Fundamentals and technicals are signaling extreme undervaluation...
It's been a while since I've covered the precious metals in an article. They've been range-bound for much of the past year, with few notable sector developments to report.
But I feel compelled to write about them today for two reasons:
The probability of an upwards re-pricing of the precious metals is rising, and
Both gold & silver are quite over-sold right now, technically-speaking.
With technical and fundamental indicators flashing green simultaneously like this, now is an advantageous time to consider increasing your PM exposure (I did so myself yesterday).
The Human Factor
Before I go into further detail on the current conditions of the PM market, here's a recent personal experience that underscores how few people have any real familiarity with gold & silver as an asset class, let alone own any (beyond, perhaps, a bit of jewelry).
A good friend moved and needed help transporting some bullion from his old town to his new one. Most of it was silver, several thousand ounces worth.
That much silver is pretty friggin' heavy.
So we huffed and strained, hauling that load out of one bank vault, into his car, and from there into the vault at his new bank. While we did our best to be as discrete as possible, our sweaty, grunting 2-man production was hard for the bank staff to ignore.
Managers at both banks figured out what was going on, as it was pretty obvious. And both separately asked us out of genuine curiosity, "Is that real silver?".
My friend briefly handed over a 100-oz bar so they could see for themselves, sparking conversations about the merits of owning physical bullion.
It turns out that neither manager had ever held a bar of silver before. This was pretty shocking to me. Even though they know that the safe deposit boxes in their own vaults very likely store some bullion, neither own it personally, nor even come into contact with it. It's just not a part of their world.
Anyways, later on I mentioned this story to another buddy who shared my surprise. "Man, if the bankers aren't familiar with silver and gold, then who the heck is?", he asked. A very good question, I agreed.
But then he jolted me by asking: "So, one of those 100oz bars -- what's it worth, anyways? $150?"
This is an otherwise intelligent, math-competent person. But like most folks, as well as those bank managers, he doesn't own any precious metals and so his knowledge of them is pretty limited. Limited enough to underestimate the price of silver by over 90%.
This reminded me of Mark Dice's videos, which show just how woefully ignorant the average person is when it comes to the value of...