Market peaks and troughs usually come with a lot of volatility, and a market top usually signals just as we all start to expect new highs happening every day.
Outside of the stock market, the broader economy remains in a precarious place, reeling from a year of uncertainty and near-zero global activity. This leaves a seasoned investor wondering what is really going on with these markets and for how much longer can the commodity and equity price rise continue?
By surrounding ourselves with the best brains and clearest thinkers, who themselves have seen it all before, we can benefit from an opportunity to invest when true value comes along. But cracking the code to investing and being a consistently profitable trader, comes with its own challenges, as keeping your wealth is as hard as making it. Whether it be through taxation, inflation, or just pure dilution of money, our purchasing power is being diminished daily and the longer we hold cash, the worse it becomes.
A store of value
One way to benefit from the recent uptick in market volatility and the rise of precious metal prices is to place a portion of your portfolio in a store of wealth like physical silver and gold. In doing so you hedge a portion of your money against inflation, you have greater access to the high-grade collateral, and though it may come with zero yields you have the chance to use it as money when the current monetary systems grind to a halt.
Higher commodity prices will inevitably lead to a ramp-up in mining production as producers try and meet the demand for silver as it becomes a valuable store of wealth and an ever-increasingly more versatile industrial metal. Bringing on new mines and financing new prospects can be a major CAPEX hurdle for some, but for some companies, it’s all upside.
Royalty companies generate value for their shareholders wherever we land in the commodity cycle, by securing fixed margins and mitigating downside risks associated with financing project developments. You may be thinking of investing in the miners directly, but you should consider data that shows royalty companies consistently outperforming other mining equities over the last 10 years and that they trade at a premium of 15-30x EBIDTA and 1.25-2.0x NAV.
One company that prides itself on being able to spot value and is growing faster than any other company in the sector is Vox Royalty (VOX.TSXV). Their management team is made up of industry experts, with a combined 40 years of knowledge focused on what makes an asset both one of quality but also one of true value, which often beats expectations.
The senior management team includes geologists and mining engineers scouring the world for the most interesting royalty assets. The company has a database of over 7,000 royalties and their intellectual property (IP) will ensure that they are able to bring on more transactional opportunities, adding significant value for their shareholders far into the future.
The Gold/Silver ratio looks to continue heading lower as the silver price rise outpaces that of gold and if you try and buy some retail silver coins and bars, you’ll find that the delivery dates are growing along with the premiums.
The premiums on retail silver are rising because the dealers have less inventory and if you couple this with the recent market-moving events in the news, the demand for precious metals is growing. Vox Royalty (VOX.TSXV) are heavily focused on growth in the precious metals space with the majority of their assets found within Australia.
An upside to having a large portfolio within Australia is that the mining sector recently faired the pressures of COVID-19 disruptions pretty well. Many investors look to the continent as one of the safest regulatory environments in global mining, with its added benefit of a stable economy and political governance.
Vox Royalty (VOX.TSXV) is expanding and rapidly became one of the fastest-growing publicly traded royalty companies, with their portfolio of 40 royalties and streams spanning several other low-risk jurisdictions.
Vox Royalty went public in May 2020 and is listed on the TSX Venture Exchange (VOX.TSXV) and over the last 3 months has seen a 33% increase in the share price.
With the share price rising in its current rising channel and estimated revenue growing exponentially, we could see the share price pushing significantly higher over the course of the next 12 months. This is backed up by the possibility of much higher prices for both silver and gold as inflation hedges when the global economy comes back-online post the vaccine.
In recent times gold made 20-year new highs and we can see in the attached chart that silver is on pace to reach higher highs as it continues in its own bullish trend following on from the 2020 high breakout.
Silver prices are more volatile than gold as the market is smaller, but it seems the period between 2014 and 2020 was an accumulation phase, as prices traded within a relatively tight range. The liquidity run last March during the height of the coronavirus pandemic market crash could have been the last chance to purchase silver at or below $15 for the foreseeable future. The projected breakout measured move would see silver back up towards its 2011 highs from where we could then reassess the supply/demand narrative.
A new deal for silver
Projecting forward we can look to the new U.S. administration where President Biden is actively seeking to implement the “New Green Deal” and has made moves to signal that electronic vehicles (EV), renewable energies like solar and wind will be part of the future he wishes to build. As an industrial metal silver is becoming more widely used and that trend doesn’t look like ending as photovoltaic cells using silver grew 7% in 2019 and the Silver Institute recently highlighted practical uses within new flexible and wearable technologies where silver is combined with silicon.
Further adding to the bullish narrative for silver prices, there is currently a mining production deficit resulting in diminishing supply. Global mine production fell for the fourth consecutive year in 2019, and estimates are for a further 6.4% decline for 2020.
As we saw with palladium, an increase in demand and steady supply leads to sustained higher prices, and silver is looking set for this to happen, so if you are looking to invest in a reduced-risk way within the sectors of the precious metals, maybe consider Vox Royalty (VOX.TSXV)