Coming up don’t miss an exclusive interview with Peter Krauth, author of the book The Silver Bull. Money Metals’ Mike Maharrey talks to Peter about a range of topics, including the slow death of the dollar, the future for silver and why he believes poor man’s gold is critical to our modern world. So be sure to stick around for a wonderful interview with Peter Krauth, coming up after this week’s market update.
Gold and silver are both showing resilience this week as gold recovered back to the $2,400 following a short-lived correction, and silver is trading above $28.50.
Money Metals’ contacts at large refineries have confirmed they are seeing heavy gold buying globally by institutional players and high-net-worth investors. This is on top of ongoing gold buying by central banks, including some strong demand coming out of China.
In recent days, Goldman Sachs grabbed some headlines when it raised its 2024 gold price target to $2,700. Not to be outdone, both Citibank and Bank of America are now predicting $3,000 by next year, citing large investor inflows and expectations of Fed interest rate cuts. And UBS announced it is expecting $4,000 gold in the next 2-3 years.
At Money Metals, we tend to give little credence to what mainstream pundits, banks, and financial houses say about gold. The reason these high price targets may matter, though, is because they are grabbing big headlines and drawing more interest into the sector.
Another big reason for the flight to gold since early March is the U.S. government’s effort to seize the assets of the Russian central bank. Actions like this to weaponize the U.S. dollar have put countries around the world on notice that their holdings in Treasury bonds and Federal Reserve notes aren’t safe. As Money Metals columnist Peter St Onge just wrote, “they can be seized any time you look at Joe Biden funny.”
Such threats are pushing countries and foreign investors in general toward gold. And since gold’s not a huge market, it moves the price pretty quickly.
Meanwhile, purchasers in the retail market for physical metal are heavily favoring gold over silver.
As of this Friday recording, gold prices come in at $2,406, gaining 2.2% for the week. Turning to silver, it currently trades at $28.81 an ounce to post a weekly gain of 2.6%.
Platinum is actually down 4.7% since last Friday’s close to trade at $942. And finally palladium is down 3.0%, now checking in at $1,053 per ounce.
As gold prices continue to soar, however, we anticipate interest will move to the much-cheaper alternative, silver. And silver almost always follows the action in gold (rather than leading).
Adding to the case for silver is new data from the Silver Institute on 2023 supply and demand.
Silver mine output actually fell by 1 percent to 830.5 million ounces last year. Silver demand also dropped slightly from 2022’s high, declining about 7 percent to 1.2 billion ounces.
So silver demand is at least 30% more than the new mine supply, meaning the shortfall must come from above-ground inventory. Unless global silver demand slows further on its own, it’s only a matter of time before the silver price will need to respond to this ongoing imbalance.
It’s not a bad time to top off your holdings of precious metals, particularly silver.
For the time being, premiums on gold and silver coins, bars, and rounds remain at multi-year lows – and Money Metals has tons of inventory available to investors right now.
Well now, without further delay and for much more on silver, let’s get right to our exclusive interview with author and resource sector industry insider Peter Krauth.
Mike Maharrey: Greetings. I’m Mike Maharrey. I’m a reporter and analyst here at Money Metals, and I’m here today with Peter Krauth. He is the author of The Silver Bull. I really appreciate you coming on the show, Peter. How are you?
Peter Krauth: I’m fine. Nice to be here with you, Mike.
Mike Maharrey: Well, I have a copy of your book here on my desk. I got it about a week ago, so I haven’t had a chance to read it cover to cover, but I have given it a thorough skimming. The first thing that really stands out to me is, it’s so well organized. I love that you broke everything down into really short, punchy chapters. You could almost take this book as almost a guide, where you don’t really have to read it page one to the end. You can really just go through it and pick and choose the type of topics you want to look at. I really like the organization. It’s really well-written, and there are no wasted words in this book. Nice job on it.
Peter Krauth: Thank you very much. I’m glad to hear that. I’m glad to hear that kind of feedback, because that really was the goal, and what I was trying to achieve by writing the book. I’m happy to say, too… obviously, I’ve tried to get it out to as many people as I could, especially people who are in the industry, and I’ve gotten feedback from people who are fund managers, and there are not many, but who specialize in silver. One in particular told me, she said, “This is ideal. This is a how to guide.” To hear that from someone of that stature, and really focusing on silver, an exclusively silver fund, really struck a chord with me, and I was really glad to get, as I say, that kind of feedback. That was my goal.
Mike Maharrey: Yeah, that’s high praise for sure. Again, it is so comprehensive. You go through everything from the history of silver and its use as money, and its industrial uses, distinguishing it between gold, and it’s just really well done. Let’s just start out, if you can give folks just a quick summary of your background, and what motivated you to write this book.
