Tom Stevenson, a seasoned market observer, has provided insightful perspectives on the future trajectories of gold and silver—a pair of precious metals that have long captivated investorsHis observations underscore the resilience of gold, which has consistently overcome significant obstacles such as high interest rates and a robust dollar on its path toward potentially hitting $3,000. Despite gold's bullish prospects, Stevenson believes that silver may represent an even more attractive investment option in the long run.

Reflecting on gold’s remarkable journey, its price has surged tenfold since 2000, an impressive feat that catapults it into a category of its ownParticularly since the end of 2023, gold has soared more than $1,000, breaking historical records repeatedlyHowever, Stevenson cautions that from the standpoint of traditional financial theory, gold's current price levels are rather unanticipatedHe elaborates, “Typically, when interest rates rise, precious metals do poorly

Advertisements

Unlike bonds, stocks, cash, or real estate, gold does not generate an income stream for investorsAs such, when the returns on other assets become enticing, the demand to hold gold—a commodity that economist John Maynard Keynes famously referred to as a 'barbarous relic'—dwindlesHowever, in today's environment, despite such market conditions, gold continues to reach new heights.”

The relationship between gold prices and the dollar further contradicts conventional wisdom. Stevenson pointed out, “Since gold is priced in U.S. dollars, it’s expected that when other currencies strengthen against the dollar, investors can exchange those currencies for more goldConversely, when other currencies weaken, the amount of gold purchasable typically decreases, leading to a decline in gold pricesYet currently, the push for a stronger dollar by the U.S. should inhibit gold prices, yet this hasn’t been the case.”

These dynamics prompt Stevenson to caution that the stellar performance of gold indicates underlying uncertainties within global affairs: “This suggests that the world is not stable and that investors harbor significant fearsHistorical evidence shows us that during times of increased market stress, neglecting the signals from gold is not wise.” He reminisces about the period preceding the financial crisis; from 2003 to 2007, the S&P 500 nearly doubled in value, yet it still lagged behind gold returns by approximately 40%. “Investors in gold remained skeptical of the stock market’s signals, and in hindsight, their judgment proved correct,” Stevenson noted.

Stevenson delineated several key reasons behind gold's robust performance. “First and foremost, gold has consistently been regarded as a safe-haven asset amidst global uncertainties; additionally, it serves as a powerful hedge against inflation

Advertisements

Numerous policies propagated by the United States—far exceeding mere tariffs—have the potential to trigger inflation, thereby creating conducive conditions for a gold price surge,” he assertsHe underlines, “For an extended period, gold has served as a store of value and diversification tool, devoid of credit risks associated with fiat currency reservesImportantly, in 2024, central banks are projected to purchase over 1,000 tons of gold for the third consecutive year, indicating its enduring allure.” Moreover, Stevenson speculates that recent news about Deepseek potentially outperforming ChatGPT at a lower cost could shake market confidence, indirectly boosting industrial demand for gold and providing further support for its continual rebound.

However, as gold prices ascend rapidly, investors inevitably ponder whether they have missed the optimal window for gold investmentStevenson empathizes with these concerns and advises, “Historically speaking, gold price dynamics follow a certain pattern; typically, after rapid increases, prices tend to stabilize or decline, often resulting in prolonged adjustment periods that can last for yearsTherefore, with the current landscape of uncertainty, are there more effective hedges available?”

In light of this, Stevenson suggests investors explore silver as a viable alternativeHe analyzes, “Gold and silver share several similarities; both are precious metals historically used as currencyHowever, they also exhibit significant differences; over half of silver’s annual demand stems from industrial uses, broadly applied within numerous electronic devices, particularly in sectors like renewable energy, artificial intelligence, and defense

Advertisements

Additionally, in the chemical industry and medical devices, silver displays antibacterial properties, making it difficult for bacteria to thrive on its surfaceOf course, just like gold, macroeconomic factors such as inflation, interest rate shifts, geopolitical pressures, and policy changes are poised to influence silver prices as well.”

Stevenson further pointed out that traditionally, the price ratio between gold and silver usually reflects the ratio at which they are mined, about 15:1. However, this has drastically changed in recent times. “Currently, gold’s price is about a hundred times silver’sAlthough a preference for gold as a risk management tool partially accounts for this price discrepancy, it overlooks the widening gap between supply and demand for silver,” he adds. “The traditional correlation between these two metals has been disrupted; gold appears overvalued in comparison to silver, which remains substantially below its recent peaks.”

To capitalize on the anticipated rise in silver prices, Stevenson offers professional adviceHe believes that utilizing silver ETFs or investing in silver mining stocks is the most favorable approachOwning physical silver poses significant challenges—storage costs are high, transportation and custody present risks, and the complexities involved in liquidating transactions deter investorsHowever, Stevenson explicitly cautions investors that while mining stocks represent a feasible option, their connection to precious metals pricing is often weak, merely following fluctuations loosely; investors should carefully weigh their decisions.

Recent market movements show that after disappointing retail sales data in January, gold prices experienced a dip

Advertisements

Advertisements