Concerned about a messy election and what this could mean for your finances? You’re not the only one who’s worried, believe me. I’ve been getting triple the number of e-mails and voice mails this week compared to what I usually get. They want answers because they’re freaking out.
The good news is that you don’t have to worry if you’ve got the right mix of assets in your portfolio. Volatility-prone tech stocks aren’t your only option. It’s perfectly fine to own some of the famous FAANG names, but the smart money’s diversifying into other areas.
Take silver as an example. Analysts at Citi are predicting that the price of silver will rise to $40 an ounce over the next 12 months. That would imply a 66% increase from the current price of around $24. You won’t likely see that magnitude of returns in FAANG stocks.
In support of their price forecast, Citi cites growing demand from investors who view silver as an affordable entry point into the world of precious metals, along with strong industrial demand. The demand is reflected in this year’s sharp increase in demand for silver-related assets.
As reported by the Silver Institute, global silver exchange traded product holdings rose by 297 million ounces through the third quarter of 2020. This is nearly tripling the growth witnessed during the comparable period of last year:
Courtesy: Silver Institute
Contributing factors included a recovery in global industrial silver demand during the third quarter; silver’s use in photovoltaics has been particularly robust this year. And of course there have been the dramatic monetary easing policies and fiscal stimulus measures, which will continue to provide a silver-bullish/dollar-bearish backdrop.
Moreover, silver bullion coin demand has been up strongly on a global basis, with a 65% increase in demand over the first three quarters of 2020. Silver bar demand has also risen sharply this year, with particularly heavy demand growth in the U.S. and Germany.
And so, Citi’s price projections for silver don’t stop at $40. In fact, Citi analysts argue that there’s a technical case for silver doubling to $50 per ounce, and potentially quadrupling to $100. Citi describes the outlook for silver as “a mini re-run of the 2009-to-2011 bull market,” harking back to a time when silver rose from $11 per ounce to $48.
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Of course, the Citi analysts are fully aware of election concerns, the pandemic, and everything else you could possibly think of. They understand the risks and they’re looking forward to the rich rewards of a silver investment.
I mentioned silver as an affordable entry point into precious metals, and I should also mention silver mining stocks as an accessible and convenient way to take a position. I’ve used First Majestic Silver (TSX:FR, NYSE:AG) shares for this purpose for years and the returns have been terrific.
Courtesy: BNN Bloomberg
Now that the balance between supply and demand has shifted heavily in favor of a long silver position, I’ve been recommending that investors should start to accumulate First Majestic stock shares now if they haven’t done so already.
This company produced 5.2 million silver equivalent ounces in the third quarter, putting it among an elite class of silver-focused miners. And I can’t stress enough how desperate the world will be for silver next year, and how few silver companies are prepared to ramp up production to meet the need.
First Majestic CEO Keith Neumeyer stated that he would not be surprised to see 2020 silver production under 800 million ounces due to the pandemic. He’s seen extreme demand for silver amid the pandemic and the supply-demand dynamic should continue to heavily favor silver in 2021.
It’s a particularly exciting time to be invested in First Majestic as the company is planning to release its unaudited third-quarter 2020 financial statements on Thursday, November 5, 2020. So, you’ll definitely want to mark your calendar for that one – or better yet, take a position ahead of time.
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