Peter Krauth: Well, sure. I have been researching, writing and investing in resources for the last 20 years. Going back about, at least 15 years, I started actually writing a resource newsletter for a group down in the U.S., and was with them for about 15 years. Eventually, some restructuring took place. I was off on my own, and started doing some freelance writing for mining companies, and had an itch to get back into the newsletter business. A former colleague, when I was writing a newsletter, kept pushing me and saying, “Peter, you really need to write a book. You really need to write a book.” Here we were, when I actually got started writing and made decision to do it, this would’ve been, I’m going to say probably March of 2021, so a year into COVID, and I thought, “You know what? He’s right. I’ve got all this research that I’ve put together.”
I had been writing a weekly report on gold and silver for my former employer, probably for three or four years, had accumulated a lot of data on the silver market, and I said, “That’s a great start for me. I can use a lot of that research.” It ended up really accounting for about, maybe 10% to 15% of the book, but it was a small hurdle I could get over, and say, “I can refer to a lot of this stuff.” I’m going to say, within about a week, I had an outline put together. I ended up not wavering, actually, much from that outline. I guess all that stuff was sitting inside me, on the back burner, and I was able to punch out that outline. That really helped me, because from that point I was able to say, “Yes, it’s going to be a lot of work, but I know where I’m going. I can just go in and fill in all these points and topics that I want to talk about that are in my outline.”
That’s where it started. Deep into COVID, middle of the winter, looking around and thinking, I’m not going anywhere. I’m barely seeing anyone. This is likely to be like this for a while. Why don’t I just go ahead and do it? I started, I absolutely said nothing to anyone, perhaps except my wife, for the first six months. No one knew I was doing this because I had to build the confidence I was going to actually finish this project. Six months in, I started telling colleagues and so on, and then I got lucky, because a few people with great experience really helped me out in the admin side of getting this up and running.
The same former colleague who encouraged me to write the book, I ended up convincing him to be my editor. He had decades of experience as a financial editor. I think he really helped to polish it, and gave me some great ideas in terms of the approach. I think that really helped to put the final finishing touches on the book. I like to say that, for this project at least, ignorance is bliss. Mike, had I known the amount of work this was going to be, I probably would’ve not done it, but now, today, I’m really glad that I did, so here we are.
Mike Maharrey: I’m amused, because there’s always people out there that are willing to create work for you. “Oh, you should do dot, dot, dot.” I like that you turned it on him, and got him to be the editor.
Peter Krauth: There you go. Yeah, exactly.
Mike Maharrey: I’ve written a couple of books, so I know the process. It’s not an easy thing, it’s a daunting thing. Again, you did a fantastic job.
Peter Krauth: Thank you.
Mike Maharrey: I want to touch on the subtitle, because it’s pretty provocative. It’s, Crush Inflation and Profit as the Dollar Dies. Now, I’ve been making this argument too, that the dollar is slowly dying, but when I say that, I get a lot of pushback. People say, “Oh no, the dollar is not going anywhere. The dollar is strong.” If you look at the dollar index, it does appear strong. I sometimes say it’s the cleanest dirty shirt in the hamper. I’m sure a lot of people, when you say that, will say, “Well, this is hyperbole.” I’m guessing you’re not exaggerating. Make your case that the dollar is dying.
Peter Krauth: You just have to look around. Here’s a perfect example. The U.S. is a huge debtor, $34 trillion. That debt is growing at a rate of a trillion dollars every 100 days. We’re at a point where the interest alone on the debt is a trillion dollars annually and growing, and growing faster if rates don’t come down. You just have to look at inflation, and what people are paying for things. I don’t think there’s anyone listening right now who will disagree, especially because it’s been so notable, and everyone feels it viscerally, that in the last three or four years essentially, nearly everything has doubled in price. If you look at the compound rate of inflation on just about anything you spend on, whether it’s rent, food, cars, gasoline, travel, entertainment, whatever it might be, I’d be hard-pressed to find someone who would not agree that it feels like prices have essentially doubled.
The dollar is really being inflated away. I talk about in the book, and this is not the first time in history, since the dollar’s been essentially an unbacked currency, that we’ve had periods of what I call financial repression. That’s where rates are kept purposely below the inflation rate so that the average person who perhaps is not aware, doesn’t understand how they can invest to protect themselves, to have some kind of buffer against that loss of buying power, is going to see the buying power of their dollar whittle away over time, and that just makes it easier for the government to service its debt.
