, corporations, and profit margins, which has not yet fully materialized.

Jordan concludes that the overwhelming evidence, from fundamental and technical analysis to ratio charts, strongly supports the view that the precious metals bull market is still in its very early stages.

The 1970s Analogy and Potential Differences

The discussion touches upon the 1970s bull market, which peaked in 1980 followed by a significant correction. The question arises whether this time will be different, especially with gold potentially regaining its role as a foundation of the global monetary system.

Gold's Future: While acknowledging that a major peak and mania could lead to an 80% decline, Jordan suggests that if gold reaches very high levels (e.g., $30,000, $50,000, or even $20,000-$22,000 for monetary base backing), a subsequent correction might be less severe than in the past, perhaps around 30% rather than 70%. He believes gold will likely experience a correction and then stabilize, potentially influenced by a return to a gold standard.
Silver's Uniqueness: Silver is considered a different animal due to its dual nature as both a monetary and industrial metal. Jordan defers to others for definitive predictions on silver's post-peak behavior but highlights that historical secular peaks in precious metals saw the gold-silver ratio bottom around 15-16. With the current ratio around 80, this implies significant upside for silver. If gold reaches $30,000-$50,000, silver could potentially reach $2,000-$2,500. Even with a 50% correction, silver would remain at historically high levels.
Monetary System Reintroduction: Jordan believes gold will likely be reintroduced into the monetary system, but silver, due to its industrial component, may not be. He suggests silver's post-peak behavior might be similar to 1980 but potentially with a less severe crash.

The Role of Mining Stocks and Prudent Allocation

Jordan is recognized as an expert in mining stocks. The conversation addresses the potential for mining stocks in this cycle and how investors should approach them.

Historical Performance: Gold stocks experienced an incredible run from 1960 to 1980, but this period included at least two instances of 60-65% declines. Jordan warns that a similar drawdown is likely in the current secular bull market, though it may not be immediate.
Risk and Reward: While significant gains are expected, most investors may not retain them due to the inherent volatility. Rick Rule's observation that every 10-bagger has had a 50% decline is cited.
Education is Paramount: Jordan strongly emphasizes that allocation to mining stocks should be directly tied to an individual's knowledge of the sector. He advises against investing heavily without understanding the companies, their history, and the industry.
Recommended Allocation: Jordan does not provide specific percentage allocations but suggests that a mainstream person might have historically recommended 5-10% in gold. He stresses that the optimal allocation depends on an individual's education and comfort level with the sector.
Trimming Before Earnings: Jordan advises trimming mining stock positions before third-quarter earnings announcements. He explains that markets discount future performance, and the positive earnings are likely already priced in. While individual companies may have unique situations, a general approach of trimming before earnings is recommended.
Physical vs. Mining Stocks: It's crucial to distinguish between physical metals and mining stocks. Physical silver accumulation should be a "buy and hold" strategy, with no trimming. Trimming applies to mining stocks, options, and other speculative trades.
Silver Price Targets and Miner Performance:
- Silver Price: After breaking through $50, Jordan anticipates silver could reach $100 within 12-18 months. A measured move from silver's bottom ($3-$4) to its peak ($50) suggests a target of $96, close to $100.
- Silver Miners: Silver miners are expected to perform exceptionally well, with many having the potential to double or triple. However, the performance will vary significantly between companies.
Smart Money in Mining: Jordan notes that "smart money" often invests in specific types of mining companies. He discusses how larger, higher-quality silver companies might see money flow into them before silver breaks $50, acting as a leading indicator.
Exploration vs. Producers: Jordan expresses caution regarding heavily advertised exploration companies, often referred to as "moose pasture" companies. He advocates for focusing on producers or developers that are close to building mines and growing production, as these offer more predictable reratings. Exploration stocks are considered highly speculative and akin to gambling.
Marketing and Promotion: Investors should approach marketing and promotional materials for mining stocks with extreme skepticism, defaulting to the assumption that it's "BS." While some promotion is legitimate, thorough due diligence on the company and its projects is essential.
Common Sense and Insider Selling: If a stock has already experienced a significant run-up and looks like a "rhino horn," it's a sign that insiders and newsletters might be selling. This is not a buy signal, but rather a hold or trim opportunity.
Focus on Fundamentals: Jordan emphasizes understanding the project's quality, plan, and potential size. He prefers companies that are growing production or have made significant discoveries.

Parting Advice for New Investors

For those just starting in precious metals and mining stocks, Jordan reiterates the importance of education.

Prioritize Company Analysis: Spend more time educating yourself on specific companies rather than solely consuming macro "doom porn" on YouTube.
Develop a Plan: Create a personal investment plan that includes when to buy, hold, and trim, considering individual tax situations.
Understand Volatility: Recognize that mining stocks are highly volatile, and significant drawdowns are a normal part of the cycle.
Physical for Insurance, Stocks for Investment: Use physical precious metals for financial insurance and mining stocks for investment and speculation.
Take Profits: Understand that bull markets are not permanent, and taking profits is essential.

Jordan and the host encourage viewers to subscribe to both their channels for ongoing insights into when to trim positions and secure profits.