PETER KRAUTH EXCLUSIVE: Silver Dramatically Underpriced vs. Gold

Mike Maharrey: Greetings. I'm Mike Maharrey, a reporter and analyst here at Money Metals, and I'm joined today with my good friend Peter Krauth. Peter is a former portfolio advisor, a 20 year veteran of the resource market. He has a wide range of expertise in precious metals, mining, energy stocks, and much, much more. He is the publisher of a new newsletter called the Silver Advisor, and then he's also the publisher of the Silver Stock Investor Newsletter, and he's the author of an excellent book on silver investing called the Great Silver Bull. Peter, how are you today?

Peter Krauth: I'm doing well, Mike. It's nice to be here once again with you.

Mike Maharrey:Well, it's always a pleasure to have you. You're an all-around nice guy and I always love talking to you and hashing out things that are going on in the world of metals, and I want to start off, I'm going to give you a little bit of hard data and we're going to start talking about gold a little bit. Gold drove from $2,500 to $3,000 in just 210 days. And to put that into a little bit of a historical context, it has taken an average of 1,700 days to reach previous $500 milestones. So going from $500 to $1,000, $1,000 to $1,500, well over 1,500 days. How surprised are you by how quickly gold has driven upward and eclipsed that what was kind of out of reach $3,000 level for a long time?

Peter Krauth:Well, I'm going to say I'm surprised that I'm not. It's one of these things that those of us who are sort of in this space have been expecting these kinds of moves for a very long time, and I guess we become a little bit jaded. We know it's coming, we expect it's coming when it actually comes, we're actually a little bit surprised ourselves. So I guess that's kind of the best way to say it. I am and I'm not. I absolutely expected this to come, but I guess the speed at which it came, the momentum it came with does surprise me somewhat and the staying power it had so far also has surprised me somewhat, but there are all sorts of things going on worldwide that I think are driving a lot of this. So if you look at the landscape, I guess you do get a lot of support for why gold is at these levels and why this is still, I think still relatively early days in this bull market.

Mike Maharrey:Yeah, I agree with you and also I think you make a really good point when you mentioned the staying power because when we hit that $3,000 level, I really expected to see a consolidation and several runs at that $3,000, and I think it took two before it actually stuck, which was kind of surprising. I'm like, you kind of feel like this is coming, but then when it does, then you have all these self-doubts, right? Absolutely. Yeah. It's really been fascinating to watch the trajectory of this. Now I'm sure that as a guy who's really got your finger on the pulse of the silver market, you get asked this question all the time because literally almost every day somebody asked me what's wrong with silver? So Peter, what's wrong with silver?

Peter Krauth:Absolutely nothing.

Mike Maharrey:Yeah, that's my answer too.

Peter Krauth:No, I mean it is a matter of perspective I guess, but mining CEOs were complaining when silver was at 18 or $20 and they're still complaining when inside $32 and $34. Frankly, I think silver is continuing to somewhat do what it always does, which is lag gold, and we are still at elevated historically elevated levels of the gold silver ratio in the low nineties, like 90, 91 or so, and that is going to correct at some point. I know everybody hears that all the time, and the question is when, but if you want to be positioned for the outsized gains that it will bring you stop asking when just get positioned right, because when it comes, it does come hard and really fast, and so you want to be able to take advantage of it, I think. But to be fair, if we dig a little deeper in terms of why silver is acting like this right now in terms of why may not be keeping up with the kinds of gains gold has had, again, if I step back for a second, if you look at the ratio, we've been at these elevated levels for some time, so I'm talking about around 90 or so.

So if you look back at the last sort of year, couple of years, it's really not behaving all that differently. Where it is behaving differently is over the last say decade or a few decades when the average of the ratio is much lower, so sort of around 55 or 60. But in I guess sort of recent times, if you are looking for perhaps reasons why silver has underperformed gold, I think some of it has to do with its industrial aspect.

