As Stagflation Fears Grip the Market, Silver Offers Ray of Hope to Investors

Published on: May 10, 2022
Author: Philip Tai

Fears of stagflation have reappeared in the global markets over the past week as the effects of inflation, the lingering pandemic and conflict in Ukraine have prompted selloffs of stocks, cryptos and bonds.  While investors are scrambling to cash out of the market, historically, precious metals have performed well in these conditions.  Will precious metals exploration companies like Golden Tag Resources (TSX.V: GOG) (OTCQB: GTAGF) see a rise during this time?  Will silver’s clean tech and high tech applications keep prices stable?  Let’s take a deeper dive on how silver will look in this time of stagflation.

“Stagflation” is Trending in Financial Media

Investors keeping an eye on the news should have seen a marked uptick in coverage about stagflation this week.  Google Trends can easily verify that Google users have searched for this term 4 times more in early May than in April!

stagflation

Why is this happening?  

Rising interest rates combating inflation is one of the major causes with the markets seeing this as a damper on global growth.  COVID and war are also responsible for causing instability in the developing and emerging markets.  Lastly, rising energy prices are making the costs of doing business higher around the world.

We are seeing reports on spiking demand for cash showing that investors are focused on capital preservation due to slowing economic growth, persistent inflation and more Covid lockdowns in Asia making a toxic investing landscape.

What is stagflation?

Stagflation is a period of slow economic growth and high unemployment which is at the same time accompanied by rising prices. Stagflation can also mean a period of inflation combined with a decline in the gross domestic product (GDP).

The most memorable period of stagflation occurred in the 1970s in the United States.

Stagflation in the 1970s was attributed to the US Federal Reserve’s unsustainable economic policy during the high growth years of the late ‘50s to ‘60s. The Fed’s strategy during this period was to keep unemployment low and boost overall demand for products and services. These policies may have spurred the unnaturally low unemployment and caused a  wage-price spiral.

The OPEC oil embargo in 1973 also contributed to the unwanted economic event in the US. Industries across the country suffered from excessively high oil prices and shortages. Demand fell to new lows, and industrial output suffered.

Does silver do well in periods of stagflation?

Over the past couple of years, investors have flirted with the idea of investing in Bitcoin and other cryptocurrencies as a hedge against inflation.  The beginning of 2022 saw a collapse of Bitcoin prices, signaling the end of that narrative.

silver-tradingview

During the ‘70s, silver prices rose significantly during stagflation.  As the value of cash decreased, hard assets like precious metals increased significantly late in the decade.

silverprice-US

Today, silver is useful for providing growth as well as a measure of stability. Like gold, silver serves as an inflationary hedge but silver also has many industrial uses, particularly in emerging green technology products. 

What’s happening with Golden Tag Resources?

Golden Tag has been hard at work exploring the San Diego property located in the prolific Valerdena silver district in Mexico.  In early May, Golden Tag announced results from its latest two drill holes, 22-65A and 65B.

As quoted from their recent press release :

Key highlights from holes 22-65A & 65B include:

    • High-grade intersections located close to surface, including 1,551 g/t Ag.Eq over 0.60 metres (“m”), and 1,194 g/t Ag.Eq over 0.65 m in the Rata Zone
    • 174 g/t Ag.Eq over 16.48 m, including 690 g/t Ag.Eq over 2.50 m, within the Canta Zone
    • 363 g/t Ag.Eq over 4.27 m within the CSplay Zone
    • 93 g/t Ag.Eq over 395 m, including a higher-grade interval of 109 g/t Ag.Eq over 186 m, of Fernandez Zone mineralization beyond the western limit of the previously established resource envelope, approximately 70 m NW of historical hole 12-47

If you want to learn more about Golden Tag and its progress at San Diego, have a look at their most recent interview here:

Disclaimer: The company described in this article is a customer of NAI Interactive Ltd. This material is for informational purposes only and is not intended as a recommendation or offer or solicitation for the purchase or sale of any securities or financial instruments, or for transactions involving any financial instrument or trading strategy.

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