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#312 - The Biggest Silver Crash In 40 Years (what’s next?) · Money Grows on Trees

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  Silver just had the steepest drop in 40 years
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  from 120 down to about 78. And most investors have
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  no idea what that means. Some people are calling it the buying opportunity of
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  a lifetime. Others are saying it's a warning sign that industrial demand
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  is collapsing. and that the global economy is slowing, and that silver is
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  just the first domino. So what is it? Is it the bottom? Or
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  is there more pain in the silver and metals markets ahead? You
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  see, silver doesn't crash like this without a reason. If
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  you don't understand why it's happening, then you're going to make the wrong decision.
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  And in this video, I'm going to show you exactly why silver tanked, what
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  the data says about where it's headed next, and whether this is an asset you
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  should be putting your money behind. I'm Lloyd James Ross, seven
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  figure investor and entrepreneur and I've helped thousands of business owners and
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  professionals turn financial stress into success. If
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  you're stuck in old money habits, overwhelmed by investing or unsure where
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  to start, this is for you. I'll give you the mindset and
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  strategies to take control, grow your wealth and achieve financial
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  freedom. It's time to make your money work for you. All right. Firstly,
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  where are we right now? What's happening in the metals market with
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  silver and gold? I'm going to take you through some numbers. I'm going to explain to
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  you what it's all about and how it impacts you. Let's
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  get the numbers on the table right now. As of right now, one, gold
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  is around just a bit over $5,000 an ounce and silver is around $80 an ounce. Gold
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  has been up massively over the last year. I mean,
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  we're talking like 70%, which it's
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  crazy thinking about how fast assets move. It's
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  a huge move in gold, all right? And everyone, of course, becomes a
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  gold bug. You can see big lines down at the bullion shop in Sydney, people
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  lining up to get gold. I'm not sure why, but
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  of course, it's for fast money. It's the jackpot money mindset I talk about in that book
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  as to what's causing that. But it sounds like
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  it's not a slow and stable store of value. It seems like
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  it's turned into a speculative something-something, right?
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  Does it sound like it's a crowded trade to you? It
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  seems like it is, because if there's lines of people in Sydney looking
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  to get gold bullion, it seems like we're at a bit of a bubble here. So
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  why the market went crazy? Here are the real drivers behind the
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  insane gold and silver run. One,
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  US dollar weakness and yields. So when the
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  US dollar weakens, and it's caused by the fact, here's how
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  the US dollar weakened. Of course, everybody knows that there's a lot of cheap money
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  pumped out. Everybody knows that there's fear of the US
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  defaulting because it's $38 trillion in debt. Everybody is aware of
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  this. But here's what happened. Donald Trump. wanted
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  Chairman Powell, who's the chair of the Federal Reserve, to cut rates
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  during full employment, steady price. So
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  that means inflation steady and down. He wants Powell to
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  cut rates, right? But Powell doesn't want to. He wants
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  to keep rates steady, higher, which is what's happened in the United States. Is
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  Trump right? Maybe. Is Powell right? Maybe. It's
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  hard to tell. But what has happened, too, since then is that Trump
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  has been jawboning to get rid of the Federal Reserve
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  and replace him with Kevin. There's two Kevins that were up for nomination. He's
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  chosen a Kevin. And he's going to come in. Now, everyone
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  anticipated and thought that Donald Trump is going to basically influence
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  the Fed chair to cut rates during a time where
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  the United States GDP growth is around 5% to 6%, which is huge. Now,
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  that's not a good time to cut rates. But everyone thought that so
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  they thought, well, Donald's definitely gonna do that. That's why he's bringing a new federal chair, right
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  for the Federal Reserve. But so that said, they're like, you know what,
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  there's gonna be cheap money everywhere. So the US dollar weakens. That's what
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  happened. And gold tends to catch a bid because it's a non
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  yielding asset, and the opportunity cost drops. Okay, basically, when
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  cash and bonds are less attractive, capital moves into gold.
