This Is What Happens Next for Silver | Peter Krauth

This is The Real Story with Michelle McCory. We are heading into what can be a decisive moment not just for geopolitics but for markets, commodities and the global financial system. In just hours, a deadline hits. President Trump has given Iran until 8 p.m. Eastern time on Tuesday to reopen the Strait of Ramos or face what he calls the destruction of key infrastructure, bridges and power plants. By midnight on Tuesday, this conflict could be largely resolved or it could escalate dramatically. Since the war started, gold is down 12% and silver is down around 22%. So what does the next phase of this conflict mean for gold and silver? And what can we expect from the metals beyond the immediate aftermath? Something we now is someone who has spent decades focused specifically on silver. Peter Kraut is the author of the best selling book, The Great Silver Bull and editor of the Silver Focused Investment newsletter, Silver Stock Investor and Silver Advisor. He spent more than 20 years researching, writing about and investing in silver and the broader resource sector. Peter is also a frequent contributor to financial media, speaker at Global Investment Conferences and widely recognized for his expertise in precious metals markets. Peter, great to have you on the show. Thanks for joining us. It's great to be here, Michelle. Thank you. All right, Peter, let's get straight into it because whether we like it or not, the Iran conflict is dominating global markets. That includes gold and silver and we're approaching a critical inflection point. The president setting 8 p.m. Tuesday for a ceasefire or meaningful progress, warning of major strikes on Iran's infrastructure, including bridges and power plants if the straight of Hamuz is not reopened or if there isn't some significant progress being made there. What happens to silver and gold if Trump attacks Iran and goes ahead with this threat to decimate Iran's power plants and bridges? Let's begin with that. What would happen? Should that scenario play out? Sometimes markets don't do what we really expect them to do. They have a tendency of surprising us, but I think we would see what we saw when this issue really started to escalate. We would initially at least see a strong positive reaction, a very short term, but a strong positive reaction from both gold and silver. I think we would see that again this time. It may not last more than a couple of days, but them being safe havens, I think we would see that. Then eventually, after perhaps a few days, we'd see what we saw this time around when the attacks started. We would start to see both of those metals come back off as people focus on yet perhaps higher energy costs, higher dollar, and you'd have lots of sovereigns probably selling off their gold as we saw recently for its liquidity to go out and buy US dollars in return and use that to buy now more expensive energy. I would expect what we saw happen play out probably once again in a similar fashion. So you expect a spike, but a short term spike. Should this Iran conflict escalate with attacks on what is called vital infrastructure in Iran? Exactly. Exactly. All right. What would happen if we do get some kind of ceasefire, some kind of potential extension of this escalation of the attack? What would happen in that scenario? Well, my instinct tells me that we would see both metals probably back off. If things calm down significantly and let's say relatively suddenly, that reduces the interest in a safe haven, so that is what I would expect they would back off. I think they're in a correction pattern anyway since the end of January when they both ran up tremendously. I think that would be a continuation of it, but that would be my expectation is initially it probably back off significantly, form some sort of a bottom and then continue moving sideways until they're done correcting for this cycle. We can talk about where I think it will go after that, but I think that we're going to start to see in different ways the market more broadly price inflation into the picture and all of that will be very bullish for the precious metals in this sort of medium term. Right. And I do, of course, want to zoom out and get you a bigger picture look beyond the immediate consequences. But I do want to get your thoughts on what we've seen on gold in the gold market. And that has been major political shock, oil volatility, rising inflation concerns, and gold has not broken out. Yes, there was an initial pop, but as we discussed it's down since the war began, people are saying that gold has failed as a safe haven because it hasn't rallied. But you've said that it's acted as it's supposed to by providing guaranteed liquidity for those in need during a crisis. So talk us through that, how is gold actually a safe haven, even though it sold off during the conflict? Well, I think people are, you know, who think that it didn't do what it's supposed to do, which they think is for a spike and run up and stay higher, is because they don't really understand it and how, why it's a safe haven. So it, in fact, did what it is supposed to do, which is provide liquidity. So, you know, any of these larger central banks, any of these sovereigns that have been stockpiling gold, as a safe haven, have turned around and have sold it off, have been buying US dollars to now buy energy from other sources that are not coming from the Middle East directly, for example, pay higher prices for it. You've basically gotten liquidity where they've been able to get it and get it quickly. And so that's the definition of a safe haven, that it's liquid when you need it. It has no counterparty risk and it's performed exceedingly well in this kind of environment. So people who think, well, it's disappointed, don't understand how it's supposed to work. You know, you think about that too, is that if in a market crash for stocks, for example, you may see gold and silver and gold and silver mining stocks back off significantly pretty, pretty early on, along with stocks. And in part, that's because they would have potentially run up with the broader market. And if broader stocks correct, people will get margin calls. They'll start selling initially the things that have run up. And oftentimes that's gold, that's silver and that's gold and silver mining stocks. So they get liquidity where they can get it as early as they can. And then they turn around and meet their margin calls and then move on from there. So in that kind of situation, though, and similar to the one that we're in now, when things kind of settle, the dust settles, that's when the broader market starts to realize. And the smart money starts to realize, these are safe havens. They have been oversold. And now that smart money that's been sitting on the sidelines, that's been sort of waiting for corrections and a better entry point starts buying and starts buying and buying and buying more. And then ultimately starts to gradually build it up, build up positions and starts to move and push up the prices of both of these assets. Look, it's really hard to determine the short term durations in the smart and I did put you on the spot there. But what we have seen though is with signs of the conflict resolving, that's when we've actually seen gold and pop a little bit and silver pop a little bit every time it sounds like things will actually resolve it. You're saying that if this escalation happens by 8 p.m. until midnight, it should all be over according to the