Gold & Silver Start to Take Off: Will Americans Get on Board?

Brien Lundin: "Silver may be the poor man's gold, but it outperforms gold during bull markets."


Mike Gleason Mike Gleason
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May 17th, 2024 Comments

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Welcome to this week’s market wrap podcast, I’m Mike Gleason

Coming up in a moment, we have an exclusive interview with Brien Lundin, editor of Gold Newsletter and the CEO of the renowned New Orleans Investment Conference. Money Metals’ Mike Maharrey and Brien discuss what’s behind the latest rally in gold. Brien also shares his unique perspective about silver and why he believes investment demand may be more important than industrial demand, which is more often what most people focus on when it comes to the white metal. Mike and Brien dive into that and much more, so you’ll definitely want to stick around for a fascinating conversation with metals and financial industry insider Brien Lundin, coming up after an abbreviated market update.

Gold and silver prices are on the rise again, poking back up to their highs of last month.

Silver actually broke through the key $30 benchmark this morning and is now even making a run to $32. The white metal currently checks in at $31.61, up a whopping 11.5% for the week or more than $3 an ounce – with more than half of that coming today. Now if silver remains above this level for a few days, it could potentially start running toward $35 and even as high as $40 over the next few months.

However, this $30 to $32 level may well act as a near-term price ceiling, and silver could still fall back well under $30 as it heads into a historically weak summer seasonal period.

Meanwhile, gold is back over $2,400 – logging a 15% price gain so far this year. Gold currently checks in at $2,421 an ounce, and, for the week, is showing a more modest 2.1% advance.

Even with these recent gains, you could argue that gold remains significantly underpriced given the inflation we've experienced that continues to rapidly devalue the dollar.

That leaves many people wondering when gold is really going to break out.

It's impossible to predict the timing of such things, but as one of our own MMX Precious Metals Specialists Garth Patchen eloquently puts it, "It will leave the port-of-call at some point."

"And like Noah's Ark of old, those who miss the boat will face a catastrophe."

The thing is there are only so many seats on board, and prices are relatively cheap at present.

Do you really want to wait until the final hour?

Imagine the masses trying to clamor aboard at the last minute, in the last hours before the doors close.

Unfortunately, their flimsy financial "life preservers" won't be adequate. They're not going to float in the tempest to come.

Imagine trying to bail out of stocks when they're dropping like a rock in an effort to salvage something close to your original investment principal.

Imagine trying to get your cash out of the bank when "capital controls" are instituted, and you can only pull out $3,000 per day or less -- or none.

Imagine trying to purchase physical gold and silver at much, much higher prices.

Imagine the FOMO (Fear of Missing Out).

Imagine the fearful, stressful rush to find safety in the face of an oncoming disaster.

Imagine if you can, how sweet the sleep is of those who have prepared ahead of time for any eventuality.

And the worst scenario?

Imagine missing the boat altogether.

This is what many Americans may be grappling with, sooner or later. They may regret not being among the mere 2% of Americans who even own a single ounce of investment gold or silver today.

Well now, without further delay let’s get right to our exclusive interview with the man behind the famous New Orleans Investment Conference, Brien Lundin.

Mike Maharrey and Saleha Mohsin

Mike Maharrey: Greetings. I'm Mike Maharrey. I'm a reporter and analyst here at Money Metals, and today I'm talking with Brien Lundin. He is the editor of Gold Newsletter and the CEO of the New Orleans Investment Conference, and you can find some of his work right on our website at moneymetals.com/news. Appreciate you taking the time to come on the show, Brien. How are you?

Brien Lundin: I'm doing great, Mike. Great to be on your show. I've been following your work, your excellent work, and I'm very excited to participate because you put out a lot of great content, a lot of wonderful analysis, and so far at least I agree with it all, so it's great-

Mike Maharrey: Well, that's good. We're birds of a feather, right?

Brien Lundin: Yeah, we'll be preaching to each other, to the choir.

Mike Maharrey: Yeah. Exactly. So we're recording this on the day that the April CPI data came out, and it was like 1/10th of a percent cooler on the month-to-month basis than expected, so now everybody is throwing a victory party it seems like. The last time I checked gold was up about $30 an ounce and stocks seem to be doing well. Let me ask you this. Do you think the Fed has actually slayed the inflation dragon?

Brien Lundin: No, I don't think it has. And a lot of smarter people than I am, there are people who at least track it in a lot more detail, friends of mine in the industry that have looked at it, and they feel that it's going to settle into 3 to 4%, but that getting down to that 2% target is just too hard of a pull, so it's going to be here for a while. So the question really isn't whether they've slayed the dragon, but if they've found enough of an excuse to pivot, because they really want to, they really want to. I mean if you look at the numbers, they are getting out of control.

