The U.S. had another daily record number of COVID-19 cases on Saturday with over 75,000 new cases, while the number of cases globally now stand at over 14 million. As a result, due to the continued economic uncertainty and stimulus around the world, both gold and silver traded up for the sixth straight week. Two weeks ago, I talked about the silver’s tiple top or pending breakout.
The $20 level represents the round, whole, psychologically level that price continues to battle with. Now what we may see in the days / weeks to come is price consolidating around the $20 level. If and when price breaks and closes above the $20, it could be off to the races with price potentially getting to the $50 level as a medium-term price target like it did during the Great Recession.
First Majestic has not had the smoothest ride by any means in 2020, with the company's Mexican mining assets shut down for multiple months due to COVID-19, and the company placing a handful of its mines on care and maintenance until such time as higher spot silver prices makes sense to reopen them.
The good news is that costs will be substantially lower next year for the mines on care and maintenance, and efficiency measures at the company's three producing mines (San Dimas, Santa Elena, and La Encantada) should yield higher output at a reasonably low cost.
As the icing on the cake, silver is a metal that tends to boom during the late stages of a recession and the first 12 months of a recovery.
According to Keith Neumeyer, CEO of First Majestic Silver, silver faces serious supply constraints, and although most people may not realize, it is a very rare metal that should be trading in the triple digits in price. What Keith is getting at is most of the silver dug up from the ground goes into some type of industrial use vs. in a warehouse or vault like gold. Keith thinks the price of silver is a joke based on the rise of other metals, along with gold. Keith said silver is ignored as a cheap gold substitute and that is a wrong assumption.
First Majestic Silver is one of the few miners to play a rise in silver. First Majestic gets most of their revenue from silver and will produce over 20 million oz of silver this year. of their revenue (93%) comes from silver and gold, with most of that being silver. Mark my words, if and when the price on silver starts to move, so will First Majestic. If First Majestic can get above $13, that will be time to consider going long.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