I absolutely believe without a doubt that the dollar is dying. It doesn’t mean it’s an overnight thing. It’s a death by a thousand cuts. It’s a slow death, but it’s a death nonetheless. If you look at 100 years of history, since the dollar has been a fiat dollar, it’s purchasing power is down 93%, or probably more, actually, but let’s go with 93. It’s enough. I just don’t think that there’s much argument to be had. The fact that you’ve got, and these are anecdotes, but backable anecdotes, the fact that you’ve got someone like Costco, someone where the average person shops, I would think, selling 100 to 200 million worth of gold and silver every month.
I’m a real die-hard Costco shopper. I’m there every week, and I see those 10 ounce bars of silver. I see the one ounce bars of gold. I look every time I go in, and I see that price go up, and it tells me that people are waking up to this, and they are starting to clue in. They realize that they need to find a way to hedge the loss of their buying power, and they are turning to the longtime tradition, which is gold and silver. Yeah, that’s my rant.
Mike Maharrey: Very well put. I’ll give you another anecdotal on the other side. There was a Wall Street Journal article that came out, I think this week, talking about the fact that Americans are throwing away millions of dollars in coins, because they just don’t see any value in coins. It’s interesting, because if you go back to 1964, when quarters and dimes and half dollars had silver in them, you throw away a 1964 quarter, you’re throwing away five bucks.
Peter Krauth: That’s right.
Mike Maharrey: Nobody’s going to do that. But when you’re throwing away a quarter, which, according to the article, and I think sometimes, these things are even understated, it said that a quarter in 1980, the buying power of that basically was a dollar compared to what it is today. It’s even worse, obviously, when you go back.
Peter Krauth: If I may, Mike, I have another interesting anecdote that relates very much to that. I knew someone, this goes back, I’m going to say about 15 years or so. This was a guy who was, like us, very clued into what’s going on. As I say, it goes quite a ways back, so early days, did a lot of his own research. He was buying Canadian silver maple leafs that have a $5 indicated nominal value on the front of them. He was buying them for $4 Canadian at the time.
Mike Maharrey: That’s crazy.
Peter Krauth: He could not go wrong. There was a built-in 25% automatic gain for him. This is arbitrage. You’ve got people around who see and recognize these opportunities, and they take advantage of them. That’s, I think, how we all need to be thinking today. It’s sad. This should not be the concern of the average person.
We should not be spending our time thinking, how do I earn money, and then worry about protecting my purchasing power. That is ridiculous, and yet, it’s a reality. This is what we live with. I’m reading a book that talks a lot about economic history, and it tells us about the history of fiat money, which is really the last 100 years, essentially. A bit less perhaps, but roughly, 100 years, a world reserve currency that is fiat, never happened before, hopefully will never happen again. He was making all kinds of great arguments about how you could have a very successful, large multinational company that has all kinds of proprietary advantages, and yet, would have an entire department spending all kinds of resources researching and worrying about exchange rates, because their inputs come from different countries, and they need to worry about, by the time I get this material or this part, and it goes into my contraption, whatever I’m manufacturing, how’s that going to affect my bottom line?
If that thing is valuable enough, and the exchange rate goes against them by the time that product gets to market, because it’s already priced in advance, that could wipe out their profit. Think of the time wasted and spent. Forex markets are in the quadrillions of dollars. It’s unreal. I think it’s something like 1000 times what the worldwide GDP is. It’s just absolutely off the charts. It’s very sad. This is where we are today, but people do need to be aware. Look for those ways to hedge yourself, find protection. Again, the precious metals, for thousands of years have been the way to do that. People in the East, China, India, Southeast Asia, the Middle East, for multiple reasons I’m not going to get into, they’re much more savvy when it comes to this, and that’s why they have this long, cultural affinity to precious metals. I believe that, actually, we’re helping their future domination by allowing this huge global devaluation of fiat currencies, because they are big, big owners and buyers of precious metals. We’re giving them the advantage.
Mike Maharrey: You hit the nail on the head. You think about, why do we have money? It’s to help us understand value, and exchange value. Instead of having to figure out, five oranges is worth three pears, we have money that gives us a medium of exchange that makes sense to everybody. And yet, with government fiat, none of it makes sense.
Peter Krauth: That’s right.
Mike Maharrey: They’ve destroyed the entire purpose of money. I would argue, and this is going far afield, we don’t have to go down this pathway, but I would argue that it’s really all about government power, and folks who can access that power enriching themselves.
