Precious metals is one of the markets we consistently cover in our annual forecasts, since 2014. In writing our 2023 forecasts we noticed the same drivers for our 2023 silver prediction as well as our gold forecast. Essentially, we see one really key driver for precious metals which is the U.S. Dollar. The USD is in overdrive but it’s not sustainable. Sooner or later, the USD will find too much resistance. As the USD was the intermarket dynamic pushing precious metals lower in 2022 we expect the exact opposite to take place in 2023. This intermarket dynamic is the basis to answer the question ‘which precious metal to buy for 2023.’
As we try to the answer the question “which precious metal to buy in 2023” we feel it is appropriate to look at the dynamics that drive the precious metals market, first and foremost monetary policies.
Precious Metals vs. Monetary Policies In 2023
It is clear that monetary policies are inversely correlated to precious metals.
In 2022, policy makers started a very tight monetary policy. This put serious pressure on precious metals. When gold and silver were ready to start an epic breakout, in March of 2022, policy makers accelerated tightening. The impact on precious metals prices is history.
Inflation expectations are a key driver of precious metals. The impact of monetary policies is that it pushes inflation expectations down for as long as monetary policy is tight. However, as soon as tightening stabilizes it will open the door for higher inflation expectations.
That’s why we believe this next chart, from our public post Stagflation Investing: How And Where To Invest In 2023 but also featured in our gold & silver 2023 forecasts, will be one of the key drivers for precious metals in 2023.
There Is A Precious Metals Bull Market Every Year
We tend to say that there always is a bull market in one of the 4 precious metals.
That’s true in 90% of the times, but apparently 2022 is an exception. There was not any of the 4 precious metals that was in a bull market.
- There have been periods in which multiple precious metals were rising simultaneously. The largest part of 2019 and 2020 is an illustration of this.
- There are periods in which just one precious metal was rising. Think 2013 and to some degree 2021 as well. In 2013, palladium was the only precious metal on the rise while all 3 other metals were crashing. In 2021, gold started rising and was followed by silver before they were stopped cold by policy makers in March of 2022.
- Gold has a track record of leading silver from a bear market into a bull market. Silver tends to be a laggard, though has explosive power once it starts trending.
- Platinum is mostly correlated to gold while palladium has a status of the outlier.
Although this chart does not give a straight answer to the question “precious metal to buy in 2023” it certainly complements our leading indicator analaysis.
Which Precious Metal To Buy In 2023?
Other than the top in the U.S. Dollar which we expect to be set early in 2023, leading to a push higher in inflation expectations (first chart above), we also focus on one additional data point: tightness in the physical market.
This physical tightness is most outspoken in the silver market. Consider the following (source: silver expert Theodore Butler):
All visible signs point to extreme physical tightness, the likes of which I have never seen, in everything from the most persistent retail premiums in silver in history, to surging wholesale physical demand in India and China – all with no notable increase in actual supply. To an extent never witnessed before, the past six months have featured the sharpest divergence between surging physical demand and a steep and highly-counterintuitive historical price collapse. To any believer in the free market law of supply and demand, it has been the strangest (and most trying) time ever – or at least the strangest time in my near 50-year experience.
He continues with an explanation why silver is not rising amid an epic tightness in the physical market:
Surging physical silver and gold demand and collapsing prices can’t occur for no reason and finding the reason is the responsibility of anyone interested in gold and silver. In fact, there is only one possible reason to explain the conundrum of surging demand and physical tightness and sharply lower prices and it is the same reason I have advanced for more than 35 years – an ongoing price manipulation on the COMEX.
That’s presumably what we can see on the long term silver price chart: an important test of its long term channel. As seen on the monthly chart, the structure since 2012 is a long term bullish reversal. Provided secular support holds on this silver chart we expect that secular resistance at 29 USD will eventually be cleared! Whenever this happens, in 2023 or 2024, we expect an epic rise in silver to follow.
Precious metal to buy forecast: invalidation conditions
When will this forecast invalidate?
It is imperative to have invalidation criteria in place for any forecast.
We believe that our bullish silver call will invalidate if one of the following conditions will be in place:
- The U.S. Dollar continues to rise, clearing 119 points on a 3 week closing basis.
- Silver falls below 18 USD on a 5 month closing basis.
- Silver falls below 14 USD on a 3 month closing basis.
We don’t think any of the above will materialize. But we must have invalidation criteria that comes with any forecast.
Silver should be the ‘real deal’ in 2023. We do know from history that silver is slow at the start of a new bull market, it needs some warming up time. However, it accelerates over time.
So there you have the answer to our question: silver has the most potential in 2023 provided you trade in and out in the same year. We believe silver will start rising as soon as the U.S. Dollar will be topping and TIP ETF confirms a bounce within its long term rising channel.
Which precious metal will shine in 2023? #Silver has the most potential. Its physical market is historically tight. Silver's Leading indicators should drastically improve in 2023. $SILVER $SLV Click To Tweet
In our premium investing service MOMENTUM INVESTING we track the price of silver as well as our top 5 silver miners. We stand ready to flash a buy signal on silver miners whenever we believe the silver market is confirming a turnaround. Moreover, in our service TRADE ALERTS we also flash short term signals on the silver price.
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