One of the things that I've been tracking for the last four or five years really has been the rising cost on servicing the federal debt, what higher interest rates would mean for that, and frankly I didn't think they'd be able to raise rates to the extent that they have and keep it here for as long as they have, but the numbers are starting to show why that's really impossible to do right now. Without even getting into corporate and individual debt service costs, we're well over $1 trillion a year just in federal debt service costs, more than any single item outside of Social Security in the federal budget, and that is only projected to go higher and higher because all of that Treasury debt is resetting now at far higher rates.

Even if... And this is one of the things I've been focusing on in some of my presentations very recently, even if the Fed cut by 150 basis points, six quarter point rate cuts, which nobody is predicting that they're going to do over the next year, that cost in the federal debt will still soar higher because that's how far above the current rate of interest being paid we are at right now, so totally unsustainable.

The Fed is searching for an excuse to cut rates, and I think they got one today, or further evidence that they will, and that's why the markets are celebrating. Interestingly, nothing is celebrating more than gold right now, and silver, which is running counter to a lot of the predictions that we saw in recent weeks that this stage of the rally was over and we were going to lose $100 or $200 from the gold price.

Mike Maharrey: Well, and that leads me into the next question I wanted to ask you, because we did have a pretty significant rally that kind of started late February, early March, saw record prices on the spot side in April, and now it seems like it kind of settled down a little bit. We're back kind of fluctuating between what, $2,300 and $2,400 an ounce. What do you think drove the rally, because it kind of started all of a sudden, like there really wasn't any big impetus? What are some of the factors you think kind of underlie that?

Brien Lundin: You know, most of the factors are well known now. During the first couple of weeks of that, going into mid-March, we really hadn't pinned it down, but it looked like it was kind of central bank buying, which was really kind of a supposition, because you don't have a good handle on that. But central bank buying was a big part of it.

In particular, though, we were able to kind of figure out that it was the Central Bank of China. The People's Bank of China was a large, large contributor to that central bank buying. And beyond that, we were actually seeing huge demand in China itself, domestic demand by the citizenry, because the real estate market was in the dumps there, the stock market wasn't performing, they were sensing some fiscal accommodation, monetary accommodation, coming from the central banks and the authorities in China, so they flocked into gold. And we've seen that demand... Although it's come off from its peaks a bit, we've seen that Chinese demand still remain very high, especially in a rising price environment, which is contrary to past trends in China.

But there's more beyond that. We saw open interest on the COMEX swell, we saw open interest on the Shanghai Futures Exchange in China expand, so we've seen a lot more speculative demand. At the same time we've seen demand on the GLD gold ETF actually kind of slack off. We haven't seen much buying there.

You add it all up and most people think we found really all of the buying, but I don't really think so. I think there's more out there. When you look at the fact that a lot of the buying seems to be price insensitive, when you look at the fact that on some days the gold price looks like an EKG readout and these bear attacks come in, and bam, it bounces right back up, there's buying coming in that is convinced of a long-term argument for much higher gold prices and is taking all of the gold that is at offer at current prices and higher, so something else is going on. I don't think we quite have our finger on it yet. I don't think we've figured it all out yet, and I think that's a good thing. I think that's probably indicative of a groundswell, kind of an undercurrent of buying that just is uncomfortable with the incompatibility of debt loads today with the interest rates where they are that sees a reckoning coming up ahead and is worried about that.

And when you look at the fact that the dollar index has been strong, the dollar has been strong against the trade currencies, when you look at the fact that treasury yields have been strong and generally rising as gold has been rising, all three of those have a safe haven aspect to it, and I think that a lot of very large portfolios are shifting allocations towards safe havens and regard gold as the safest of all.

Mike Maharrey: Yeah, I think a lot of what you say... Well, not a lot of it, everything that you say makes absolute sense, and I'm of the opinion... I'd be curious to know if you agree with me that the interest rates have been hiked to the level where I think it will ultimately break something in the economy. We haven't really seen it manifest. Well, we kind of did. We saw the banking crisis over a year ago now, but the Fed was able to paper over that. But I still think that in the long term something is going to break even if they start cutting rates today, and I kind of base this just on history. I go back to 2008 and look at the trajectory there. It was 2006, is when interest rates actually peaked and they were cutting when the financial crisis happened. Do you think that something breaking is inevitable, or can they still manage to do the... You know, land the airplane on the Hudson River so to speak?