Peter Krauth: I’ve often read and heard that it’s the first who have access to this printed money that benefit the most from it. As time goes by, that money, because obviously, we have fractional reserve banking, so this gets multiplied, but over time, the effect is less and less. It really is, as you say, the ones who have the initial access to that money that have the most benefit. In the book I talk about… and again, I think you’re right. My idea was to really try and boil things down to as simple as possible. I talk about, what is money? I say it’s a few things, but one of its main things is a store of… I tried to put it this way. It’s a store of effort. You work, you save, your savings are represented in that money, in that currency. We really should use the word currency, because money is gold and silver.
Our savings are stored in this currency, and yet, you can’t plan properly, because that currency does not keep its value. If you worked, and you put those savings into this currency, and you hold that currency for, I don’t know, today, it doesn’t take long, but let’s say three years, five years, 10 years, and there’s little to no earnings on that currency, you’ve just whittled away your work, because it no longer buys you what it bought you at the time that you put that effort in. It’s very sad. As you say, it’s all being debased, and we’re essentially losers unless we have ways to hedge that.
Mike Maharrey: I’ve never heard that term, a store of effort. That is perfect. That is the perfect term for it. You say that silver is the ideal money, and I think most people will think gold first. Why do you prefer silver? Make the case for silver.
Peter Krauth: There are multiple reasons. If you just look back historically, let’s start with that, silver was actually used as money before gold was. There was a time, this was, I think, probably in the first civilizations, that you had dual money at the time. I think it was barley and it was silver that were both used in these earliest civilizations. I think over time, because silver relative to gold has a lower value by weight, it is easier to use in daily transactions. I’ve heard before, a few times, that it’s estimated that throughout history, there has been more business transacted through silver than gold, because gold is a way that you store wealth rather than use to transact. Obviously, it makes for great money, and it makes for ideal money when you’re doing larger transactions, because you need to transport less, and move less around to make large payments.
And then, if you just look at up to maybe 50 years or so ago, in the U.S. and a lot of western nations, we had silver in our money, and it was in the coinage. The coinage, obviously, is something that is for everybody, for every day, and you could pay for small things. Today, a silver maple or a silver eagle, let’s say, roughly worth about $30, $35 or so, is a few hours of labor. You could technically go out and buy groceries with that, pay for some meals, pay for some gasoline. It really is a daily, natural form of money compared to gold. You’d need to have fractions of an ounce of gold to pay for things. All of these reasons, I think, explain why it makes, and has made a perfect kind of money.
Mike Maharrey: Yeah, the proof is in pudding, right?
Peter Krauth: Yeah, exactly. Perhaps Mike, I shouldn’t say perfect, because really, nothing is perfect.
Mike Maharrey: Right.
Peter Krauth: I think that it’s proven itself. Because of the volume of use of silver, it’s proven itself historically as, perhaps… until otherwise, until something else comes along, it has proven itself as the best found form of money.
Mike Maharrey: I’ve been arguing for quite a while, and I’m going to shift gears a little bit here, but I’ve been arguing for quite a while that silver is drastically under priced right now, just given the supply and demand dynamics. You do touch on this in the book. Can you just share some of your thoughts on the current price, and the underlying fundamentals for silver?
Peter Krauth: Absolutely. I do have a table in the book that compares the price of silver with other metals, base metals, platinum group metals. This goes back to 1980, and I believe the table was produced in probably 2020 or 2021. If you compared all of the base metals, and the precious metals, and the platinum group metals with their price in 1980, they were all dozens of percent if not hundreds of percent, and in some cases thousands of percent above their 1980 level. Silver was the only one of all of those that was still below its 1980 high. You can make all kinds of arguments. 1980 was a fluke, it was a one-off. I don’t think that matters that much. You could still take half of its price in 1980, let’s say $25, it only recently passed that. It’s been above it, sure, but if you look at a long-term average, it’s been below it.
It’s very much undervalued. Silver is a consumed metal compared to gold, and that’s changing. It used to be, until a few years ago, about half of silver was industrial. The other half was what I call investment. I combine buying bars, coins, jewelry and silverware as investment. I’ve just lumped those together, and that accounts for the other half of silver demand. Actually, the industrial side has grown, so it’s now taken over, and it’s become more like 60%. I think that the absolute most recent data shows it’s even higher than 60% now. What that means is that a lot of silver is used in industry, so it’s consumed, and because the way it’s used often is in very, very small amounts, it makes it uneconomic to recycle.
It just ends up in landfills. We don’t get that silver back. Most of it we do not get back. The silver market is about a billion ounces a year of supply, something like 15% of that supply comes from recycling, and the other 80% to 85% comes from mining. Despite the demand, which has been growing tremendously for the last several years, we have not seen mine supply react at all. In fact, mine supply peaked in 2016 at 900 million ounces, and we are currently right around 800 million ounces. This is eight years later, with demand having grown somewhere around probably 30% or 40%, and yet, mine supply is not keeping up. There’s no parallel reaction from the supply side, which is supposed to be economics 101, you have higher demand, you’re going to get higher supply, and there are a few reasons for that.