president. At least the infrastructure should all be destroyed by then or mostly destroyed. You're saying that it would spike. Why would that be if that doesn't, if we're seeing an escalation in the conflict? So people are concerned because an escalation means you don't know how much infrastructure you're losing, you don't know how much that's going to potentially affect even more severely the access to energy. The price of energy given that suddenly it's become instantly even more scarce than prior. So I think that's the reason that you know people will flock to what is, they will want to save haven initially. It's essentially, you know, like if there's some kind of a food shortage or like we lit through COVID, people running out buying food, buying things like toilet paper and all sorts of things that we maybe didn't think would end up in a supply chain issue and having difficulty was supplies. So it's a safe haven. It remains liquid and I think that as I say the initial response would be that it would, they would both metals would pop and that would last a few days and then the dust starts to settle, people start to evaluate and calculate and reason and they would see that in fact, of course, at that point once again, energy would cost more. The supply would be dramatically restricted, even further restricted and so higher energy cost. I mean, you have to buy more US dollars at a higher exchange rate. You're going to start to probably sell off your metals once again and look to use the proceeds to go out and fund your purchases of energy. I mean, if you look at what happened in Turkey in the last couple of months, that's a great example. They have pretty large reserve of gold and they've sold 58 tons of gold just in the last couple of months to help meet imports of energy. You know, they're not a big energy producer. They have to buy a lot of it. So they've had no choice. They've had to liquidate in the sort of near medium term. Their liquid safe asset to go out and buy energy to continue running the country. Right. I mean, and there's also talk that people have been selling their gold in order to get Chinese yuan, which is what Iran is supposedly demanding for safe haven across the straight-off removes for certain select vessels. And I get that in conflict. We've seen the dollar rally. So that obviously impacts gold and silver prices and impacts inflation expectations, which impacts what the Fed could do and impacts interest rates. A lot of moving parts here in a story where every single tweet changes the nature of the markets of very challenging environment. So let's zoom out and let's focus specifically on silver here because that is your main field of expertise beyond the immediate market reaction of this conflict and beyond what happens in the next 24, 48 hours, if you will, well, beyond that. What do you see happening with the silver markets? What actually drives the markets in the next, say, six months? So I think that over the next couple of months. So let's say we look forward from here, the next couple of months. I do think that unless there's some sort of big unexpected event, assuming things either continue sideways with the war, even if they, or even if they resolve in near term and things sort of really kind of calm down, I do think that we're going to see gold and silver continue to move sideways, frankly. If you look at what happened over the last couple of years, it was pretty phenomenal, especially in the silver market, gold essentially doubled over the last couple of years and silver has essentially tripled over the last couple of years. I'm not talking at today's prices, but where they peaked at the end of January at $120. So that was pretty, pretty tremendous, quite the run up. And if you look just technically at the chart for the silver price, it was one of what we call a parabolic rise. It's not something that's typically sustainable. It was due to correct. I think all we needed at that point was to look for, we look back and look for a reason why that bubble popped. And eventually we got the big correction. Silver went from $120 to nearly $67 within a matter of a couple of days. So that does a lot to shake out the weekends. That corrections have to typically correct in a matter of degree or in price and over a certain amount of time so that you get the full sort of sustainable correction. And then you form a proper bottom so that things can, the weekends basically get shaken out and the strong hands keep holding and those that feel they may have missed but really understand the true fundamentals of the market will start participating, start buying and then build that base for a new rise in the market. So next couple of months, I think we could see more consolidation. I think after that in the second half of the year, I think we're going to start to see both metals regain bull market status and start rising once again. Not sure that we're going to see the highs that we saw earlier this year, but I do think we're going to see significantly higher prices before the year is out. All right. So it sounds like you're saying silver will be in a consolidation phase for the next couple of months, potentially even testing lower levels, but then medium term, we're going to get it to move higher. If that's the accurate characterization, explain what the drivers would be here. What is the next catalyst upwards for silver? So it's actually pretty interesting for silver because we've had sort of arguments on both sides. People are saying with silver now at say averaging $70 for example, or $75 that that's wreaking havoc to some degree on solar panel manufacturers. So that's sort of what I call the 800 pound gorilla in the in the silver industry because it consumes 20% of all of the silver supply every year, just solar panels. So and every solar panel the cost of it at about $30, $40 was somewhere around 10, 15% or so of the overall cost of the panel. You can imagine that at $60, $70 that starts to look like 20, 25%, maybe 30% of the overall cost of of a solar panel. So they get more expensive. The manufacturers are not going to be able to absorb those kinds of increased costs. And what they do is either increase the price of the solar panel or people start consuming them less to some degree. Or I think there's even a case potentially for solar panels to eventually get renewed subsidies by governments. I think we could certainly see that happen. And so there's that aspect of it. But the flip side of it is that as we see silver prices higher and how that could dent solar panel demand. There was a very interesting piece out of the CVC recently that interviewed the head of the largest electricity producer in the UK, Octopus Energy. And he was saying that in the last couple of months, they've seen a 50% increase in demand for solar panels because people are looking at the effects of this war in Iran. They see much higher oil prices. That feeds into heating oil, for example. So they're seeing their daily costs just to do heater homes and heater businesses go through the roof. So they're looking for alternatives. And even at higher prices, potentially, I'm not saying that the higher prices have fed through yet from higher silver in solar panels, but there's a good chance that that will. Nonetheless, people have decided to look for alternatives to oil and natural gas. And they've to some degree turned to solar panels because once you've made that capital investment, that just keeps generating power for the next 20 years. I was just looking