Brien Lundin: Right. Right. Yeah. I think that the list of things that could break is longer now than it has really ever been since the 1970s. You look back to that time period, you make a great point. In 2007 we had Bernanke out there saying that everything is well controlled-

Mike Maharrey: Contained.

Brien Lundin: ... the market's operating as it should. Yeah, it's very much... It's contained and nothing to worry about, and that's a lot of what we're hearing now, but there's a long list of things. We have debt resets in corporate debt of around a trillion dollars coming up this year. And you look at the zombie companies... We heard about those for years, where 20% of US corporations were barely able to pay their debt service charges with interest rates near zero. So all of those zombie companies are going to just go away finally if and as interest rates reset over the months straight ahead. We had the banking crisis as well, potential banking crisis. We were on the verge of a bank run, and if you remember back then how [inaudible 00:10:08] and Yellen hadn't quite gotten their story straight and were on the verge of saying we're going to just backstop everybody's deposits at whatever level, which is... You know, the repercussions of that are unimaginable.

There's just a lot of things that could go wrong, and then there's just a plain good old recession. But I don't think the Fed needs any of that. I think they're sensing that this will start really stressing things, and they will pivot. If they get just the narrowest of wiggle room to pivot they are going to do that to try and forestall that. Even if they don't, that turn toward a lower interest rate, toward rate cuts, from the harshest rate hiking environment we've ever seen would be enough to propel gold to much, much higher levels.

I mean consider the fact that if you look at the charts and when they started raising rates, when they began on the steepest rate hike campaign that they've ever done before, people are amazed when I tell them that gold from trough to peak gained $700 an ounce, or over 40%, during that rate hiking period. So when they turn the corner and begin the down cycle, which they'll have to do, you can just imagine what gold will do in that environment.

Mike Maharrey: Yeah. Absolutely. It's interesting too... Again, going back, looking at that trajectory, I think people tend to have a very short time span that they operate in. It's kind of the microwave society, and everything runs on the 24 hour news cycle. We got the CPI data today, and so now the Fed is going to cut rates, and if we get some economic data out tomorrow that's counter to that, then all of a sudden the rate hikes will be off the table.

I'm curious, for you, how do you kind of look beyond the headline of the day, beyond the chart movement of the day, and kind of look at things in a bigger picture? What are some of the things that you look at to kind of create a foundational basis on your investing strategy and what you think is happening in the markets?

Brien Lundin: Yeah. Yeah. Great question. And, you know, I think it goes beyond just the short-term nature of the news and the short attention span of the markets, and it goes toward what they're focused on, and it's always Fed policy. There's no macroeconomic analysis, how is this going to affect any aspect of the economy, but rather how is it going to affect those old economists on the Federal Reserve Board and how they're going to vote? And what's happening is that every investment sector, every investor is like a piglet suckling at its mother. They're just dependent on the flow of that liquidity because they've grown addicted to it.

If you pull back and look at the past 40 some odd years, since the early '80s, since Volcker started cutting rates after killing off inflation, we see that every time they went through recession, or even in some cases the hint of the possibility of a recession, some sort of a slowdown, the Fed's policy was the same. It cut interest rates, [inaudible 00:13:48] toward easier money.

And we have a four decade plus bond bull market and trend of ever easier money, not just easy money, but ever easier money, so the markets have become conditioned like Pavlov's dog that every time there's any kind of a hiccup they're going to be rescued by monetary policy. And then that kept going and going, and then in the 2008 great financial crisis they were forced to do even more and to get that same reaction, because the markets had developed a tolerance to the drug they had to do so much more. They had to go straight to zeroed interest rates, come up with quantitative easing, and a bunch of acronym programs. And then came COVID, and what they did over four to five years they did literally over four to five days, shut the economy down, but encountered with interest rates at zero, doubled the Fed balance sheet, just tremendous bailouts.

And that trend, if you take it to its end, number one, you see that we are pretty much in the end game of that. You also see that the next crisis they're going to have to do so much more. It's going to make your head spin. You're going to be absolutely blown away by what they do. And that process at each step, at each cycle, degrades the credibility of fiat currencies in the whole system. At some point, and that point is nearing, is growing close, they're going to have to restore credibility in the system, and the easiest way to do that is to attach it in some form of fashion back to gold.

So I think that's a big part of what we're seeing right now, that the resolution of this trend is going to involve gold somehow. The details we can discuss and argue and speculate about, but the bottom line is gold prices at current levels, at current relationships to fiat currencies, are going to be totally changed over the next few years to a great degree, and you need to be the opposition for that if you want to not only build wealth, but just protect what you have.

