Silver follows gold, not the other way around
Both metals kept falling even during conflict. Prices tend to drop when war looks "on" and rise when peace nears, the reverse of what most expect.
This is a gold story, not a silver story. Silver will not lead and will not move on its own. Gold is the big brother; silver is the little sister. Understand gold and you understand silver, so ignore silver's fundamentals and its chart, even though people love watching that chart. If silver is going to reach 100, 150, or 200, gold leads it there.
Right now gold is down 28% at 4,000, and silver is down 52%. Silver fell more because it was in catch-up mode. Gold led for a long time, then last year silver ran from 35 to 120. That huge outperformance is why it has corrected harder now. Silver was at 28 and gold went down 29% at its worst. As a rule, if gold drops 29%, silver drops 40%. This time silver dropped 50-55%.
This is a correction, not a broken bull market
Gold could fall a bit more between now and the midterms, with a lower low likely below the 3,950 already seen. For the gold bull market to actually break, gold has to fall below 3,000, probably below 2,800. That is how strong the gold chart is, so there is very little worry the bull market is done. This is a correction and a buying opportunity. Most people agree, both the technical analysts and those who study the broader picture.
The HUI, used to gauge miner value, sits at 615, down 38% from a high of 989. The index has not printed a five handle in this correction, and 615 looks close to the bottom. The HUI could dip into the low 500s, but a four handle is not expected. The miners have been obliterated, which makes this a buying opportunity.
June gave two such chances: a drop to the 200-day moving average around 4,100, then a drop to 3,950, a bounce back almost to 4,200, and now back to 4,000. Gold has not benefited from the war. Both June dips were bought, and the current one is under watch.
If gold trends up to 4,400-4,500, silver could rise as far as 70. But any rally in the next 1 to 4 weeks is likely a dead cat bounce. After that comes seasonal weakness from mid-August to mid-October, which probably brings another correction.
The real reason to own miners
I am more bullish than ever on gold miners, and it comes down to macro analysis. Some believe AI, the Fed, and fiscal dominance will keep the US economy intact, that GDP is a train that never stops, that there is no recession coming, and that there is no reason to move into high-risk gold and silver miners. My outlook is the opposite. The only reason to own a gold or silver miner is if you do not believe in the US economy, and not just that a recession is coming, but a serious one.
After 20-plus years of weighing the cost and benefit on the US economy, the balance has never leaned toward gold like it does now. The main factor is the US bond market. The budget deficit runs $2 trillion and will not come down. Cutting $500 billion to bring it to $1.5 trillion would badly damage the economy, so they cannot cut $500 billion, which means they cannot cut anything. There is no solution, and that is a major problem. Buying juniors started in 2004, but belief in this problem came earlier. It is heading toward a doom loop. This is the debt bubble, the everything bubble.
The pressures stacking up
The problems pile on. Inflation is not falling; the 2% target has effectively been abandoned and will not return soon. Interest rates make a house cost 6-7%, with a median price around $450,000, creating an affordability and cost-of-living crisis. The bottom half of the country cannot pay its bills and has to decide each month what to cut from the budget, and it worsens as inflation outpaces income.
The banking system is under strain. Private equity is locking people out and pulling money out. Banks hold ugly balance sheets full of underwater bonds they cannot sell without taking a loss.
AI is sold as the savior but is a job killer. Roughly 10,000 jobs a month are being lost to AI, and companies are not hiring because they use AI instead, a double whammy. Businesses grow more efficient, but at a cost. On top of that, companies do not know their return on AI spending. OpenAI has told the public it will not make money until at least 2030 and will bleed cash until then, the old Amazon line about not earning for a long time. The return is an unknown asset.
De-dollarization makes it worse
The rest of the world is slowly de-dollarizing. Foreign buyers do not want to hold US Treasuries or dollars on their balance sheets, so foreign demand for US debt is falling. Central banks are cutting Treasury purchases and buying gold instead. Gold buying is rising in China, India, and the Middle East.
Why does this matter so much? The US economy is a juggernaut at about 24% of global GDP. If it slips into recession, every problem above escalates and gets worse. Because of the budget, deficit, and debt problems, it is a ticking time bomb, and the beneficiary of all of it is gold.
The stance is a philosophy: be anti-US economy and pro-gold, stop worrying about timelines, buy the miners, and wait. It is a waiting game for the bond market to break. Some say it will never break because the government can print. It cannot print everything. Printing creates inflation and destroys the currency and the economy. Greenspan's claim that the US will never default because it has a printing press is baloney. You cannot just print everything you need.
The stock picks
Two buckets stand out. For a 12-month approach, the high-quality producers, whether through ETFs or direct picks:
- Equinox - the Equinox-Orla merger made it extremely strong and highly undervalued.
- West Gold in Australia - a high-quality mid-tier producer trading at about a six multiple.
- SSR Mining - has never caught up. It had problems in Turkey, sold that project and got out, but never recovered, and now faces the big sell-off.
For developers, the potential ten-baggers:
- 1911 Gold - going into production in Q4 this year in Canada.
- Talisker Resources - in British Columbia, Canada, slowly increasing production.
- A third gold developer building a mine, which has not yet started construction but will begin this year.
Developers near production can offer large upside if execution goes to plan, though project risk stays real, so careful stock selection matters more than buying the sector blindly.