at an interesting piece that was from Ember Research. And they were showing how you could generate, I think it's 1.5 terawatt hours of energy from a $100 million investment in solar panels, which would produce, produce power that same amount of power for 20 years, or you could spend $100 million on natural gas, and you'll get that amount of power one time. So you can make that capital, you can make that investment once and it draws out for 20 years or you can make it once and you're good for one year for that amount of energy. So frankly, even at higher costs for solar panels, they're easy to justify versus many of their alternatives. And I also think that, remember this, Michelle, you know, war is inflationary. We're blowing things up. We need to rebuild them afterwards. We're blowing up infrastructure, whether that's industrial or a civilian, we're blowing up the arms that we're using to destroy things. You know, that in itself just the cost to rebuild all of this is going to mean lots of money printing over the next several years, but at the time all of this stuff gets rebuilt. And then you've got the impact, I think a lot of people are missing, is how the reaction, the reaction of the consumers of a lot of this energy are going to look for alternatives. What happened during COVID? Supply chain breakdown. You know, it was the start of declobalization, right? And you had these regions where you had different actors saying, well, I'm not comfortable buying from so and so. I don't know if they're going to keep selling to me, but I can buy from these other nations or entities that I have, you know, more comfort buying from, I feel are more reliable. It may cost me more, but I can, you know, sign these long term energy contracts at a higher price. Yes, it's going to cost me more. Yes, it's going to be inflationary, but at least I feel more comfortable and it's more reliable. And I can use these, these prices I know I'm going to pay to plan better. So inevitably, yes, that makes things perhaps more stable to some degree, but, but these consumers are still going to end up paying more for that energy. So you have these kinds of things happening. You also have is if you look back to when Russia moved into Ukraine, the US froze Russian assets. So, you know, you had a lot of actors around the world. You had central banks. You had large sovereign funds, et cetera. Saying, you know, I don't want to, I don't want to be at risk like that. So what is my alternative? Do I want to own US turjories? or do I want to own physical gold and perhaps some physical silver? And that has no counterparty risk. You can bet that that's one of the things since then that some of the larger actors have been using. Iran, for example, I have little doubt has probably been using gold to buy whatever kinds of commodities or other energy and other sorts of things that they have to from other countries that perhaps are still willing to deal with them, but have issues with payments and so on. So that's one of the reasons we can look to the metals doing well again over the medium longer term inflationary costs of war. And then the return to, hey, I want to be, I want to build sustainable supply chains. And I also don't want to be affected by some kind of a large player globally in the financial system that could just certainly block these things and freeze assets and freeze access to assets. So I think all of this is going to feed through. We're going to see this, we're going to see the smart money be willing to return to the precious metals market pretty quickly. - All right, let's focus again specifically on silver here. So you're saying that this conflict only serves to emphasize silver's structural underlying fact is both from an industrial demand perspective as it'll create a need to rebuild, replenish potentially diversification from oil as an energy source and into solar as well as its use as a monetary asset because of inflation, debasement, evaluation and diversification from the dollar, if I'm understanding you correctly, that this war kind of emphasizes both of those two under pillars that have supported the silver species. - Yes, exactly. So, you know, silver is a hybrid metal, it's both industrial and it's an investment, I mean, monetary metal. And so both of those perhaps at different times to different degrees, but both of those aspects will have people and investors come back to it before long. We do know that if there's a risk of recession over underperforms gold through the middle part of a recession but it tends to outperform it prior and outperform it at on the exit phases of recession. So that wouldn't surprise me. That said, you know, you have to look not all that far back to the Biden era, for example. You know, if we look back what happened during the financial crisis and afterwards, there was all kinds of stimulus to get the economy going again. So, okay, recession is a risk, but if there's stimulus and governments are supportive of green energy and the energy transition, they're gonna be supportive of things like solar, for example. So if they're going to subsidize solar panels, then that's bullish for silver once again, even if we're looking at a potential recession scenario. And like I was saying earlier, you know, solar panels, again, as a source of green energy, if high silver prices feed into higher solar prices, solar panel prices, I could certainly see a scenario where governments are gonna step in as they have previously, perhaps for different reasons this time and to a different degree and say, well, hey, we want to continue this energy transition. Let's subsidize solar panels that I believe is totally within the realm of possibility. So let's focus on that a little bit because the argument could be made firstly that the ESG narrative has sort of fallen out of favor. Many would say that that's a positive. BlackRock has dropped it as an investment criteria or has downplayed it significantly from where it used to be a priority for how it would allocate funds. There's been a slight change of tune from Larry Finkelnet one. The Trump administration clearly not a fan of ESG. And why would solar be the beneficiary of diversification away from oil and not uranium, for example, or even coal is making somewhat of a comeback? But let's focus on uranium. Why would it not be where the demand for new energy goes rather than solar? Why is so convinced that solar picks up the slack of demand here? - So I've got, if I may, if I may share a chart, I've got some really interesting chart that will give us an idea of the comparison. So can you see this? Okay, so here we go. If you look at what happened over the past year or so, we've seen data centers have exploded in terms of, in terms of the degree to which we have them. We're producing and storing more data than we ever have, it's exponential rise. And many of them are turning to carbon-free energy for different reasons, not just to be green and not for ESG reasons, but because it's reliable, they can be completely off-grid. And this shows us that in the past year or so, carbon-free energy contracts by US tech giants have outpaced nuclear contracts by five to five to one. So seven and a half times versus 34 times for solar. The other argument is on the time frame, so nuclear takes 15 years to approve and build out. Solar takes a year and a half to approve and build out. And so remember, Michelle, if you think, for example, of a data center, if they have sufficient land, they could technically build a solar farm right