Mike Maharrey: Yeah. I think we're seeing this to some degree with the gold buying in China and the central banks in the mostly emerging markets, mostly those aligned with BRICS, and they made no secret about the fact that they want an alternative to the dollar, and they've certainly hinted that gold may well be part of that equation. So I think you make a really good point.

And to kind of pile onto your point about the way the Fed always steps into the rescue, I think a lot of people kind of miss a little piece of economic history and don't realize, because we had the COVID thing and they were able to put the quantitative easing on steroids, that even in 2019 the Fed had already gone back to rate cuts. They were already doing, they didn't call it quantitative easing, but it was quantitative easing so just that little [inaudible 00:17:14].

Brien Lundin: Yeah. They insisted there wasn't quantitative easing because it wasn't across the entire yield curve. Well, who cared? You add $300 to $500 billion to the balance sheet over a few months because of stresses in the repo market and other things going on before you even had COVID.

Mike Maharrey: Yeah. Exactly. And we were supposedly in the greatest economy in the history of the world according to Donald Trump.

Brien Lundin: Yeah. Right. And perhaps we'll have again.

Mike Maharrey: Yeah. So let's pivot to silver a little bit. We just re-posted an article you wrote about silver being on the launch pad. I know there's some technical reasons to like silver, and you covered that very well in the article, some of the charts. What's your more fundamental case for the white metal?

Brien Lundin: Well, my fundamental case is a bit different than most people's and most analysts in that I totally disregard the industrial usage for silver. I think what drives silver is its monetary history and legacy, and that buying on the margin really is what drives the price. I think if it was purely industrial would probably be $5 an ounce or something like that.

I do recognize the whole solar story and how that's taking a lot of silver off the market, but there's a lot of silver out there, and 70% of it is a byproduct of other metals production, which is good and bad in that high prices won't bring more silver onto the market, but unfortunately low prices won't take much off the market either.

But silver throughout history has been used as money, and since gold has been an investible asset, not money, which really means since 1971, every time we've had a bull market, a secular bull market in gold, silver has outperformed gold, because it is the poor man's gold. It does offer that leverage. It's cheaper than gold. It's easier for the common man to get involved in a significant way.

So, simply put, I think it's going to happen again. We saw it in the spring of 2020. In that post-COVID run silver dramatically outperformed gold and silver stocks dramatically outperformed silver. So if you look at a lot of the junior silver stocks that we kind of focus on in Gold Newsletter, you can add leverage on top of leverage to the big macro picture that's driving gold higher. So it's a great way to play this next bull run.

Most people don't really understand it, but silver has generally outperformed gold during this rally, and in recent days especially it's really taken off, so I think a big move is just beginning for silver.

Mike Maharrey: You mentioned the mining stocks. It seems like particularly the gold mining stocks... I haven't looked at the silver mining stocks as much, but I know the gold mining stocks have kind of lagged the rally. They haven't really reflected the big jump in the price of gold. Why do you think that is?

Brien Lundin: Well, a few things. Technically they've actually outperformed gold, but the impression is that they haven't because they haven't done as well as we would have thought, given the magnitude of gold's rally. So two things really happened in my view. One is that the price rise was so dramatic, so sudden and to such a degree, so steep, that people kind of sat on the sidelines and waited for an entry point. They waited for a setback before they got involved.

The other thing is that mining stock investors have been so conditioned to really get slammed on each big rally that they didn't really understand what was moving gold. So they didn't understand it, they didn't know what kind of lasting power it had, and if you don't know what's driving the metal you don't know when that slam is going to come and if it's going to come, so there was some confusion about that.

Now I think a lot of that has cleared up. We had that kind of pause in the big rally in gold, and we saw some generalist investors actually take advantage of that and start to get into the market. On April, I think it was 22nd, we had a $60 down day in gold, and you would've thought that would've really sent people running for the exits. The next day or the day after... It was right after that big down day, as soon as the gold price stabilized we saw Newmont Mining, which is the only big gold producer in the S&P 500, and therefore the most likely target of the generalist investors, it had a 10% up date, so the people who were waiting on the sidelines said, this is our chance, and they jumped in.

I think we're starting to see that happen right now. Again, not to the degree we would've hoped for those of us who have so much of our portfolios dedicated to the area, but it's starting to happen. And today as we speak my screen is green and I'm getting personally some of that FOMO involved, like do I have enough of this stuff? It's starting to get exciting, in other words.

