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The Silver Series: The Start of A New Gold-Silver Cycle (Part 1 of 3)

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The world has experienced a decade of growth fueled by record-low interest rates, a burgeoning money supply, and historic debt levels – but the good times only last so long.

As the global economy slows and eventually begins to retract, can precious metals offer a useful store of value to investors?

Part 1: The Start of a New Cycle

Today’s infographic comes to us from Endeavour Silver, and it outlines some key indicators that precede a coming gold-silver cycle in which exposure to hard assets may help to protect wealth.

The Start of a New Gold-Silver Cycle

Bankers Blowing Bubbles

Since 2008, central bankers around the world launched a historic market intervention by printing money and bailing out major banks. With cheap and abundant money, this strategy worked so well that it created a bull market in every sector — except for precious metals.

Stock markets, consumer lending, and property values surged. Meanwhile, the U.S. Federal Reserve’s assets ballooned, and so did corporate, government, and household debt. By 2018, total debt reached almost $250 trillion worldwide.

Currency vs. Precious Metals

The world awash in unprecedented amounts of currency, and these dollars chase a limited supply of goods. Historically speaking, it’s only a matter of time before the price of goods increases or inflates – eroding the purchasing power of every dollar.

Gold and silver are some of the only assets unaffected by inflation, retaining their value.

Gold and silver are money… everything else is credit.

– J.P. Morgan

The Perfect Story for a Gold-Silver Cycle?

Investors can use several indicators to gauge the beginning of the gold-silver cycle:

  1. Gold/Silver Futures

    Most traders do not trade physical gold and silver, but paper contracts with the promise to buy at a future price. Every week, U.S. commodity exchanges publish the Commitment of Traders “COT” report. This report summarizes the positions (long/short) of traders for a particular commodity.

    Typically, speculators are long and commercial traders are short the price of gold and silver. However, when speculators and commercial traders positions reach near zero, there is usually a big upswing in the price of silver.

  2. Gold-to-Silver Ratio Compression

    As the difference between gold and silver prices decreases (i.e. the compression of the ratio), history suggests silver prices can make big moves upwards in price. The gold-to-silver ratio compression is now at high levels and may eventually revert to its long-term average, which implies a strong movement in prices is imminent for silver.

  3. Scarcity: Declining Silver Production

    Silver production has been declining despite its growing importance as a safe haven hedge, as well as its use in industrial applications and renewable technologies.

  4. The Silver Exception

    Silver is not just for coins, bars, jewelry and the family silverware. It stands out from gold with its practical industrial uses which account for 56.1% of its annual consumption. Silver will continue to be a critical material in solar technology. While photovoltaics currently account for 8% of annual silver consumption, this is set to change with the dramatic increase in the use of solar technologies.

The Price of Gold and Silver

Forecasting the exact price of gold and silver is not a science, but there are clear signs that point to the direction their prices will head. The prices of gold and silver do not accurately reflect a world awash with cheap and easy money, but now may be their time to shine.

Don’t miss another part of the Silver Series by connecting with Visual Capitalist.

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Charted: IMF Forecasts for International Interest Rates

Which economies are expected to see interest rates rise, or fall? We highlight IMF forecasts for international interest rates through 2028.

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Charted: IMF Forecasts for International Interest Rates

With inflation impacting markets and international interest rates for more than a year, how are different central banks expected to act in the future?

Although the outlook on inflation remains uncertain, the International Monetary Fund (IMF) expects most advanced economies to begin gradually easing interest rates by mid-2024.

These charts show the IMF’s projected central bank policy rates for four major economies through 2028, using the World Economic Outlook forecast data as of October 2023.

Interest Rates Forecasts for 4 Major Economies (2024‒2028)

Since 2022, interest rates have climbed in the EU, the UK, and the U.S. by at least 4 percentage points.

In 2023, rates have continued to climb at a slower pace and are expected to peak at the start of 2024. The U.S. Federal Reserve, for example, is expected to see interest rates peak around 5.4% before beginning to implement rate cuts in Q3 2024.

Fiscal Quarter 🇺🇸 U.S.🇪🇺 EU🇯🇵 Japan🇬🇧 UK
2022Q10.2%-0.6%0.0%0.8%
2022Q20.8%-0.6%0.0%1.5%
2022Q32.2%-0.1%0.0%2.6%
2022Q43.7%1.2%-0.1%3.7%
2023Q14.6%2.2%0.0%4.3%
2023Q25.0%3.1%0.0%5.1%
2023Q35.3%3.6%-0.1%5.6%
2023Q45.4%3.9%-0.1%5.9%
2024Q15.4%3.9%-0.1%6.0%
2024Q25.4%3.8%-0.1%5.9%
2024Q35.3%3.8%-0.1%5.7%
2024Q45.0%3.8%-0.1%5.5%
2025Q14.4%3.6%-0.1%5.3%
2025Q24.1%3.4%-0.1%5.1%
2025Q33.8%3.1%0.0%5.0%
2025Q43.5%3.0%0.0%4.8%
2026Q13.1%2.8%0.1%4.7%
2026Q22.9%2.7%0.1%4.6%
2026Q32.9%2.7%0.1%4.6%
2026Q42.7%2.7%0.1%4.5%
2027Q12.6%2.7%0.1%4.4%
2027Q22.6%2.7%0.1%4.4%
2027Q32.6%2.6%0.1%4.4%
2027Q42.6%2.6%0.1%4.3%
2028Q12.6%2.6%0.1%4.3%
2028Q22.6%2.6%0.1%4.3%
2028Q32.6%2.6%0.1%4.3%
2028Q42.6%2.5%0.1%4.3%

On the other hand, Japan has held interest rates at 0% or slightly lower since 2016.

Despite the Japanese yen falling and inflation (and prices) in the country continuing to climb, the Japanese economy as a whole has struggled over the past few decades with weak consumer demand. There are worries that raising interest rates will make economic recovery tougher in the long run.

And as other central banks plan to start cutting rates, Japan is poised to do the opposite. In 2025, the country is forecasted by the IMF to see its first positive interest rates in nine years.

It’s important to remember that future rate cuts will largely depend on whether inflation in countries continues to decelerate. Major developments, such as the Israel-Hamas war, can also disrupt global markets and force central banks to change course.

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