next to the data center, be completely off-grid, be completely self-reliant. We're talking about a technology that is relatively low maintenance. And you don't have to go out and buy this from utility. You basically go out and build your farm, as I say, low maintenance. Once you have that sunk cost, that capital cost, you're producing for 20 years, very low impact to the environment and very low and predictable cost to you. So these are, I think, some of the strong reasons why we could expect that, for example, the a lot of industries will continue aiming for solar versus other sources of power. And bringing it back to silver, there's been an exploration of using copper as a substitute to silver and solar panels. Why would that trend not win out? So that is something that is certainly something to consider. The solar panel manufacturers now with such high silver prices, and what I believe, and if that's what they think, I believe they're right, that these higher silver prices are going to stay high and be maintained and probably continue to climb higher. That makes production of solar panels more expensive. And so they're looking for alternatives. Obviously, they want to either thrift, they want to find replacement technologies. And I just don't believe that copper is a proven one. There's a few issues with copper, it's less efficient. It corrods. And besides that, you have to shut your entire factory down. You have to completely retool. You have huge cap X to bring in new manufacturing to work the copper into the new technology for the solar panel, for example. And these are costs that they have to weigh versus continuing to produce with solar and trying to find ways either to continue to squeeze more silver out of the process or find ways where you're making the silver more efficient. But it's by far the most efficient way to produce energy from solar. And so I think that's the counterbalance to see versus other technologies. I think that it's proven, it's reliable, it's the most conductive of heat, most conductive of energy, it's the most reflective, it's a wonder metal. And after oil, silver has the most industrial uses, the most patents globally, something like 10,000 or more patents for different uses for silver. It really is a wonder metal. I like to call it the Swiss Army knife of metals. It really does so many fantastic things. It's quite impressive. Right, I mean, look, silver is used and absolutely everything from my laptop to my cell phone to those missiles that have been flying across the Middle East as we've discussed and is also integral to AI and not just from supplying the data centers. It's also integral to the chips, the actual computers, potentially. If we get to that stage in the near future, the robots that Elon is building require tremendous amount of silver. But a lot of these factors are dependent on a robust macroeconomy. The structural demand drivers are, for the most part, cyclical industries. If we enter a recession or even a slowdown and many people are pointing to that, how would that impacting industrial demand wouldn't that weaken and therefore bring down the price of silver? So it could. And I think that that's something to consider. I believe there's a risk of that. But I think that it would be relatively short lived. Like I was saying earlier, I think that you'd have-- You have this continued push towards renewable sources of energy. And even if you end up in an environment economically where demand has slowed down, governments will bring out all sorts of stimulus programs. And if they bring out programs, some of the ones that are the most, let's say, easy to sell to the population are the ones that are environmentally positive or supportive. You have people who are obviously, as we've discussed, all sorts of reasons why they like to aim for renewable energy. They're less reliant on the fluctuations in terms of price of the output of energy. So again, I think governments would step in to some degree that could alleviate the risk, the downside risk for silver price because that will help support demand producing things like solar panels and all of the other electronics, as you mentioned earlier. And then you've got the monetary aspect of it. So imagine that you're in a recession. Things are slowing down, but that doesn't mean that prices are not sustained high. I believe we're going to move into what we saw in the 1970s where we have stagnation. So you've got high and or rising inflation. And you've got slow economic output, slow or slowing economic output. And so in that kind of environment, you still have high prices. So people will look to silver, for example, as they do to gold as an inflation hedge. So the monetary aspect, I think, continues to support silver and higher silver prices. It's that dual aspect that I think if there is issue with recession that it's relatively short-lived, the other side of it is government seeing inflation and despite that, you're having central banks cutting rates and essentially feeding even more inflation. So it has proven itself as a form of money as an inflation hedge for millennia. I don't think that's about to change. So you're seeing Fed cuts into an inflationary environment? Exactly. That's a wrap wrap look there. Exactly. Do we get triple digit silver in 2026 again? I think the odds are relatively good for that. I think that in the second half of this year, probably as we approach closer to the end of the year, I do think that that's a real possibility. If you look at the assessment by the broader markets of where the economy is going, where is inflationary as we talked about earlier? In the near term, silver needs to continue to consolidate but I think that as we start to see the costs of rebuilding, look, we have issues in Gaza, we have issues in Ukraine and Russia, we now have issues in Iran and all sorts of surrounding countries in that area. There's a lot of rebuilding that needs to happen. A lot of governments, whether it's the local governments or help from other governments that aren't, let's say net revenue positive, they have to print money to have enough money. That's going to continue and I think that we are not going to see prices come down or even stay flat in any kind of a meaningful way. If anything, things may slow for a while, inflation may slow but I was reading a piece today about how the OECD is actually forecasting US inflation is going to be at 4.2% this year, whereas the Fed sees it in the high twos, the OECD thinks it's going to be above 4%. That's significantly higher. We've just had a big reversal in the markets' expectation for a Fed rate cut, which was somewhere around 63-64% by July. Now they think it's going to be zero by July. So no Fed rate cut means the Fed will keep things sideways, but as I say, as the market likely starts to price in inflation later this year after not just the war, but the war certainly is going to be a big factor now. Then we're going to see, as I say, the central banks cutting rates in the face of high and rising inflation and the market's going to look at that and say, wow, even in high and rising inflation, not only can they not keep rates steady, they have to cut them. So they're just going to feed inflation even more and people will look for a hedge. I think that we've seen that happen in gold over the last couple of years. Gold went from, say, 2000 and ultimately through 3, 4, and above 5 earlier this year, steady buying from central banks, people who started to see this happen. It was essentially