The Gold and Silver Dam Breaketh / Commodities / Gold & Silver 2020

Ask precious metals' holders and chart technicians what in the last6-8 weeks stands out in their mind and they will point to the breakout of gold andsilver above areas which had contained them for almost a decade.

Gold rocketed without pause to $2,070. Silver,though still well below record nominal dollar highs, sliced through $26, whichwas supposed to be a lid on prices until next year.

A litany of "price pullers" we've long discussed in ouressays – government deficit spending, lagging metals' production vs. explodingdemand, and an almost complete absence of big discoveries have all played apart.

But these are relative symptoms. I believe that several new andhard to quantify root causes are set to become critical drivers in their ownright.

The interplay of these new factors means that all bets are off interms of how high, how violently up and down, and how vigorously the rest ofthis secular gold and silver bull run – over at least the next several years,will play out.

As Dorothy tells her dog Toto in The Wizard of Oz, after riding thetornado and landing with a bump... "We're not in Kansasanymore."

What follows are two "finishing touches" to thisuber-bull narrative. The third element – a "capstone event" – tookplace in early August.

Combined with the "volcanic tremors" discussed above,these volatile elements should soon lead to "a pyroclastic explosion"in the price of gold, silver and the miners which produce them.

National Geographic defines my metaphor as,

"... a dense,fast-moving flow of solidified lava pieces, volcanic ash, and hot gases...extremely hot, burning anything in its path...Pyroclastic flows often occur intwo parts. Along the ground, lava and pieces of rock flow downhill. Above this,a thick cloud of ash forms over the fast-moving flow. (It) can transform thelandscape drastically in a short period of time.”

M + R +WB = P.O.R.

#1, The "M" Factor: Millennials, the cohort born between 1980 and2000 are today's largest generation – bigger than the record-sized BabyBoomers. Their sheer numbers will have an outsized impact on the markets. Oneinvestment approach that a fair number are taking is...

#2, The "R" Factor: Robinhood.com is a "no-commission"trading site that allows trading from relatively small accounts. Millennialsare flocking to it in droves.

Robinhood.com

Courtesy Robinhood.com

There's even a related site that tracks how many Robinhoodinvestors hold a given stock. Interestingly, not just Tesla and Apple, but alsogold and silver mining picks are showing up on this screen. And you can betyour bottom fiat dollar that they're buying physical metal too!

#3, The "WB" Factor: Warren Buffett is arguably the most successfulinvestor alive today. During the "early days" a friend of mine boughtjust 4 shares of Berkshire Hathaway and lived off the increased value andsplits for the rest of his life! Though Buffet's late father was a proponent ofgold as money, he has himself been a naysayer for many years.

One of Buffett’s many comments was that "Gold gets dug out ofthe ground in Africa, or some place. Then we melt it down, dig another hole,bury it again and pay people to stand around guarding it. It has noutility."

However, after having sold off his airline holdings and much of hisbank stock position this spring, he decided to buy $560 million dollars ofBarrick Gold (NYSE:GOLD), the world's second largest gold miner!

The implications of this monumental philosophical turnaround willbe massive, far-reaching, and enduring.

Here's what "Plunger," the resident Market Historian atRambus1.com (one of the very best technical analysis sites I know of and towhich I am a paid subscriber) has to say:

This is the ultimategreen light for the sector, it has now been legitimized in the canyons of WallStreet. Whereas before, asset managers feared getting fired for owning goldstocks, they will now fear getting fired for NOT owning gold stocks because ofWarren’s action. The gold bull market now sits at the cusp of the publics' pointof recognition (POR). 

I cannot overemphasizehow significant this is. 

Buffet has been the dam,holding back the great flood of investment dollars into the gold bull market.As long as Buffett steered clear, the lemming institutional money managerswould avoid the sector as well. The dam broke on Friday afternoon after themarket closed when Berkshire’s 13f filing was publicly released revealing hehad bought about $500m of Barrick last quarter. He’s now given tacit permissionthat the average investor needs to own some gold stocks. Don’t think peoplewon’t notice.

This sector was always going to be an asymmetric trade once thethird leg of the secular rise got underway, even as the shakeout of the lastnine years was brutal and unforgiving.

Sadly now, a number of those who had held on are washing out, andhave been selling their physical metal at break-even levels, or for "atidy profit."

I understand their motivation from the dark times and false starts,but they might want to take a second look.

If this scenario sounds logical, there's no dishonor in gettingback in, even at a higher price. And if you're still fence-sitting about atleast getting a reasonable amount (by your definition) of hold-in hand gold andsilver, that last train sure looks to be heading out of the station.

Personally, I'm willing to accept the risk that goes with takingaction because sometimes it can be even more risky not acting. I've gonethrough the last 9 years with the bear nipping at my heels just like you have.But I'm still showing up.

Whether the next impulse G/S leg above $2,100 and $30 respectivelygets underway tomorrow, in October, or next year is irrelevant to me.

Top-tier investor Rick Rule has a motto that resonates. He says,"You've gone through the pain, now get ready for the gain!"

David Smith isSenior Analyst for TheMorganReport.com and a regular contributor to MoneyMetals.com aswell as the LODE Cryptographic Silver Monetary System Project. He hasinvestigated precious metals’ mines and exploration sites in Argentina, Chile,Peru, Mexico, Bolivia, China, Canada and the U.S. He shares resource sectorobservations withr eaders, the media and North American investment conferenceattendees.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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