NEW YORK, NY – The pandemic, to state the obvious, is affecting the world in numerous ways big and small. It has generated plenty of commentary about where it all is leading. But to state something that may be less obvious, one of its most significant effects will be to speed up a shift in economic clout from West to East and more specifically from the U.S. to China. That has enormous implications for investors. They encompass three closely interrelated trends that already have begun to emerge but that will be accelerating: surging gold, rising commodities, of which silver may be headed for the largest gains.
The transition from West to East has its roots in China’s joining the World Trade Organization in 2001. Since then, China’s rise in the world has been dizzying. China’s superior success in getting back to business has positioned it to move full steam ahead with its Belt and Road Initiative, under the banner of which it is creating infrastructure in, and ties with and among, a large swath of developing countries. Recognize that infrastructure not only increases productivity and trade but is also one of the best ways of creating jobs. Renewable energies are among the most important areas of infrastructure spending.
Even if you are agnostic about climate change, renewables are critical for managing commodity scarcities. Moreover, with leading renewables like solar and wind under many circumstances now cheaper than non-renewables, they offer a way to control energy costs. A couple of important facts: Over the past decade, renewable energies have created about 11 million jobs globally. The dominant segment of renewables has been photovoltaics. And the dominant country in photovoltaics has been China.
A widening Chinese lead in the use of renewables and in control of renewable supply chains gives China, its Belt and Road Initiative, and the East overall a nearly unassailable leadership position in perhaps the world’s most important industry, energy. The recent collapse in fracking, another consequence of the pandemic, comes after more than a decade of losses that will likely tally up to at least half a trillion dollars. Matt Gallagher, head of Parsley Energy, one of the best performing stocks in the shale patch – and indeed among all energy companies – recently said: “I don’t think I’ll see 13 million bbl/d again in my lifetime.”
Translated, this means that non-conventional oil, even with a negative return on investment, joins cheap oil, i.e., oil produced in the Mideast, in peaking as solar and wind continue to burgeon. The pandemic, in other words, has further entrenched China – which is the leading importer of oil from the Mideast and whose refining capacity is burgeoning – as a key player in providing the world with energy. Equally consequential is that the pandemic has moved China further ahead in its ability to achieve another of its signal goals, a new monetary reserve system linked to gold. China’s preparation for a new monetary system has been in the works for more than a decade. And now we’re reaching the latter innings of this long-term game.
$20,000+ Gold
In my forthcoming book China’s Rise and the New Age of Gold, due out this October, I present these developments in detail, looking at how the world will be transformed in ways that will ensure commodity scarcities and a starring role for gold, propelling massive gains in gold that will dwarf those already seen, or ever seen, for that matter. Before this bull market in gold ends, gold will reach previously unimaginable levels – $20,000 and higher. These projections aren’t pulled out of a hat. They are based on what will be necessary to manage worldwide growth in the context of resource scarcities.
But something else is true as well, something that even the most dedicated gold investor should find intriguing and worth considering: The same developments that will be so favorable to gold also will benefit silver – which under some circumstances could even pull ahead of gold. And this makes silver investments a terrific companion to gold investments.
The Rise Of Silver
Like gold, silver has a long monetary history. But there are some obvious and important differences between the two metals. One is that silver is far less scarce than gold, explaining why an ounce of silver will always have less value than an ounce of gold. It also helps account for why silver is less suitable as a…
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