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The Silver Lining in the Latest Inflation Numbers

By Kelly Ryan

In a world filled with political upheaval, we were ready for little good news. But who expected it would come from the Consumer Price Index? 

Canada’s inflation rate released in mid-November was 3.1%, which was lower than economists had predicted. Across the border, inflation in the U.S. slowed to 3.2% from 3.7% in September and August.    

That sent ripples through the financial world and created a surge in precious metals prices.  

“What happened was that financial market participants took the news as a sign that the Fed will not raise interest rates in December or even in the first quarter of 2024 as expected,” says Jeffrey Christian, founder and managing partner of research consulting company CPM Group

Christian has been studying silver and other commodities since the 1970s. His CPM Group is an independent commodities research, asset management, and investment banking firm that is considered one of the world’s most knowledgeable sources of silver market information and analysis. 

He adds that the signals sent are that interest rates are peaking, or have already peaked, and that real economic conditions such as job growth remain strong. 

“All asset prices – from stocks and corporate bonds to gold, silver, and other commodities – rose sharply on news of much lower U.S. inflation.”

Christian expects silver to continue its upswing in the next year (with the typical peaks and valleys, of course), to $22-$27 USD with an average increase of 5% over 2023 prices. 

When the CPI numbers were released, silver shot up to $24 USD an ounce, its 52-week high. 

For silver-focused companies, it is an exciting turn of events.  

Andrew Williams, the CEO of Vancouver-based New Pacific Metals (TSX:NUAG/NYSE-A:NEWP) says it is the kind of news he has been hoping for. 

“Especially with our shares trading at a fraction of their all-time highs, this is a great opportunity,” Williams says. “Buying silver in the ground via mining equities provides significant leverage to a rising silver price, plus an interest in a growing business.”  

Williams says NUAG’s projects, based in the silver-rich hills of southwestern Bolivia, are part of a freakish geological area, with huge reserves of high-grade silver close enough to the surface that the recovery of much of the resource can be done through open-pit mining.

“Our company is fortunate to have 200 million ounces of silver resources at our flagship Silver Sand project and another 200 million ounces at our Carangas project. As we continue to execute on our focused strategic objectives, we are well positioned to deliver value to our shareholders.” 

The company is also developing a third project in Bolivia. 

Silverstrike is in the early stages of exploration, but results have already shown broad gold and silver zones, similar to the mineralization of the Carangas site.  

New Pacific is one of the companies Jeffrey Christian looks to when he wants to dispel what he calls an erroneous belief that there is not enough silver in the world to meet future demands. He points out there are already around 5.5 billion ounces of silver above ground in bullion bars and coins. Another 16 billion ounces have been identified worldwide as mineable reserves, and many times more in estimated resources.  

“Companies are exploring and tapping into some of these deposits that have relatively higher-grade ore such as New Pacific Metals’ Carangas and Silver Sand.” 

Despite the encouraging news on inflation, and the optimism it brought to the market, Christian suggests 2024 will be a challenging year, with tensions abounding internationally. 

His sterling advice to investors:  

“Investors should always have a portion of their wealth in gold and silver. How much depends on political and economic conditions – a minimum of 5-10% in good times, and maybe 20-30% during economically and politically challenging times.” 

With the wars in Ukraine and Israel/Gaza, elections in major powers including Russia and the U.S., changes in the workplace with the rise of artificial intelligence, and increasing wealth inequality, “politically challenging” may be an understatement.    

And while there is no silver bullet for building wealth in difficult times, from Christian’s perspective, buying silver is a solid move.  

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