Back in July, when Goldman Sachs lifted its price target on silver from $22 to $30, the 2020 election seemed so far away. Now it’s less than a month out and $30 is clearly just the beginning of a much bigger secular bull market.
This is a time when investors have to expect the unexpected. First, Covid penetrates the White House and the stock market’s down. Then the market roars back over the next several days as the President stages a swift recovery.
Most amateur traders probably imagined that the President getting the coronavirus would send stocks into a 10%+ correction. But, that’s not how it works. The markets are forward-looking and investors knew that Trump would receive the best medical care and would be back on the campaign trail quickly.
Not only that, but the President’s busy making deals. In fact, Trump just doubled his stimulus plan proposal to $1.8 trillion dollars. With that, Trump tweeted, “Covid Relief Negotiations are moving along. Go Big!” while on a radio program he said, “I would like to see a bigger stimulus package, frankly, than either the Democrats or Republicans are offering.”
On the other side of the aisle, Nancy Pelosi pushed a $2.2 trillion stimulus bill through the House of Representatives this month. Clearly, everyone wants a massive relief package to go through and it’s not a matter of if, but when and how much.
Naturally, this will require mega-scale money printing and spending, which is business as usual because it’s easy for the government to spend everyone else’s money. This isn’t great news for folks holding a lot of cash, unless they’re ready to put it to good use.
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One way to put your cash to use is by stocking up on assets that benefit when the government goes on a massive spending binge. Historically, silver has proven time and again that dollar inflation is a consistent headwind for precious metals as well as the companies that mine them.
A company that’s working diligently to mine superior-grade silver is First Majestic Silver (TSX:FR, NYSE:AG), whose new liquid natural gas facility (pictured below) is being built at the Santa Elena operation. This plant will be turned on in early 2021 and will save significantly on energy costs of approximately $1 to $1.50 per ounce of silver.
As the company announced, liquid natural gas tanks have already been delivered and installed at Santa Elena. Converting this operation from diesel to liquid natural gas will save the First Majestic millions of dollars annually and significantly reduce the all-in sustaining cost to produce silver.
First Majestic also reported that the conversion from diesel to liquid natural gas power generation is expected to significantly reduce the production of carbon emissions while decreasing energy costs by approximately 40%.
Efficient production is among the key drivers of First Majestic’s amazing multi-year growth story. Undoubtedly, it’s also a contributing factor to the incredible 159% increase in the share price that’s happened over the past five years.
And as for the spot silver price, Goldman’s prediction is a severe underestimation of what’s already in progress. The way I see it, if gold goes to $2,500, silver will trade over $40. Not only will the U.S. government allow this to happen – with their penchant for printing and spending, they’ll effectively guarantee it.
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