something they couldn't ignore anymore and said, well, gold is at 4,000, gold is at 5,000 now. Maybe I need to own some. But I'm getting one ounce at that price. What is my alternative? Silver has traditionally been that alternative. People have looked at gold and when it has gotten relatively expensive and we see that through the silver gold ratio and silver is relatively cheap. People will start looking for an alternative. And if you can buy 60, 70, 80 ounces of silver versus one ounce of gold for the same amount of money, well, it starts to look pretty attractive. Okay, I take all of those points. Let me just push back on you here a little bit. A lot of factors in silver's favor, including persistent structural supply deficit. Silver hasn't balanced supply and demand for years. Many would say there's a multiyear deficit that cannot just easily be replaced. We do have an industrial demand increase as you discussed solar panels, electric vehicles, electronics, AI hardware, medical devices, growth in those sectors is continuing to tighten the physical market and squeeze inventories. We have been seeing a lot of physical silver being delivered as opposed to just paper contracts. As you mentioned, safe haven buying from macro stress, geopolitical tensions, currency concerns, depreciation pressures, devalued debatement, expectations of potential inflation potential low interest rates despite that inflation. Because what else does the Fed do at Princeton matter what? We've also had retail and ETF inflows, record amounts of that. As certainly in the beginning of this year, try to many call that a crowded trade, but we were seeing a lot of retail interest in an ETF surging in the silver market. The physical market has been tightening versus the paper markets. We've been seeing all of that. Weak dollar, macro risk, all of these factors, relative cheapness compared to gold. As you mentioned, I have been hearing this for a very, very long time that we have these convergence of structural forces that have been building for years and are now colliding and we're going to get that explosive move up in silver any day now. Any minute now. It hasn't happened, Peter. That much to the frustration of many a silver investor, the structural are there. All of the fundamentals are there and yet we have not seen that explosive move upwards. Why? Why and what changes to actually get that move upwards? I forgot to mention silver also being added to the critical minerals list on top of all of that. On the paper, it looks like everything is moving in silver's favor and yet just as we get to triple digits, it gets pulled back down again. Just as we're about to, well, I mean, I did hit it, but pulled back down subsequent to that. What happens to get this persistent rally in silver? What needs to change? What has been holding it back? Well, I think I have to disagree because we did get that explosive run up. We dropped it back down. Exactly. However, think about where we've averaged since then. So we've averaged, let's say, let's roughly call it about $70. A year ago, we were at barely 30, 30, say 30, 35. We are April now. That's double what we had. I can tell you that two years ago, I had mining CEO saying to me, Peter, if we could only get above $30 so that we could make decent profits, we could reinvest, we could explore more. Now we're averaging $70. I think that many of these silver producers and explorers are more than happy at this level. I can't speak for investors and maybe they're just too greedy, but frankly, these are fantastic prices and it's tremendous for the market. It always has other issues. That's for sure. We talked about the challenges for the solar industry, for example. But as I say, the silver producers, the silver developers, the silver Explorers are all really happy with these much, much higher silver prices and the market is very tight There've been no meaningful discoveries of silver in the last Several years. It's been the same for gold and silver is different from from gold in the sense that About 75% of silver comes as a byproduct of mind silver comes as a byproduct only 25% of mind silver is from what we call primary silver mines. So you depend a lot for the Silver that comes to market from mining you depend a lot on Mining other metals so gold copper lead and zinc those are the four most common metals that have silver as a byproduct so You know the producers of these metals are not motivated to produce more silver just because the silver Price went up. It's a small portion of their revenues. So they're happy to see silver at Whatever price especially if it's climbing and climbing and climbing they're not going to go out of their way to try and produce more silver So you can actually get to a point where What we call it the inelasticity of silver supply so higher silver prices do not mean bringing more silver to market So I think what we're going to see is now we've had this this this parabolic rise We've had silver pullback. We're at a point where silver is now Very likely and at least for the last couple of months has averaged somewhere around the 70 75 dollar range That as I say is more than double where it was a year ago that is Way higher than we've had it. I mean look Michelle it took 45 years for silver to go from $50 in 1980 back to silver back to $50 last October and then finally break above it and stay above it It took 45 years for that and then it took three months to double to a hundred that was way too much too fast But I think that when we can digest these gains and we can have a healthier more more gradual climb in the silver price as the market comes to term with terms with the fact that this is a medal that in nearly all of its applications is not easily Substitutable and in in many of them it is absolutely not substitutable That's when with these tight tight silver markets and as I say few discoveries Next to know I mean you look at numbers from the silver institute. They're forecasting Perhaps a one to two percent Supply mine supply growth. That's that is a drop in the bucket when you're you have a structural deficit of 10 to 15 percent every year, but the if you add up the deficits of the last four years You have an entire year's mine supply of deficit the only reason that you know silver prices have been I'm gonna say capped So to speak around that $30 level up until literally part of last year was because The five to ten years prior to 2020 you had Excess silver. So you had silver surpluses not huge amounts, but you did have surpluses But for for several years and those were building up and a lot of that sat a lot of that was was bought and and saved as investment but but a lot of it went into the The futures markets and sat as above ground inventories. So If you look at those inventories they peaked in early 2021 and then they started to come off very very Significantly and then by early 24 I was also wondering why is the silver price not moving if we're already two or three years into a structural deficit And by looking at these inventories I realized that well they've been drawn down The big industrial consumers and especially that that don't have a choice absolutely have to have this silver to manufacture electronics to manufacture solar panels Have been able to go to the futures markets by a long contract and wait for it to mature and take delivery But that can only go on for so long these these inventories have been significantly drained And in early 24 I was saying that we've got 12 to 18 months of this and When we