The numbers seem unreal, but no matter the final price tag determined in the coming weeks by Congress, the value of precious metals is likely to rise once again.
Economists have been rigidly fixed on inflation and the relationship of gold as a hedge to inflationary pressures across the economy. But what does that mean for growth in the silver market? And more importantly, how long will this type of hedge be necessary?
First off, let’s look at the infrastructure bill. U.S. Senate Democrats have agreed on a $3.5 trillion investment plan that can be included in a budget reconciliation process that needs to be worked out soon before the August recess.
It all kicks off with a $1.2 trillion bipartisan framework that was agreed upon some weeks ago. The framework includes various measures including transportation infrastructure, clean water infrastructure, universal broadband infrastructure, clean power infrastructure, and resilience to the changing climate. Yet, essentially, this plan invests two-thirds of the resources President Joe Biden had previously proposed in his American Jobs Plan.
All these measures, particularly around clean power and broadband infrastructure, will likely rely on precious metals to get the job done as these natural conductors are used in everything from technological components for broadband to electric vehicle (EV) car batteries.
It has been said that Biden is leading an EV revolution and that’s because more money in this massive infrastructure spending bill will be spent on these vehicles than on the highways and bridges they will be driving on.
Silver is used in vehicle electrical control units. According to the Silver Institute, silver use is even higher in hybrid vehicles, and in battery electric vehicles, the use of silver increases to roughly double.
Investment analysts have forecasted that annual silver demand could climb 87% over the next 15 years if the U.S. energy sector alone moves to renewable energy alternatives such as wind and solar.
Silver is also used in solar panels, and if large institutional investors make good on promises to invest in cleaner energy and go carbon neutral there is a great expectation that there will be a push into solar photovoltaics that rely on silver.
Silver and gold are both expected to see higher valuations before the end of this year as wireless broadband infrastructure is expanded to serve a wider swath of the country. Analysts point to the shift to 5G wireless and the electrical components that rely on both gold and silver helping boost the value of each as government officials prepare to approve the massive, once-in-a-generation spending bill.
Critics, though, point to rising inflation and devaluing of the dollar as U.S. government debt grows. These trends may give an added boost to gold prices albeit having knock-on effects on the economy broadly.
While mining production fell during the pandemic and drove record-setting gold prices, mines are now open and back in business, experts say. However, as prices rise globally, inflation is expected to play a role in deciding the future of gold.
According to the IMF, $12 trillion has already been pumped into global financial markets as governments and central banks around the world have tried to stabilize their respective economies.
The expectation now is that as prices rise and the dollar falls, gold will remain a portfolio hedge against future inflation.
Ready to learn even more or take the plunge and open a Precious Metals IRA? Call our team at (844) 824-5051.