And given the issue with tariffs, given the issue with uncertainty with high inflation and likely ongoing high inflation despite central banks cutting rates, I think that that is what the market is sort of pricing in to some extent to the silver price saying, look, if a big part of it is industrial and things are slowing down and tariffs are creating uncertainty and likely to contribute to some kind of an economic slowdown, then perhaps the demand for silver will come off on the industrial side and that will dampen the overall demand for it. So, I think that certainly is feeding into it.

But I think that if that in hindsight ends up being the case, then I think that it's actually giving us once again a bit of an opportunity because I've looked at the numbers and I forget what they are specifically, but if you looked at how silver behaved when the Fed started cutting rates and then when the Fed was in about halfway through its cutting rate cycle, the once that I do remember was within about on average within about a year to two years, silver was up hundreds of percent. I mean seriously over 300%. I think if you look at the last couple of large rate cutting cycles, so the outlook for silver is actually really looks extremely bullish and there's always talk about how it's potentially being manipulated, pressured downwards and so on. I don't follow the silver futures market a whole lot. I know that it is important and what I do follow to some extent is the flows of physical silver, and that's been a really big deal since last November because of the threat of terrorists. And again, the specifics I don't follow, but I do know that silver lease rates right now, I can't tell you the exact specific rate, but they are much higher than normal and that speaks to serious tightness in the physical silver market. So there are some interesting pressures around the silver market right now, and despite its price seemingly capped so to speak, it's sort of boiling under the surface, I guess is the best way I could explain it.

Mike Maharrey:Yeah, that's a good way to put it. It's interesting to me, I've always kind of felt like the big gold bull run was going to happen when we really experienced the unwinding of the Covid monetary policy, which really was just an extension of the 2008 monetary policy. We've had nearly two decades of artificially low suppressed interest rates, loose money, and it's interesting to me that we've seen this big surge in gold even without really yet having seen that economic chaos and a situation where the fed its hand is forced to push interest rates even lower. And so I think it's interesting in that dynamic that we're actually seeing this bull run absent really significant loosening. We've seen some obviously, but not to the extent obviously what people would like. How do you see the monetary policy part of this playing in?

Peter Krauth:Well, I agree with what you just said. It is very interesting that gold has been so solid and being able to make and maintain these gains in this kind of environment and really despite the fact that yes, monetary fiscal policy have been very supportive for higher gold, I think is very early. And what we're about to see is going to just help sort of skyrocket the gold price. About 10 or 15 years ago, I was talking to a banker and said to him, I mean, I think gold was $400, $500, $600 at the time, and I remember saying that I think it's going to $2,000, and he thought I was crazy, and yet we're 50% above that now and it's looking really solid almost 20 years ago I was saying eventually we're going to see gold go through the $5,000 level, and in the book I talk about $5,000. I use it as a price assumption to look at ratios and different kinds of things to where ultimately silver could go. And I actually think that $10,000 is a lot more realistic, frankly in gold, and that's a triple from here almost, which really doesn't sound all that challenging anymore.

What I do think, and to back to your point from before is that I think the market is kind of sniffing out that we are due for some kind of a serious economic slowdown. Certainly the ingredients are there for that right now, and the Fed is as it has often been stuck between a rock and a hard place and it cannot ignore the deficits. It cannot ignore funding deficits and funding deficits at relatively high interest rates. And it says it doesn't take those kinds of things into consideration. I don't believe it, frankly. I think when push comes to shove, it will have to, and I think the market is sniffing out that when the Fed continues to cut rates in the face of elevated inflation, that is when I think it will lose the last grain of credibility hit might still have. And the market would say, okay, that's it, game over. And then you'll see gold jump by perhaps hundreds of dollars in a matter of days or weeks, and then I think that you will certainly start to see silver really catch up in a meaningful way. And to be fair, again, silver, we also know historically it tends to lag gold and it tends to outperform. In fact, it has always outperformed gold in bull markets that comes later.