get to a point where those are low enough A lot of that silver is not available for deliver anymore. So essentially you've you've dried up that above ground supply remember something very important Those consumers those big industrial consumers could go out and buy that silver that was sitting above ground that had already been produced And because they could buy that prevailing prices they didn't have to put pressure on bringing additional silver to mark Even though they were consuming more than we were bringing to market because we had that excess already sitting there But I knew that once you got that excess down to significantly low levels or crucially low levels Then the game was over you had to have a price reaction and that's what we got that's what started I'm going to say in early 24 silver was 22 dollars at the end of February I remember very well and I was at a conference. I was being asked about this and I said we're probably Very close to a bottom at this point and I think within a matter of a couple of weeks It started to gradually trend higher. It wasn't wasn't ringing the bell at the bottom Um, but if you look back that's when silver bottomed and essentially did not look back after that Very very steadily rising Didn't give you the kinds of returns that you got in gold gold was really stealing the headlines you had these huge Uh, you know buying purchasing campaigns by the central banks and gold was stealing all the headlines And silver was just biting its time gradually rising and when the market saw that gold was relentlessly being bought and being pushed higher very steadily And you know crossing through these these milestone three four or five thousand dollar levels Investors started to say okay I need I need exposure to this sector Gold's already gotten so expensive. What are my alternatives and they turn to silver? I think Um, you know, we've been through that that sort of uh, there's a really interesting chart that I've used in in Actually, I should probably pull it up. Let's see if I can I can find that so um All right Here we are so this chart shows us How assets go through different phases and this could be doesn't have to be silver But it's very telling I think that the first phase is what we call a stealth phase That's when really the really really smart money is involved. They've been buying They've done their research. They know that this um, this is a an asset that has significant potential They know that in the case of silver there was a structural supply deficit There still is and that it was a matter of time before You know price would reflect the the market dynamics and so as I say the smart money gets involved at that point Then when it really starts to move significantly higher and I think that when we got to 40 and especially $50 That's when we got into we moved into the awareness phase and lots of Participants that that were not as well informed were not as patient Started to pay attention because silver was making headlines especially breaking out, you know, 45-year ceiling and then more and more people got in and wanted to make a quick buck on it and drove it to 80 90 100 dollars So I think what we have is that first bump where um it says first sell off and uh that's where we were Right after things corrected at the end of January so early February you had that sell off after so it was obviously a much bigger spike than we have there but what you had was um People who'd bought in at 80 90 100 dollars saw things tank to 60 70 dollars You had this this clear out of weekends and um a lot of those people sold lost and figured they're never coming back And that's why it right there. It's called a bear trap and so I think michelle We've been through that bear trap at this point a lot of those participants think that silver is now in a bear market And is never going anywhere near the hundred and hundred and twenty dollars that it was at before But that helps you build the base for that new rise and then eventually I think But we are all over the the surge There in your chart. Yes, I'm confused by the we are here pot So so that's because you're you that's a fair point when when I when I put that chart together we are here was Early February we had had that correction and so That that that area was essentially the um the bear trap Okay, you had you had that correction you had people sell out Lost on their on their sales because they'd bought higher they sell it tank and then they said okay, I'm out and And then so you had that that um that that selling by the weekends essentially so the the strong hands I or didn't sell or sold a bit perhaps took profits close to the top And then you've had the others who've been watching this all unfold and said, I get it. I see where we are. They have probably done some research. They realize that this is a significantly strong market that has much higher to go. And now that we've had the correction, they're going to start buying. They're going to start buying at the levels where we are now, that bottom, and they're going to set the stage for that new rise. And that new rise takes us eventually out of above the previous top. And as I say in silver, it's been much higher. But even if the chart looks somewhat different, we're going to eventually take out the previous highs. It could take a year, could take maybe a couple of years, hard to say, but we're going to a couple of years until we get an all-time high in silver again. I don't think it'll be that long. But yes, I do think we could see triple digits by the end of this year. But I do think that in that chart where we saw the awareness phase that we're in now, and eventually the media phase, I think the difference is that it's going to be drawn out much longer than we saw. That chart looks compressed to me when you apply it to silver. Right. I mean, looking at the fact behind the cell of many words, they was market manipulation. How the silver market is relatively easily manipulated through paper contracts, but that's starting to crack because of demand for delivery on the physical silver side. So one of the arguments that's been made is that this manipulation can't last for much longer because silver is so increasingly important on the industrial side that taking physical delivery is going to eventually end the paper market manipulation that we've seen for such a long time. And as we've discussed, silver has been put on the critical minerals list, vital to national security, vital to the defense sector, vital to the economy, particularly with AI. And I think that's something I'd like to explore a little bit further with you because if one thing that this Iran war conflict does is it that the conflict in Iran does is highlight the geopolitical tensions in the world. And we're seeing that play out with China and silver just recently China has ended exports of silver. It's saying that it is expanding its silver export controls, silver is under a much strict state control licensing system. And as we know China holds some of the largest silver reserves in the world, China is continuously buying more and more China and more and more silver. It's important here to reach your high to start to 2026. So we're seeing China pulling more metal off the market. And by the way, we've also been seeing a price difference between how silver and gold are priced physically in Shanghai versus the other metal exchanges in the world. And that may also be a crack to the manipulation in the system or what many call the manipulation in the system. So