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  That's what's happened. They're fearful of the money becoming
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  worth less. Meanwhile, China has been buying a ton
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  of gold. So the demand is also really high. A lot of demand for
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  gold and also the people saying, well, the currency is going to
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  be worth nothing. The narrative, the story. is what
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  happens, right? So a big part of the gold narrative is rising stress in
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  the US debt dynamics and the declining trust in the dollar
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  asset. And that's been the core pillar of the bull market
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  in gold and silver, right? And the other
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  driver is the central bank So governments like
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  the US and other central banks like China, they're going
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  after gold, okay? So the demand is what's also pushing prices higher.
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  On the silver side, it's structural supply issues and a deficit in
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  the silver supply that's actually causing the narrative. So silver has
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  got its own fuel. There's been talk of structural deficits, heavy investment
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  demand required to get more silver out of the ground. Huge volatility, and
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  that's what caused this massive sharp move in silver, like extreme levels.
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  Like $120 an ounce, it is huge, right? So the metals
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  didn't rise because everyone suddenly became responsible investors.
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  They rose because macro conditions created a fear trade.
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  That's what it is. Gold and silver is a fear trade. Probably
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  more so gold than silver, alright? So let's look at what's happened in
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  the past when this has happened. Gold and silver have done
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  this before. Here's some examples in the gold bull markets of yonder
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  year. The 1970s, inflation, which is kind of what's happening at
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  the moment. The oil shocks that happened from the oil embargo in the 70s.
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  And a lot of dollar weakness. Gold ran hard. So we're almost repeating the
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  1970s when Paul Volcker was the Fed chair. And
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  as a result of that, interest rates went up to 17%. It happened
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  again. So yeah, it's more of like
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  an inflation shock that's causing this and
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  dollar weakness. Same as the 70s. 2001, 2011, dollar issues, crisis
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  era, another major multi-year bull run. Silver bull examples,
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  1979 to 1980. The biggest, one
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  of the biggest ever, silver spiked, then collapsed violently. In fact, I'm
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  pretty sure it collapsed in 1980, pretty sure, by
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  63% in a day. And that's why I don't touch the metals. But 2008, 2011, a
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  major crisis around money. So what we're seeing in the past is that anytime there's
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  this rhetoric, this narrative around weak, cheap
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  fiat money, US dollars weakening, we get a fear trade
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  into gold and silver. And that's what's happened, right? So the point is
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  that metals never just go up. The point is that metals historically go
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  up in waves based on a story and then they
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  punish late buyers, like punish. Could you imagine losing
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  60% of your wealth in silver in a day? And this will happen time and time
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  again. So will it happen again? Of course it will. Are you kidding me? Of course. So
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  if you're seeing massive bull runs in gold and silver, and you're seeing
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  people line up around the bullion shop to buy, and you're seeing people talk about it all the
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  time, it's probably the top. And will you lose money? You
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  probably already lost money from the silver. I shouldn't laugh, but it's
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  a little bit amusing because if you understood, if you watch this channel for long enough, if
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  you wouldn't want to play in this area, right? And that's why I don't touch that
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  stuff. It's just so unpredictable. So now let's talk about the punch in
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  the face. Gold had a brutal fall right after Trump
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  named Kevin Walsh, which is one of the two Kevins he nominated. So Kevin Walsh comes
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  into the Fed chair. He's the next one coming in. And the market, this
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  is why it collapsed. Gold was pumping because of the US cheap
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  dollar narrative, like, oh, the US dollar is disappearing. That's the narrative. And
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  here's what happened. Kevin Walsh gets picked. And the market
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  interprets it as, actually, if you look at his record, he actually
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  likes to increase interest rates. Boom!
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  All of a sudden, in a day, it's like, uh-oh, this guy's going to increase rates.
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  That means there's less cheap money. That means the US dollar is probably going to gain strength. Oh,
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  shivers. And then gold plunges 10% in a single day, late Jan.