What I think is interesting too is that if you look at how silver has been acting, let's say in just the last couple of weeks where it has basically maybe kind of gone sideways while gold has made new highs, I'm actually wondering if silver is not a little bit ahead of gold in this case, silver, silver miners looking ahead and saying maybe things have gotten a little rich and have gotten a little overbought and gold likes uncertainty, and we're speaking today on April 2nd when a bunch of these tariffs are supposed to come in. And we may get clarity around what that is. I mean, who knows for 24 hours or something, but we may get some clarity, right? And if the market starts to feel like it has more direction on where some of this stuff is heading, maybe that is a bit of a trigger for gold to retreat somewhat because I do think that it is overbought on a technical basis, and if we get that, I think silver is maybe a little bit better prepared to weather that a little bit. I do think it would come off along with gold, but both will hand us I think what will be very attractive opportunities to buy in or to add.

Mike Maharrey: Yeah, I think you're absolutely right about that regime uncertainty. I think it’s a huge factor right now just in all of the markets, stocks, bonds, precious metals, commodities, no matter what. And maybe we will get some clarity. I will say this though, I think that the modus operandi for Trump is uncertainty. And I honestly, I think that has a lot to do with that he's primarily driven by pragmatism. I don't really think… he's definitely not a principled politician. He's not Ron Paul or a Bernie Sanders. He's very pragmatic, and so he's apt to flip and flop and shift and negotiate and bargain, which works great in the business world, but markets do not like that at all. I think you're absolutely right. I think a lot of people are looking for that clarity. Do you have any sense in terms of silver, let's say we do get the tariffs, let's say it gets put in stone. We understand what they are. How do you think that is going to affect the silver market? I would think it would have more impact on silver than gold given the industrial importance of silver. Have you given that any thought?

Peter Krauth:Sure. And that's part of a little bit of my working narrative that I explained a little bit just now, is that because of its industrial component and that has become gradually more important in terms of the demand side of silver over the last decade or so. I do think that silver is a little bit at risk for somewhat of a correction. We're talking at this point maybe to the tune of 10, 15% on the metal’s price. But if you think back in terms of what I was saying earlier in terms of the outlook, there's always the monetary side. And I think that people do discount that for silver. And I like to say that it's the industrial component that provides a rising floor under the silver price, but a stable one. And then it's the investment demand on the side on that side that will come in. It ebbs and flows, it comes in a big way. Sometimes it moves back out and it comes back in. And when it comes in a big way, I mean it can be overwhelming. And what I find really something interesting to consider is that if you look back 10 years ago, so here's how I split up the silver demand market.

It has been traditionally about 50 50 industrial and 50 investment. And when I say investment, I include physical coins and bars I include, include jewelry, and I include silverware. So for me, that makes up the 50% and a lot of it's for simplicity's sake.

In fact, in the last 10 years, a lot of the reason for that is solar. You've got EVs to some extent and so on, but the industrial demand has actually moved from about 50% to closer to 60% now. So that leaves 40% for investment. So my argument is when investment demand does come back in a big way, there's now less silver available to meet that demand. So what happens when you've get the same or more demand as you've had in the past coming in a big wave and there's less supply available for it? Well, the same buying is just going to push it up even harder and faster and higher. And so I think we are in for volatility and some considerable upside volatility in the silver price because of that. And back to my economic narrative, if you go forward and you get this situation where you've got central banks in the Fed cutting rates in the face of sustained high inflation, and the market's saying, okay, that's it, getting over. I think that who knows, gold may be $3,500, maybe $4,000, whatever, but still fairly higher potentially than it is right now. And investors really starting to pay a lot more attention to gold and saying, wow, one ounce of gold, $3,500, that's little rich. What other options do I have? And then who knows, silver might be $35, $40, $50 at that point. And relatively the amount of silver you're getting for your money is a lot more content wise.

