With gold hitting an all-time high, closing in on the US$2,000 per ounce mark, and silver also on the rise, many investors are wondering if it’s still a good time to jump into precious metals.
Speaking at the recent Sprott Natural Resource Symposium, mining entrepreneur Ross Beaty shared why he still likes gold and silver. “I love gold for all kinds of reasons,” he said. “And I love it because it’s a relatively easy thing to build a mining company around.”
Beaty is the chairman and founder of Equinox Gold (TSX:EQX,NYSEAMERICAN:EQX) and Pan American Silver (TSX:PAAS,NASDAQ:PAAS), two companies that he of course sees as the best plays right now.
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“I’m long gold because I really think we are now, again, in a very beautiful long-term secular gold bull market,” Beaty said. “It began at the beginning of 2016, after four years of bear markets — this one is going to go longer and stronger for all sorts of reasons.”
For the mining legend, the overarching reason for the gold bull market that is happening right now, and will continue to happen, is simply the debasement of fiat currencies all over the world.
“It’s not just in the US, where it’s happening at record levels, but it’s in Europe, it’s in Japan, it’s in China, it’s all over the world,” he said. “When countries print money, when they live way beyond their means, gold has to be seen as a good investment alternative to stocks and bonds, or even currencies.”
Beaty pointed out that governments have been behaving the same way for millennia, overspending, not having enough revenues and printing money.
“The value of their currency goes down, inflation often happens in prodigiously high amounts and gold is one of those metals that has simply held its value,” he said. “I really see gold as having a binding value today in an environment where governments are just printing money like crazy, and where debt doesn’t seem to mean anything.”
In January, Beaty said gold was in the fourth inning of a bull market, and the coronavirus pandemic that hit the globe this year has simply thrown gasoline on the fire.
“It’s no surprise to me to see the gold market as strong as it is. I don’t think it’s over. I think we’re maybe in the fifth inning, and it’s just going to go longer and stronger,” Beaty said. “I don’t know to what level, I don’t know when, but I’m profoundly bullish on gold.”
Looking over to silver, which has rebounded from its March low of US$12.59 per ounce to its current level of around US$25, the future is also bright for gold’s sister metal.
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“The thing about silver is you’ve got to understand not just the conditions in the precious metals market … but you’ve also got to understand what’s going on in the industrial market, because silver has all these industrial uses,” he explained.
For Beaty, overall demand for silver has been less strong for two main reasons: China has changed its style of industrial production and COVID-19 has hit demand for all industrial metals hard.
Speculating on what could happen later on this year, Beaty said that if industrial production picks up and silver demand picks up, silver could easily outperform gold.
“(That’s) because it’s going to have bullish demand both as money and as a precious metal, and it’s also going to have bullish demand as an industrial metal,” he said.
However, if industrial demand doesn’t pick up, Beaty sees silver continuing to underperform against gold — and it won’t do as well.
“But in the market today, even today’s price is pretty good for most silver companies. Certainly it’s great for Pan American Silver. But I wouldn’t say I’m as perfectly bullish as I am for gold on the silver side — I am bullish, but not crazy bullish.”
On Wednesday (July 29) at 3:00 p.m. EST, gold was trading at U$1,978.70 and silver was at U$24.89.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.
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Updated July 27, 2020