2020 has been a rollercoaster of a year to say the least. In times of economic and social uncertainty people tend to invest their money in safe haven assets like physical precious metals for example. It’s obvious at this point that the events of 2020 have fostered such an environment into existence. Prices of metals are up across the board and in this article we will dive into 8 possible reasons that this modern day gold rush is unfolding right before our eyes.
- The Pandemic
- Stimulus Money
- Unemployment Benefits
- The Hobbyist
- Bill Holiday
- Civil Unrest/ Societal Collapse
- Fear of Financial Collapse
- Fear of Missing Out
1. The Pandemic
The coronavirus pandemic has swept the entire world since Q4 of 2019 and silver isn’t exempt from it’s effects. The virus has caused the intermittent disruptions of borders, businesses, mail, mints and mines. Even if demand was flat in comparison to 2019 the shortages caused by delays of physical resources goes hand in hand with the cost of said resources.
2. Stimulus Money
When the American people began receiving $1,200 dollar stimulus checks in mid April of 2020 many needed them to keep afloat in their day to day life’s. However, if even fractions of one percent of the $2 trillion dollars were invested in silver the price would soar.
3. Unemployment Benefits
Many businesses were forced to close when the pandemic began ravaging America in March of this year. The U.S. government was quick to step in and provide $600 dollars of additional unemployment benefits per week to those that lost their jobs. For many this money was and still is needed to keep the lights on, but others are now making more money on unemployment than they was making as a part of the workforce. It is possible that some of this money has trickled into the precious metals markets as well.
4. The Hobbyist
The freshly unemployed people now have something else in addition to money on their hands and that’s time. Most people are so busy with their responsibilities that they often don’t have time to pursue their passion’s. Now that millions of people around the world are unemployed the prices of securities and collectables have risen sharply.
Things like baseball cards, Bitcoin and collectables have all experienced price surges. On April 10 silver was $15.49 per ounce, by July 24 it has risen by over 30 percent to $22.89 per ounce. It’s quite possible that hobbyist have played a role in the increase in demand and price.
The dreaded word Inflation, I had to include it, only because money is being printed and tossed around by the Federal Reserve at a rate that would make even the best of Monopoly players watch in wonder. Whether or not all of the stimulus money is justified is another topic all together and would make a great article as well but that’s a very delicate and multifaceted conundrum and would require more research on my part.
The bottom line was and continues to be that many millions of American’s are hurting financially and desperately need any assistance they can get. However, money can’t be printed endlessly without dire consequences (See Venezuela and Zimbabwe). The price of many goods have already risen considerably, good examples of this are the cost of beef and used cars. Silver and metals in general would also climb in price as the injection of capital circulates throughout different sectors of the economy.
5. Bill Holiday
America still has an unemployment rate of 11 percent as of July 2020. The rate before the pandemic was near record lows of 3 percent. Over the past 4 months the unemployment rate peaked at over 20 percent and most of the world has experienced similar numbers. Many lenders and utility companies worldwide have allowed citizens to delay their payments. Is it possible that some are delaying payments and using the extra capital as an interest free loan to invest? I say absolutely, it is.
6. Civil Unrest/ Societal Collapse
The recent protests have no doubt created a feeling of uncertainty for most investors. Who’s right and who’s wrong is a different debate that isn’t the topic of this article. I would refer you to this video (link to my YouTube video) for what I would love to see happen, but I digress. When investors feel a sense of unease or dare I say panic, one of the first assets they often turn too is physical silver.
7. Fear of financial collapse
The pandemic has brought global trade to a crawl and we’ve already touched on the unemployment numbers and record amounts of capital being injected into the economy. The combination of these factors have brought with it strong undertones of fear, uncertainty and doubt. In many peoples minds conditions are right for a financial collapse or reset. During these times many are drawn to the safety and relative stability of physical silver.
8. Fear of Missing out
Peter Schiff is one of the most vocal investors when it comes to pounding the drum in support of precious metals, often at the expense of cryptocurrencies. Now that he’s been proven correct (at least partially) his followers as well as those of many other ‘gold bugs’ in the industry are buying up metals at record pace. It’s quite possible that this has played a role in the backlog of orders and exceptional premiums currently seen in the silver market. People don’t like to feel like they are missing out on a once in a lifetime opportunity, so as the price begins to rise more and more investors begin to pile in.
Premiums on physical silver are at record highs in 2020, costing buyers between 30 and 35 dollars an ounce for a commodity that is trading at only 22.89, and the boom seems to be only getting started.
The world we live in today is a very different place than it was only a few short months ago. I’m going to conclude that all eight of the reasons listed play a role in the current silver boom. Although I do believe that there are many more layers to this surge in demand as well.
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