Rick Rule: I Like Silver Because It’s Roundly Hated

Published on: Feb 28, 2024
Author: Caroline Kong

In a recent interview with Kitco News, Rick Rule, former CEO of Sprott Holdings and founder of Rule Investment Media, said that in markets where skepticism prevails, the most under-appreciated assets, such as silver, offer a very significant opportunity for investors.

Unlike sister metal gold, which is currently hovering at all-time highs above $2,000, silver prices are now less than half of their all-time highs, suggesting that the market is generally bearish with its industrial demand and investment interest. Rule, on the other hand, asserts that the reason to like silver is simply because it is roundly hated.

He points out that the squeeze in the silver market that emerged in 2021 left many investors disappointed with silver. However, great opportunities often lurk in those hated markets, and the price of silver could come out of a bull run in the face of widespread disenchantment.

This view is in line with industry forecasts for silver demand growth, driven in particular by silver’s use in solar energy and electronics. Despite the market’s short-term volatility, silver’s fundamental value and growing industrial use support Rule’s optimistic outlook on the metal’s investment potential.

Michael DiRienzo, executive director of the Silver Institute, said this month that silver will perform well this year, especially on the demand side. He expects the price of silver to reach $30 an ounce, which would be the highest level in 10 years. Silver is currently trading near $22.40 an ounce and last touched $30 in February 2013.

In a report by the Silver Institute, it was noted that demand for silverware will grow by 9% this year and jewellery by 6%, with India expected to drive a significant increase in silver jewellery purchases. Meanwhile, the expected recovery in consumer electronics will give the silver market an additional boost.

While silver prices are constrained in the short term, analysts note that things could turn around in the second half of 2024, when most market observers believe the Federal Reserve will begin cutting interest rates. Silver prices, like gold prices, tend to have an inverse relationship with interest rates. A higher interest rate environment hurts demand for silver and gold because precious metals pay no interest and will be less attractive compared to alternative investments such as bonds.

When the price of gold rises, silver usually rises as well, said Randy Smallwood, chief executive officer of Wheaton Precious Metals. However, silver will eventually outperform gold, it’s just that the rise in silver comes later.

DiRienzo expressed a similar view, saying that silver could indeed outperform gold, especially if the Fed starts cutting interest rates.

If you’re interested in investing in silver, you might want to keep an eye on this company: Silver Storm Mining Ltd. (TSXV:SVRS). Silver Storm Mining Ltd. holds advanced-stage silver projects located in Durango, Mexico. Golden Tag recently completed the acquisition of 100% of the La Parrilla Silver Mine Complex, a prolific operation which is comprised of a 2,000 tpd mill as well as five underground mines and an open pit that collectively produced 34.3 million silver-equivalent ounces between 2005 and 2019. The Company also holds a 100% interest in the San Diego Project, which is among the largest undeveloped silver assets in Mexico.

Disclaimer: Investing involves risk, and individuals should conduct thorough research and seek professional advice before making financial decisions. NAI is being compensated for this content. Materials contained in this content are for information purposes only and is not intended to constitute an offering of securities in any jurisdiction. Nothing on this content should be construed as an offer, solicitation or recommendation to buy or sell products or securities.

In-Depth Analysis Industrial Metals Precious Metals Silver