Mike Maharrey: Yeah. It'll be interesting to see how things play out. I think the next year to 18 months are going to be really, really interesting in both the broader economy and in the precious metals markets. I want to pivot a little bit before we close out and I wanted to give you an opportunity to talk a little bit about the New Orleans Investment Conference. Is there anything exciting that you can tell us about that's coming up in the next version of the conference? Version, that's not the right word, but-

Brien Lundin: Yeah. The next edition, this year's conference is... Yeah, I think it's safe to say thanks for teeing me up there. It's safe to say it's going to be exciting. This is our 50th anniversary, the New Orleans [inaudible 00:23:42] is the longest running investment event in the world, and we're known for bringing the top experts together to talk about the macro picture, then drilling down into the various markets. But because we were founded to teach American investors how to invest in gold with our founder, Jim Blanchard, having been really instrumental in getting gold legalized in the US, he started this event and it's a legacy we're very proud of and really try to burnish with every year's event.

Now that said, this being our 50th anniversary, we're trying to take it to an even greater level, and we've got speakers like... James Grant is coming this year. He rarely speaks outside of his own event. He always tries to come to our event and he's making it this year. We have Doug Casey coming this year in what he says will be his swan song, his last public appearance. So that's going to be a big pull. We've got Brent Johnson, who is a big gold bug, people don't realize, as well as a dollar bug. Danielle DiMartino Booth, Dave Collum. I'm reading off my list here as we talk. Dominic Frisby, George Gammon, Peter Boockvar, Rick Rule, Lyn Alden, Tavi Costa, and the list goes on and on.

We're in the process of building what we think is going to be the most value packed speaker roster that we've ever had, plus a lot of special events at this year's conference, and dozens of the top mining chairs, mining companies, junior mining companies, and opportunities there. So it's November 20th to 23rd, and I really urge people to sign up now when registration fees are at their lowest, because it is going to be a can't miss event.

Mike Maharrey: I recognize a lot of those names, and this is definitely exciting. Jim Grant is one of my favorites, so that's-

Brien Lundin: He's the best, isn't he?

Mike Maharrey: Yeah.

Brien Lundin: Wonderful guy.

Mike Maharrey: He is. Where can folks go to learn more about the conference and register?

Brien Lundin: Neworleansconference.com, simply put. You'll get our current speaker roster. Know that we are expanding it. We've got a lot of great invitations out to people and some new speakers coming, but neworleansconference.com gets you all the details.

Mike Maharrey: Awesome. And where can folks go to sign up and get your newsletter and get more of the content that you're producing out there?

Brien Lundin: If they go to goldnewsletter.com they can learn more about Gold Newsletter, which is our paid subscription newsletter. I cover everything in a monthly issue and give my specific junior stock recommendations in that publication. We also have a free letter that they can sign up for at that site. That free letter is Golden Opportunities, and it's... Not only will you get that letter at no charge, which you'll get our Investor's Guide to Gold and Silver at no charge, which is a great how-to guide for precious metals investing, everything from mining stocks, to bullion, to futures and options, and everything under the sun.

Mike Maharrey: Outstanding. And you're active on the Twitterverse? I guess it's not Twitter, I guess it's the Xverse now?

Brien Lundin: Yeah, whatever they call it these days. Yeah, Brian, B-R-I-E-N, underscore, Lundin, L-U-N-D-I-N. Yeah, I'm pretty active on there. You'll get some of my analyses, reactions to the news, and personal observations, and occasionally some far out political views probably, so-

Mike Maharrey: I bet they're not as far out as mine. So outstanding. I really appreciate you taking the time to chat with us. You can also find some of your work over on Money Metals, and we appreciate those contributions. And, again, thank you so much for taking time out of your day to chat with us, and we'll get you on here again, because I think you have a lot of valuable insights,

Brien Lundin: Always willing to do it. You do a great job, Mike. I was very excited at this opportunity and look forward to more of them.

Mike Maharrey: All right. Well, thank you, and you have a good afternoon.

Well, I hope you enjoyed that interview, and that will do it for this week. Be sure to check back next Friday for our next Weekly Market Wrap Podcast. And of course, you’ll want to check in to the Money Metals Midweek Memo each Wednesday, hosted by Mike Maharrey. To listen to any of our audio programs just go to MoneyMetals.com/podcasts or find them on whatever podcast platform you prefer.

Until next time, this has been Mike Gleason with Money Metals Exchange, thanks for listening and have a wonderful weekend everybody.

Mike Gleason

About the Author:

Mike Gleason is a Director with Money Metals Exchange, a precious metals dealer recently named "Best in the USA" by an independent global ratings group. Gleason is a hard money advocate and a strong proponent of personal liberty, limited government and the Austrian School of Economics. A graduate of the University of Florida, Gleason has extensive experience in management, sales and logistics as well as precious metals investing. He also puts his longtime broadcasting background to good use, hosting a weekly precious metals podcast since 2011, a program listened to by tens of thousands each week.