when we start to see the US adding silvets to its critical minerals list because of its role in energy and defense technologies, when we start to see the shift by China controlling exports while it continues to hoard more and more silver, when does that start to reflect in the prices? I say pretty quickly, I think that those are great points. You know, the US, as you said, just last year in the fall, added silver to its critical minerals list. That's the first time that's ever happened. If you look at the import numbers, which I have, and it, you know, the numbers vary depending who does the research and so on. But we're looking at at least 40% of the silver that the US consumes being imported. That's a pretty significant number for the world's largest economy and silver becoming more important. So why would it add it to its critical minerals list? Look, you've had Trump, for example, saying that they want to build stockpiles of critical minerals. They have all sorts of programs that are government and privately joint funded that will help build these these critical minerals stockpiles. They want to be more self-reliant. China actually controls 60 to 70% of the world's silver refining. So even if, you know, you may have produced silver in one place, there's a decent chance that it's gone through China to be refined before it gets exported back out. And now they're talking about restricting those exports. It's a licensing thing where they're saying that companies have to have exported a certain amount in the past. The companies have to be a certain size. They're just basically, you know, setting the stage so that they can call the shots more easily and keep the silver at home. Remember, they control about the 80 or 85% of solar panel and solar panel manufacturing globally. And that's the single biggest industrial consumption application for silver. So I don't think it's going to take that long. When you start to get rebuild and restocking of arms after using up significant amounts here in Ukraine, when I say here I meant during this war now here in Iran. And that's not over. So let's see how that goes. But that's a lot of arms to replace. And China's talking about limiting their exports. So it's not surprising that we've even seen, for example, we had seen this decades ago, but it started to happen again in a couple of cases. The US administration has now started to go out and outright buy stock in public companies because they believe in the long term potential of their projects that are at home. So, you know, within their own borders and not only necessarily within their own borders, there's an interesting project down in Peru, a company called Sarodopasco, has one of the world's largest above ground mineral stockpiles anywhere. And so we're talking about an equivalent of about 400 million ounces of silver. Now this was mind starting back about a hundred years and they had different mining methods. They weren't as efficient as they were today. And a lot of the tailings or what we call tailings today still has very high grade by today's standards. High grade silver, copper, gold, zinc, things like gallium in fact, which is a rare metal that is, I think something like 95% controlled by China. So now this company has backing by the Defense Department in the US because they have a critical mineral. So they're providing funds to them to do research to advance the project and could potentially advance hundreds of millions of dollars of loans to be able to fund and build the project to actually mine this stuff eventually. So, you know, US administration is going beyond its own borders to help finance projects in places that they feel comfortable. So all of this is getting sort of rewritten and and read the lines are being redrawn. And you know, we're having more and more of deglobalization and we're having regionalization. And these things are inflationary because you can't get necessarily or you're moving away from necessarily the cheapest cost provider to perhaps the more reliable or the higher comfort provider and you're willing to pay the praise for it. Right. All very good points, consolidation of resources as the world is fracturing and again this conflict in Iran only highlighting that. You are clearly a silver bull as the book says and you've also laid out a very specific framework for investing in silver your map framework metals which is the physical assets ETFs and producers. So very quickly break down the map framework and explain how you're allocating right now recording to that. First I want to thank you for reading the book Michelle. I appreciate not everyone takes the time for that but so the map is essentially it's a way of sort of come up with to help remember how to how to invest in silver. So M is for metals, A is for allocation, P is for protection and then sorry MAP what am I missing? Give me a quick second. I thought it was just a MAP. MAP. Yeah you're right. The last one is. The MAP will ask that and produce. The last one is for allocation. So after you allocate essentially when you when you end up you know having run the course of this bull cycle you sell. You sell when you know things I mean it's no one's going to ever pick the top exactly. But what you're looking for is signs and signposts that things have a render of course. So essentially you start selling when things look very overpriced. You know, you're in a mania phase. You know, again, you may not get the top, but you can sell in traces the way you probably should buy as well, because it's hard to know when you're at some kind of an intermediate bottom. But the way that you allocate, or the way that at least I should say that I allocate, is across the different sectors of the silver space. So 10% to physical, then 50% in the sort of lowest risk equity portion, which includes things like silver ETFs, large royalty companies, large producers, then 20% I allocate to the mid and smaller size producers and developers. And then as much as 20% can go to juniors, but then you definitely want to spread that out across a number of names, because they're obviously a lot riskier and they can be more volatile. But if you've spread across the silver spectrum well enough, then you're going to keep your risk relatively low. And you know, people need to do what's comfortable for them. If that means, for example, higher allocation to physical, higher allocation to the larger producers, and the royalty companies, that's perfectly fine. I have examples in the book where you've got companies like Wheaton, Precious Metals, for example, tens of billions of dollar public silver company that in the 2008 to 2011 period had a 16 time return. So you don't have to go to the highest risk companies to potentially get fantastic returns. So we've seen that happen over and over and over. And I think that silver belongs in everyone's portfolio. It's a matter of deciding which across the spectrum, which silver equities make the most sense for you, as well as including some physical and balancing it out that way. It really has, I think you can make up for the volatility and people shouldn't let the volatility scare them away. They should actually use it to their advantage. But they can make up for it by being more conservative, allocating smaller percentages to the more volatile sectors within the silver equity space. And I think that's the way to balance. And you have to know yourself as an investor. Are you seeing opportunities in the mining equities right now? Absolutely. I mean, because there's