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  Silver falls 27% in the same set, 27% in a single session. One
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  of the biggest recorded drawdowns ever. Like trillions
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  moved, trillions of dollars. So if
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  it's a safe haven, like how can it drop 10% in a day? How safe is
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  it when positioning is crowded? Just quickly, if you're ready to take control
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  of your finances but feel stuck on where to start, I have a
• 8:07
  solution. My book, Money Buys Happiness, simplifies investing
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  and wealth building with practical steps to help you achieve financial peace.
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  Get your copy via the link in the show notes and let's get your money working for
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  you. Now back to the episode. So here's what I want to talk to you about and
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  explore this with you. So you have a bit of an anchor or something to
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  understand the price moves of gold. So you know if you're getting like, this
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  will keep you out of trouble. Okay, if you're gonna play there, here's some rules, right?
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  Here's the gold and silver to oil ratio. And
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  this is why I believe metals are still gonna fall because
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  of this ratio. So this will help put some bumpers
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  on your metals investments, if that's something you wanna participate in,
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  right? And here's what most people don't understand or ignore, right? Gold
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  doesn't move in isolation, it moves relative to other real
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  assets. Fact. So here's one of the key lessons, the gold
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  to oil ratio. How many barrels of oil, which
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  is the most productive commodity in the world, how many
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  barrels of oil equal one ounce of gold? This is the gold
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  to oil ratio, right? Historically, the ratio has often sat around
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  the mid-teens. So around 15, okay?
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  So that means 15 barrels of oil will buy
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  an ounce of gold. Does that make sense?
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  So 5,000 roughly goes into, what was it, 60? Yeah, we're
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  looking at like, it's a lot more. It's not 15. So
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  you can understand where I'm going with this, right? So does it does this
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  make sense to you? 15 barrels of oil will buy an ounce of gold.
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  So since the 1980s, it's typically traded in a broad range between
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  six and 40. So it just oscillates, yeah, with extreme spikes in
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  either direction. And that's what you have to understand. Where are we in that ratio? Okay.
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  So if we look at The extreme valuation of
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  The usual is 15, we're at 80. So if you think about that,
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  if that's the case and 80 was going to be steady, 80 barrels, all
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  we have to do is take 5,000 an ounce divided by $60 a
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  barrel. So right now we're at 83, literally. As I record
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  this, we're at 83 barrels of oil per one ounce of gold. Now normally it's
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  15. So if we take 5,000 divided by 15, $333 is what oil has to get to for that ratio to balance out. Does that
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  make sense? So if oil is at $333 a barrel, we'll be at the 15 to 1 ratio. So
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  either oil has to, divided by 63, either
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  oil has to 5x from here, which would pretty much kill
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  the economy. Oil, yeah, ain't no one be driving petrol
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  cars at that point. 5x, that's what has to happen, or
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  gold must fall. Now what I've experienced in my life, and
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  you may take this as a bit of a gold nugget of wisdom, I hope you do, because
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  I learnt it and I'm like, that's helped me so much in my life, is this. The answer
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  to these difficult questions is typically found in the middle somewhere, okay?
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  So if we can say, well, what's going to happen? Well, what if it's in the middle? What if gold falls
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  to, say, $3,000 an ounce and oil dries
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  up to $200 a barrel? Yeah? We're back at $15. Look
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  at that. Dead on $15. I just did that quick sum on my phone. $3,000 an ounce
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  of gold and oil at $200 a
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  barrel. We're back at the ratio. So one or two things can happen. Oil
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  may go to 200 and it probably will. And Warren Buffett's also said that,
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  which is likely because there's a huge structural undersupply in oil. I've done
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  episodes on this before, so go back and check out my oil episodes. And
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  also gold will fall. So I'm anticipating gold will come
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  down from 5,000 ounce down to 3,000. And I can't wait to
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  do an episode on that because I'm pretty sure that's going to happen. And
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  it's going to show you that this show is not just about entertainment
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  and education. It's actually about, you know, we know what we're talking about here a little bit too. I'm
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  using data to help you understand this myriad of
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  difficulty in the financial world. You can see it very clearly, oil
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  is going to go up. And you can see it very clearly, gold is stretched. And
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  so some of these things in politics start to play out in real
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  life, right? So oil is a catalyst that can push it up. It'll
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  start to shift, all right? So here's the logic. If oil rises, the
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  ratio normalizes, and gold will probably come
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  down, okay? It's a combination of the two things. So what does that mean for
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  you? Well, here's the summary of this. Here's why I'm
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  doing this episode. Obviously, my view is that oil is a stronger trade,
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  and you can buy wonderful companies at great prices that you can make money
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  from that are very predictable. On the opposite side, it's
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  very unpredictable to play in gold and silver. Very. Okay. I
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  don't buy gold or silver for that reason that it's actually very difficult
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  to understand or plan what's going to happen. Okay. Not because they can't go
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  up and so forth, but because I want consistency to be able to build
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  wealth over time, right? There's no cash flowing metals. I want assets to
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  produce something while I'm waiting for the value to go up. I want earnings, dividends, rental
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  income, free cash flow. That's what I want. And you should want that too. Gold and silver
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  produce nothing. You need to pay someone else or
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  you need someone else to pay more for it to go up. That's not a compounding machine.