One of them is that 70% of silver does not come from primary silver mines. It comes as a byproduct of mining other metals like copper, gold, lead and zinc. 70% of the output of silver depends on mining other metals. If you don’t have growth in mining of these other metals, it will seriously impact the output of silver that comes from mining. If we are going into a recession, you can make some reasonable arguments that, especially lead and zinc for example, perhaps even copper, will perhaps plateau, or even dial back. That would automatically affect the amount of silver that comes out of mining. That could be regardless of the silver price, because those producers could care less what the silver price is. If the silver price goes today from $28 to $50, they’ll say, “Thank you very much. I’ll take the $50, and so be it. I’ll continue producing as I always produce. It’s an afterthought for me, and it will boost my bottom line, but if it’s not there, I could hardly care.”
The silver supply is inelastic to the silver price. It’s very, very particular. That just adds to the upside volatility in silver, because you could get more demand for silver, a higher price for silver, and yet, no new supply coming to market. If you’d like, we can go into some research that I’ve come across in the last few months, that I think is very pertinent to the state right now. Interestingly enough, I’ve seen, shortly after I came to my own conclusions, that a few investment banks are really, now, seeing very similar things, and have very similar targets. It just makes me more confident about my conclusions.
Mike Maharrey: Well, I don’t want to you, because we’re bumping up on time, but I totally agree with you. I think it’s interesting, if you look at the demand side, it’s only going to keep growing because of this continuous push for green energy. No matter what you think about green energy, the push is going to continue, and so much of that is government subsidized. A lot of people will say, “Well, if we have a recession, then demand for silver will go down.” Not necessarily when you have government subsidizing one of the primary industrial uses for the metal. I’m with you, I’m very bullish, just taking aside the monetary aspect, just looking at fundamental supply and demand.
Peter Krauth: Mike, if I could give you one stat.
Mike Maharrey: Absolutely.
Peter Krauth: I think this is probably something that your listeners really need to take away from this. I spend my days looking at numbers in the silver market, and researching this. I consider the solar consumption of silver, because it’s integral, it’s indispensable to solar panels, to be the 800 pound gorilla in the solar market. Solar has now become 20% of all silver demand. It grew last year by 64% over the prior year. You have to pay attention to what is happening in the solar market. Even if solar panel production went flat for the next five years, we would still need more silver for solar because we are transitioning to new technologies in solar that are requiring from 50% to 150% more silver per solar panel. This is not going away. It’s only going to mean more silver is going to be required. I have to say that much. This is, in a nutshell, one of the big things people need to know about, and pay attention to.
Mike Maharrey: Well, absolutely. Before we wrap up, I do want you to let people know where they can find your book, and where they can follow you, if you’re out there doing social media stuff. I’m certain people will want to follow you, and get this information as it comes out.
Peter Krauth: Sure. The book is The Great Silver Bull. You can find that on Amazon. It’s in print, Kindle and in audiobook version. Otherwise, I write a newsletter that is published twice a month. It’s called Silver Stock Investor. You can follow me at silverstockinvestor.com. I do proprietary research on silver. I cover the entire silver market, everything except the futures side of silver, but otherwise, physical silver, silver ETFs, mining in terms of large royalty and producing companies, all the way down to silver juniors. That’s a way to follow what’s happening real time in the silver market, as opposed to the book, that gives you a one-time overview of the opportunity, what I call a generational opportunity in silver. Otherwise, I’m active on Twitter, now X. You could follow me at Peter underscore Krauth, that’s K-R-A-U-T-H, and I’m on LinkedIn as well, and Peter Krauth. These are ways to follow me, and amazing opportunities, I feel, lying ahead in silver. Definitely something everyone should have exposure to in their portfolios.
Mike Maharrey: Absolutely, I agree completely. I really appreciate you taking a little bit of time out of your day to talk. I feel like we could probably go on for hours.
Peter Krauth: Oh, I agree.
Mike Maharrey: You’ve written a huge book about it, and I would love to have you back on at some point in the near future, to delve a little bit more into some of these subjects. We didn’t even touch on the gold/silver ratio, and the difference between the paper market and the physical market. There’s plenty to cover, but I do want to be respectful of your time, and I do very much appreciate you coming on.
Peter Krauth: Michael, it’s been my pleasure, and anytime you want to have me back, I’ll be glad to oblige.
Mike Maharrey: Thank you.
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 don’t forget to tune into the Money Metals Midweek Memo, hosted by Mike Maharrey as well. 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.
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