So, I certainly could see a little bit of that shift and people saying, wow, that makes silver a whole lot attractive. And then you get this big wave of investment buying and then it really pushes this silver price up a lot higher. I think that later this year it is very realistic to possibly see somewhere around $40 in silver. And I do think that odds are pretty good for next year to have silver potentially take out its, what is it at that point, a 50 60-year high of $50 at some point in 2026. So the outlook is bright, let's put it that way.

Mike Maharrey: Yeah, I think people, and I'd be interested if you agree with this, I think sometimes people underestimate the government support under the industrial demand. And by that I mean the fact that we have somewhat of a global consensus. The Trump administration may be an outlier here, but I think broadly speaking, there's a lot of support for green energy, clean energy, solar. There's a lot of government subsidies involved in that. I don't think that's going anywhere. I don't see all of a sudden governments saying, oh, well we don't care about climate change anymore. Obviously there would be some impact from a recession, but I really do think that the government supports some of that industrial demand. Do you agree with that?

Peter Krauth:I completely agree. In fact, I think that that was what we saw coming out of the financial crisis, that the stimulus was very much a green and infrastructure oriented. I think that that was an easy sell for governments because

Mike Maharrey:Yeah, always is.

Peter Krauth:Right. It always is because people don't push back much saying infrastructure, green energy, it's the right way so to speak, and infrastructure everyone benefits from. So at least everyone's thinking, well, my roads are going to improve my airports, my rail tracks, all that stuff is going to improve my power generation. All that stuff gets better. Two interesting things I'd like to point out. One is that just yesterday I came across a chart showing that in the US for the first time in 2024, renewable energy surpassed coal for Oh electricity. Oh yeah. So that was very interesting to see. And the trend is up for that would include wind and solar. Solar is going to be the bulk of it that's trending upwards. Very supportive for silver. Absolutely. With silver being so important to solar and new generations in solar technology actually requiring up to 50% more silver per panel.

So that's something keep in mind. The other thing is we talked about stimulus and green and so on, and governments now, I mean this is something I think that a lot of us are missing in North America at least, is that Europe is looking for, in my view, to some extent, excuses to spend on re-arming and also looking for ways to spend even more on green economy, green environment and so on. And so you've got Germany for example, that, and this is from arguably right leaning new leader who's saying, we want to bring in something like a $900 billion package to spend on re-arming and to spend on supporting green energy. Part of that is to appease the grouping they have to make in government because they can't form a government alone. In fact, they're passing constitutional amendments to allow increases in defense and infrastructure and even foreign aid that through increased borrowing that was not allowed in the past.

So, to think that they're willing and able to change, or at least proposing to change their constitution to allow all this new spending. So this new spending is bullish for silver in a couple of ways. One, the green energy side is certainly for solar EVs, EV chargers to some extent wind, nuclear and so on. So you've got that. And then the re-arming. So unfortunately the silver market is notoriously lacking in information in terms of the demand for silver in military applications. But we do know it's there. We do know that it's significant. And so if you've got this huge re-arming program for Germany and for Europe, then the demand for silver, the demand for metals is just going to continue going through the roof.

To some extent, to their credit, I know this is true in Canada, it's true in the us we're hearing about it a lot in Australia and in Europe, Western Europe, at least, that governments there are looking to streamline mining and infrastructure projects. In Canada, for example, the hopeful new, we're having an election soon, and the hopeful new prime minister is saying that he would eliminate. So, we've got project approval for mining on the federal level and on the provincial level, which is the state level in us. And he's basically saying, well, you know what? If we've got a robust system to evaluate and to permit projects on the provincial level, we can eliminate the federal level.

So that's probably going to cut a matter of years off of permitting for projects. And you've got, as I say, similar things happening in Australia, similar things in Western Europe. So that will again help push all of this production of metals to help feed the demand. Part of it is also I think, driven by a new world order that is becoming polarized. We don't feel like we're comfortable depending on suppliers and clients, people who will buy from us as readily as we were in sort of the more globalized world. So that's I think driving a lot of these new policies as well.