a lot of concern. We've had lots of guests on the show saying that the stock market is due for a big correction. Everything's going to tank. Would you be allocating to mining equities right now? I still would. Absolutely. I think that they've gone through a significant correction. I'm not saying they can't go lower. And if broader markets correct, the odds are they would go lower as well. But they've seen a significant, I think, enough correction. A lot of that has already taken place. I think the downside is relatively limited. But that's a good reason to be buying in tranches, to not necessarily allocate your full amount to a specific name immediately. And I'll give you some examples. In fact, if you like, I can pull up another chart or two. All right. So here is one of the best ways to illustrate what's going on. Silver prices have significantly run up. But the equities have not reflected that yet. And I'm going to show you a few charts. The first one here is shows how the profit margins have just exploded. So assuming it costs about $20 or so to produce all in cost to produce an ounce of silver. When silver was trading at $30, that meant a 33% profit margin. When silver's at $90, which it was for several weeks in the past few months, you're talking about a 78% profit margin. I think over the next several quarters, when the producers report their profits. And we've started to see that already for Q1. Some of them have profits that are three, four, five times what they were in previous quarters, especially on a year-over-year basis. So tremendous profits. The market has not come to terms with that yet. The market especially when they see that that happens in quarter out for the next several quarters, we're going to get a re-rate in a lot of these names. What you want to consider as well is the following. Silver miners trade at what we call a scarcity premium. If you look at, so these silver bars are the four largest, essentially the four largest cap goal producers. They traded at 1.3 times price to net asset value. If you look at the four top silver producers, you're looking at a 2.1 times price to net asset value. I believe that is essentially because of the scarcity premium. There are so few. If you want to buy the best and biggest silver miners, you have to buy these names. And so those prices get bit up. Now, interesting point, and this is not me saying it initially, but a guy by the name Ned Naylor-Lelin who runs the $3 billion Jupyter asset management Gold and Silver Fund. He pointed out that silver producers are trading at 2 times net asset value. Silver developers are trading at 0.2 times net asset value. That is a 10X in the silver space to go from a developer to a producer. That in itself is, I think, quite compelling. So, yeah, I think that the opportunity, I think the easy money so far in the silver space has been made over the last couple of years by owning silver. Because although in the last year, the silver equities have performed many of them have performed very well. Over the last five years, silver itself has outperformed the equities. In the last two years, they have performed equally. And I think in the next two years, the equities are going to start to outperform the silver price. The silver price will move higher. The equities will bring a multiple of that. And it's, as I say, the market is going to start to price in these profits from the producers. The producers are going to see multiple expansions in their price earnings ratios. The shares are going to move much higher. They're going to start to use their shares as a currency to go out and buy smaller producers to buy out developers. Developers prices are going to get higher. It's all going to trickle down. The developers are, and the smaller producers are going to go out and buy some of the explorers that have some really promising economic discoveries. So it's going to trickle down. I think it's going to be a fantastic couple of years in the silver mining space. I like to say the silver miners are the next opportunity in the silver space. That's all dependent on highest silver prices. So potentially, back to triple digits and potentially a new old time high back by 2026, if I'm getting that correct. Do you have an outlook for mid-2027? Do you have another timeline where you're comfortable giving a price range outlook by? I think in the first half of next year, there are good odds we're going to take out the all-time high of 120 from this year. So that would be, let's say, a year later. In the second half of next year, I think we're going to see new all-time highs being made in the 130, perhaps 140, price level. I think that not that any of these miners need that, as I was saying, they're more than happy at these kinds of prices. They're producing fantastic profits. But I do think that structurally, the market is so tight that we're going to see these higher prices in silver continue to push higher and the multiples and the miners are going to follow to a significant degree. All right. We will leave it on that. I know that you select particular mining stocks in your investment use. Let us say here's your opportunity to tell a views where they can learn more about your work. So I published two newsletters. The first is Silver Stock Investor, and that has been around for five years now. It's all about the silver mining equity space. I cover everything from some of the silver ETFs. And even I talk about physical silver as well. Through ETFs mining ETFs and physically backed silver ETFs through the large explorers and royalty companies, developers, small producers, and ultimately some of the smaller junior explorers and even some pre-discovery junior explorers, the highest risk part of that spectrum. And then I've got a free letter called Silver Advisor, which was launched a year ago. And that covers nearly 20 companies in the silver space. You have some junior explorers and you have some mid-sized producers. And so a good range there as well. And that's called Silver Advisor. People can go to thegoldadvisor.com. and look to subscribe there for that and get all kinds of free advice and free research on the silver space. All right, Peter, thank you so much for spending some of your free time with us. Appreciate your insight and your analysis, Peter Krat. Thank you. Well, Michelle, thank you very much and I want to thank you for choosing to wear your silver dress today because I think it's very appropriate for a frickly days topic. Yes, so it looks great. It's a great messaging to the viewers. I heard you got it first back, but clearly I am a silver. It's not that it's not that's not that subtle. Exactly. Not that subtle. All right. Well, thank you for noticing. Like I said, your wife has you well trained. Thank you, Peter. And as always, a big thank you to our viewers for watching. If you enjoy our content, find it informative, entertaining, educational, and we hope you do. Please make sure to share it with your friends and family. Please subscribe. And if you would like to learn more about building a precious metal strategy, you can reach out to [email protected]. We also have a weekly newsletter that you don't want to miss. It has previews and specials and exclusive macro insights as a link in the description. It's also on our website, milesfranklin.com. As always, leave us your comments. Feel free to praise, wine, or just a fine. I'm Michelle McCory from me and the rest of the team. Thanks for watching. We'll see you soon. This is The Real Story with Michelle McCory.