Hi,
Some assets periodically reach a point where there is a favorable alignment of long-term demand, global conditions, and behavior of investors. These phases are sometimes known as “supercycles,” which refer to periods of rising prices over many years, as opposed to months.
Recently, a common question that many investors have been asking is whether gold and silver are now in a supercycle, a phenomenon that is quite rare in the precious metal market.
What Is a Supercycle?
A supercycle is more about the bigger trends in markets, like debt, currencies, geopolitics, and supply, rather than being focused on short-term bursts in markets or keeping up with the current news headlines.
The historical pattern for precious metals to go into supercycles is during periods where the confidence in the financial systems wanes, with investors seeking stores of value that aren’t based on promises.
The Economic Background Cannot be Overlooked
The world’s governments owe more money than ever before. Interest payments are rising, exchange rates are being pushed to the limit, and central banks are balancing a tightrope between keeping inflation at bay while also promoting growth.
But for many investors, this kind of environment does little to foster confidence – and this is where precious metals can really perform well. Gold and silver aren’t influenced by an earnings statement, an economic or political decision, or an Fed move. They are simply there, existing in physical form as a means of storing value.
The supply is not meeting the demand
The other crucial element of a supercycle is supply pressure. The extraction of newly mined gold and silver is a costly process that involves a lot of time and is heavily regulated. At the same time, the demand is on a steady increase – from investors as well as from industries that use silver for their technological needs.
As the demand keeps growing while the supply finds it difficult to cope, the pressure on the price keeps building in the long run.
Investors Are Thinking Long-Term Again
One of the most significant changes taking place behind the scenes is the way that people think about money. More investment is taking place away from speculation and moving towards preservation.
It’s not, “How fast can this grow?” It’s, “How well will this hold up over time?” And by nature, this philosophy is conducive to tangible assets such as gold and silver, assets that have outlasted every form of monetary system before them.
So… Is a Supercycle Starting?
It is impossible to know what is going to happen to prices. But it is clear that there is a set of circumstances that is very similar to what occurred during previous precious metals supercycles.
The challenge for some investors isn’t in timing when to peak, it’s in peaking early and remaining patient. This is because, by the time supercycles become apparent to all, they have already been in progress for some time.
