Over the last few weeks - in the midst of all the volatility within the Dow Jones and S & P 500 - it could be argued that the recent price action in gold has now started to show the average investor that when investor confidence starts to shake - gold can react accordingly.
Gold’s current strength within the backdrop of a downturn in the general markets has begun to shift investor sentiment towards the precious metal as an asset class that - perhaps finally - represents the safe haven status that all contrarian investors know and love.
And if more volatility spreads across the general markets - which in turn will continue to shake the average investor’s confidence - it’s inevitable that more eyes will turn towards gold and eventually, to silver.
And why silver? Because - as seasoned contrarian investors in the precious metals space already know and understand - once gold begins a move, silver usually follows.
And perhaps now - we might be beginning to see the start of that move in silver.
For a forgotten asset class like silver and the mining related equities, the recent rise to around $15 per ounce has given patient, contrarian minded investors, a renewed sense that it was wise to stay patient and watch the story play out.
After all, since the last price run up in 2011 has anything changed to the fundamentals behind the silver story? Have the demands and uses for silver decreased since then?
It would be fair to say that the price action in silver over the last few years has made a lot of investors question if it will ever return to the 2011 levels and beyond.
However, we believe that when an asset class is left alone and forgotten about - where the fast easy gains are perceived to have come and gone and are never coming back - is when contrarians with a long term horizon can really show what they are made of.
For contrarian investors sometimes the hardest thing to do - is to simply do nothing.
Usually when there is a long drawn out period of consolidation in a market - when prices appear to drift sideways over many months or even years - then the average investor either loses patience, gives up, and usually moves on to a more bullish sector that offers the promise of quick easy gains (that never usually work out).
When instead - as contrarian investors - we should keep researching the fundamentals, analyse what is happening, and focus on the markets we know and understand.
And if the story hasn’t changed, if the premise of future higher prices is still on the horizon, then we should sit tight and stay patient.
During 2018 we had the pleasure to interview a few key figures within the silver industry to gain a better understanding on how the silver market may play out over the next few years.
Having investment and speculation experience in the silver sector - and gaining advice from investors who were around and profited in the last bull market - is rare. And trying to find successful investors who were around in the last Silver bull market isn’t an easy task.
But back in August (when pessimism within the entire commodity sector was perhaps at its highest) we caught up David Morgan - an expert in the silver space and a participant in the last silver bull market - for an in-depth interview on the psychology of markets, silver, and other commodities. View the entire interview here.
Another speculator that has had success over the years within the resource space is Lobo Tiggre (who was previously known as Louis James) and back in April he gave us his thoughts on silver and why he is still bullish on the metal. View the entire interview here.
To conclude, many financial commentators are now starting to talk about gold, and as it continues to move in a more constructive fashion, more average investors will begin to start looking at this forgotten safe haven asset.
And when it starts to move with full force - with a big move that may continue over the next few years - gold will firmly have everyones attention once again.
And silver? Well, i would suggest that today’s prices are only the beginning of what’s to come next.
Until next time, happy contrarian investing.
The Palisade team
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