The “Silver Guru”, David Morgan holds degrees in finance and economics as well as engineering. He is the author of the investment newsletter The Morgan Report, a monthly publication that covers economic news, the currency market and reasons for investing in precious metals and specific mining equities.
David Morgan is a regular commentator on the gold and silver markets and has been featured on CNBC, Fox Business News and BNN in Canada. David is also regularly featured as a speaker at mining investment conferences in North America.
David publishes the website Silver-Investor.com and in 2009 he published, “Get the Skinny on Silver Investing”.
In his book David writes, “The silver market is not only much smaller than the gold market physically, but it is also true monetarily. The total amount of silver, in price terms, might equal ten billion dollars (factoring in bullion and coins). Whereas gold bullion and coins would be worth over a trillion dollars, this fact displays itself in the price action of the two metals. Silver is far more volatile than gold and, thus, investors should bear this in mind. However, as precious metal markets continue to gather strength throughout this decade, just a small increase in new silver purchases could have a far greater impact on silver prices than the same amount of money invested in gold.”
With ongoing easing of monetary policy around the world gold and silver are in the spotlight again. We caught up with David Morgan for our Top Mining Minds series.
What factors will drive the mining markets over the next 12 months?
Earning will drive any stock, so earnings that are higher than expected or earnings growth would be the first place to look. Couple this with an increasing precious metals prices and the professional money will come into this sector. This implies producers with wide margins are the first area to examine.
The “risk on” factor also plays a part with so much uncertainty in investments such as bonds which now are questionable investments in the minds of sophisticated investors that understand why the Euro is in so much trouble and why the QE3 announcement means a currency crisis is brewing.
Finally, momentum players will come on board but it may take longer than one year.
What should investors be doing right now?
General equity investors would be best served to be very cautious at the present time. Although U.S. equity markets remain “strong” it is in appearance only and internally the general stock market is quite weak. Any real selling pressure could take the market down noticeably. However, we also need to factor in that this is an election year in the U.S. and the working group on financial markets (plunge protection team) would most likely abate any significant drops in the main indexes such as the Dow or S&P 500. Regardless, caution is advised.
In the resource sector investors could look at which commodities are leading and which are lagging. It is best to purchase the strong groups which currently are the precious metals. The precious metals are negatively correlated to the general equity markets, so in a sell off gold usually performs well. This is not true of gold or silver stocks initially, but if the general equity market falters for long even the precious metals stocks will move up versus the downtrend in the general market.
Investors need to stress value and earnings! Look for companies that have earnings and earnings growth and if possible are undervalued. Times have changed a general rule is to seek companies that produce things that are “needed” and have demand regardless of economic conditions.
What are your top picks and why?
My top investment pick is the commodity sector in general, with the precious metals being my favorite within the sector. In times of financial turmoil the market seeks safety and value so both of the precious metals have these characteristics with silver also being imperative in a high tech society.
To read more from our Top Mining Minds series – CLICK HERE.