|What to Expect From Gold and Silver Going Forward|
While we believe a huge precious metals bull market lies in front of us, we must also be aware that challenges remain over the medium term. Since the beginning of 2021, the average gold stock is down about 10%; in comparison, the average energy stock is up over 60%. The question for precious metals investors is how long this period of price consolidation will last.
We believe the current consolidation period is not yet over. We have long argued the upcoming bull market will be driven by western investors, as it was back in the 1970s. In contrast, the bull market between 2000 and 2012 was driven by eastern buyers who believed gold was a cheap asset class that had to be accumulated and held.
Back in 2000, the US and Europe consumed approximately 700 tonnes of gold combined. By 2012, as the first leg of the gold bull market was ending, their consumption had fallen to 460 tonnes. Gold had gone from $250 per ounce to $1,900 per ounce while western consumption had fallen. In other words, there was no participation from western buyers even though gold prices advanced over seven-fold. Over the same period, India and China went from consuming 1,150 tonnes combined in 2000 to 2,400 tonnes by 2013. Clearly, the major source of buying during the last gold bull market came from the East with no net participation from the West.