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  Metals are the greatest fear cycles, right? They're not great for compounding wealth
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  because over decades, they just go up and down with
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  uncertainty. Volatility is completely underestimated. People call
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  gold safe, but you just watch it drop 10% in a day, right?
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  So I'll give you a real example of how it can impact people's life. This topic of
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  gold, how people can get sucked into the narrative out of fear
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  and how it can actually have a consequence in their personal finances, right? So
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  I've had a few students of mine ask me recently, they've said, Lloyd, Should
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  I buy gold or silver because everyone's gone crazy for it and they're lining up That's the
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  first question and I've had another one say hey, I actually hold this
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  it's gone up 40 or 50% What should I do? Right and
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  so there's two things happening People are getting seconded or
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  seduced into it without knowing and those who have participated
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  in the boom the jackpot Unknowingly and they don't know how they made the
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  money now. They're stuck and So you can see here very clearly, you're
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  damned if you do and you're damned if you don't. So that's why I just do not touch
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  it. Does that make sense? It'll be
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  an unwinnable game. So if you want
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  to trade the fear cycle, trade it in real assets. I know
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  that no matter what happens in the economy, people are going to come into my laundromat and
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  want to wash their clothes and they'll pay me. I know in a real economy and
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  no matter what happens, railroads will have to move stock. I
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  know in any economy, people will need oil. I know in a real economy, they'll
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  need healthcare. There's certain businesses that you just want to be a part of and
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  certain assets you want to be a part of. I even, I know I beat up real estate a lot because
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  I don't like buying it when it's overvalued, but even shelter and real estate is a good asset
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  in the worst of times because it's solid. It's
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  not going to evaporate and it doesn't drop 70% in a single day. So
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  this is how it can affect you. So I hope that makes sense. The questions are
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  coming out from various students of mine because it's on everyone's mind.
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  It's a hot topic. And I would say if you don't understand the rules, don't
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  play the game. So just based on that, you know where I
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  stand. If you own gold or silver and you're like, what
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  do I do with it? It's a fair question. I can't give you any advice. But
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  I would say is don't play in games where you don't understand the
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  rules. So I hope you can take this episode and the data I've shared
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  with you as to where it will go, what will happen, and how I think about it.
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  And I anticipate and hope that this will give you some level of education as
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  to what you're playing in, why you're playing in it, and whether you should
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  be or not. So I hope you've enjoyed the episode. It's a shorter one. Leave
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  me a comment below. Are you an investor in gold or silver? Do you agree with me?
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  Do you disagree? Where do you stand on this topic? I'd love for you to leave a comment,
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  and we can come and debate in the comments. Hit the subscribe button, and I'll see you in the next episode. Thanks
• 15:36
  for listening to Money Grows on Trees. If you enjoyed the episode, leave a
• 15:39
  five-star review on Apple Podcasts and Spotify and subscribe
• 15:43
  to us on YouTube so you never miss an episode. And if you're serious about
• 15:46
  building wealth, make sure to check out the links in the show notes and follow me
• 15:50
  on all social media platforms at LloydJamesRoss for