Mike Maharrey:Yeah, you hear the term bipolar coming up a lot. Which could infer I guess insanity, but I think what they really mean is multiple economic centers. I'm going to get you out on this one. I don't know how big of a technical in that and analyst kind of guy you are, but it is interesting to look at kind of the cup and handle formation that we've had in the silver market going all the way back to 1980. So you've got these two $50 highs which form the tops of the cups, and then you've got a handle that's kind of been going since about 2011. Do you put much stock in this kind of technical thing because this would signal historically in technical analysis a huge breakout in the making?

Peter Krauth:Absolutely. And yes, I do put a fair bit of weight to it just because I know that I'm not going to quote, but I guess I'll sort of paraphrase Jim Rogers here because he said too, he himself didn't consider himself to be a technical analyst, but he said, and I very much agree with his point, that there are many technical followers out there and for that reason alone break breakouts and will be meaningful. And so yes, I do think this will help create momentum. And so I actually, a friend and colleague, Jordan Roy-Byrne, who writes, I'm going to give a shout out to him. He writes a newsletter called The Daily Gold, this fantastic technical analysis, and I often refer to his work, and Jordan has said that the silver, I think along perhaps with commodities in sort of modern history are once at least silver breaks out of the $50 level.

This will be, if not the one of the single most significant technical breakouts of all time. And he said the 35 to $37 range, which we're very close to right now, once you get a breakout from that range, then very, very meaningful. And then once you get a breakout of $50, that is absolutely completely uncharted. Waters all new. You could get huge moves subsequent to that, perhaps to $70, $80, a hundred dollars within a matter of weeks, months after that. So yes, I do attribute a lot of value to that because as I say, many people follow it and I think that it'll get a lot of headlines at that point and it'll attract a lot of eyeballs and a lot of buying.

Mike Maharrey: And I think you're right. I think that $35 level is kind of the first big hurdle. We've seen it kind of bump up on that a few times and it's retreated. But I think once we hit that, then it's going to be or could be a short trip to 50. And then as you say, then all bets are off. I actually had Jordan on the show a few weeks back and he's fantastic. Yeah, he's got a really good long, very long range lens that he looks at things through. Well, I'm going to let you go. I'm sure you've got plenty of things to do today, but before we have you sign off, I would like for you to let folks know where they can find your newsletters and follow your work.

Peter Krauth:Thanks Mike. So yes, my main newsletter is Silver Stock Investor. You can go to silverstockinvestor.com. That's a paid letter. I also have recently launched at the beginning of this year, a free newsletter called Silver Advisor. And this is companies that perhaps maybe a little bit larger, a little bit more advanced, slightly lower risk companies that you can follow there. As I say, for free, just go to the gold advisor.com/registration and you'll be able to sign up for that newsletter there. And then you can follow read my book, which we've talked about before, the Great Silver Bowl, which gives you, I think, a good overview of the opportunity in Silver. And it's a good introduction I think, for people to the whole Silver Space. Other than that, I'm pretty active on Twitter or now X at Peter Kraut, K-R-A-U-T-H, and I'm also on LinkedIn, Peter. So these are different ways to follow me and certainly look forward to interacting with your audience.

Mike Maharrey:Yeah, I'm glad you mentioned the book because people need to get that book. I tell people all the time, if they want a good overview of the Silver market, your book is fantastic. And the thing that I like, I say this every time I have you on the show, but the thing I love about it is that the way you've put it into digestible nuggets, you don't have to wade through 40 pages of technical analysis to get the point. You can go through the various bullet points. It's so well done, and I really appreciate that book. Thanks. Thank you so much again for taking time to be on the show. I'm sure we'll have you on again here in the near future as things continue to develop, but I always appreciate your insights and your ability to communicate those insights in an understandable way. So thank you so much.

Peter Krauth:Thank you, Michael. It was a pleasure. Looking forward to it.