#312 - The Biggest Silver Crash In 40 Years (what’s next?)

Silver just had the steepest drop in 40 years from 120 down to about 78. And most investors have no idea what that means. Some people are calling it the buying opportunity of a lifetime. Others are saying it's a warning sign that industrial demand is collapsing. and that the global economy is slowing, and that silver is just the first domino. So what is it? Is it the bottom? Or is there more pain in the silver and metals markets ahead? You

see, silver doesn't crash like this without a reason. If you don't understand why it's happening, then you're going to make the wrong decision. And in this video, I'm going to show you exactly why silver tanked, what the data says about where it's headed next, and whether this is an asset you should be putting your money behind. I'm Lloyd James Ross, seven figure investor and entrepreneur and I've helped thousands of business owners and

professionals turn financial stress into success. If you're stuck in old money habits, overwhelmed by investing or unsure where to start, this is for you. I'll give you the mindset and strategies to take control, grow your wealth and achieve financial freedom. It's time to make your money work for you. All right. Firstly,

where are we right now? What's happening in the metals market with silver and gold? I'm going to take you through some numbers. I'm going to explain to you what it's all about and how it impacts you. Let's get the numbers on the table right now. As of right now, one, gold is around just a bit over $5,000 an ounce and silver is around $80 an ounce. Gold has been up massively over the last year. I mean, we're talking like 70%, which it's crazy thinking about how fast assets move. It's

a huge move in gold, all right? And everyone, of course, becomes a gold bug. You can see big lines down at the bullion shop in Sydney, people lining up to get gold. I'm not sure why, but of course, it's for fast money. It's the jackpot money mindset I talk about in that book as to what's causing that. But it sounds like it's not a slow and stable store of value. It seems like it's turned into a speculative something-something, right?

Does it sound like it's a crowded trade to you? It seems like it is, because if there's lines of people in Sydney looking to get gold bullion, it seems like we're at a bit of a bubble here. So why the market went crazy? Here are the real drivers behind the insane gold and silver run. One,

US dollar weakness and yields. So when the US dollar weakens, and it's caused by the fact, here's how the US dollar weakened. Of course, everybody knows that there's a lot of cheap money pumped out. Everybody knows that there's fear of the US defaulting because it's $38 trillion in debt. Everybody is aware of this. But here's what happened. Donald Trump. wanted Chairman Powell, who's the chair of the Federal Reserve, to cut rates during full employment, steady price. So

that means inflation steady and down. He wants Powell to cut rates, right? But Powell doesn't want to. He wants to keep rates steady, higher, which is what's happened in the United States. Is Trump right? Maybe. Is Powell right? Maybe. It's hard to tell. But what has happened, too, since then is that Trump has been jawboning to get rid of the Federal Reserve and replace him with Kevin. There's two Kevins that were up for nomination. He's

chosen a Kevin. And he's going to come in. Now, everyone anticipated and thought that Donald Trump is going to basically influence the Fed chair to cut rates during a time where the United States GDP growth is around 5% to 6%, which is huge. Now, that's not a good time to cut rates. But everyone thought that so they thought, well, Donald's definitely gonna do that. That's why he's bringing a new federal chair, right for the Federal Reserve. But so that said, they're like, you know what,

there's gonna be cheap money everywhere. So the US dollar weakens. That's what happened. And gold tends to catch a bid because it's a non yielding asset, and the opportunity cost drops. Okay, basically, when cash and bonds are less attractive, capital moves into gold. That's what's happened. They're fearful of the money becoming worth less. Meanwhile, China has been buying a ton

of gold. So the demand is also really high. A lot of demand for gold and also the people saying, well, the currency is going to be worth nothing. The narrative, the story. is what happens, right? So a big part of the gold narrative is rising stress in the US debt dynamics and the declining trust in the dollar asset. And that's been the core pillar of the bull market in gold and silver, right? And the other driver is the central bank So governments like

the US and other central banks like China, they're going after gold, okay? So the demand is what's also pushing prices higher. On the silver side, it's structural supply issues and a deficit in the silver supply that's actually causing the narrative. So silver has got its own fuel. There's been talk of structural deficits, heavy investment demand required to get more silver out of the ground. Huge volatility, and that's what caused this massive sharp move in silver, like extreme levels.

Like $120 an ounce, it is huge, right? So the metals didn't rise because everyone suddenly became responsible investors. They rose because macro conditions created a fear trade. That's what it is. Gold and silver is a fear trade. Probably more so gold than silver, alright? So let's look at what's happened in the past when this has happened. Gold and silver have done this before. Here's some examples in the gold bull markets of yonder

year. The 1970s, inflation, which is kind of what's happening at the moment. The oil shocks that happened from the oil embargo in the 70s. And a lot of dollar weakness. Gold ran hard. So we're almost repeating the 1970s when Paul Volcker was the Fed chair. And as a result of that, interest rates went up to 17%. It happened again. So yeah, it's more of like an inflation shock that's causing this and dollar weakness. Same as the 70s. 2001, 2011, dollar issues, crisis

era, another major multi-year bull run. Silver bull examples, 1979 to 1980. The biggest, one of the biggest ever, silver spiked, then collapsed violently. In fact, I'm pretty sure it collapsed in 1980, pretty sure, by 63% in a day. And that's why I don't touch the metals. But 2008, 2011, a major crisis around money. So what we're seeing in the past is that anytime there's this rhetoric, this narrative around weak, cheap fiat money, US dollars weakening, we get a fear trade

into gold and silver. And that's what's happened, right? So the point is that metals never just go up. The point is that metals historically go up in waves based on a story and then they punish late buyers, like punish. Could you imagine losing 60% of your wealth in silver in a day? And this will happen time and time again. So will it happen again? Of course it will. Are you kidding me? Of course. So if you're seeing massive bull runs in gold and silver, and you're seeing

people line up around the bullion shop to buy, and you're seeing people talk about it all the time, it's probably the top. And will you lose money? You probably already lost money from the silver. I shouldn't laugh, but it's a little bit amusing because if you understood, if you watch this channel for long enough, if you wouldn't want to play in this area, right? And that's why I don't touch that stuff. It's just so unpredictable. So now let's talk about the punch in

the face. Gold had a brutal fall right after Trump named Kevin Walsh, which is one of the two Kevins he nominated. So Kevin Walsh comes into the Fed chair. He's the next one coming in. And the market, this is why it collapsed. Gold was pumping because of the US cheap dollar narrative, like, oh, the US dollar is disappearing. That's the narrative. And here's what happened. Kevin Walsh gets picked. And the market interprets it as, actually, if you look at his record, he actually

likes to increase interest rates. Boom! All of a sudden, in a day, it's like, uh-oh, this guy's going to increase rates. That means there's less cheap money. That means the US dollar is probably going to gain strength. Oh, shivers. And then gold plunges 10% in a single day, late Jan. Silver falls 27% in the same set, 27% in a single session. One of the biggest recorded drawdowns ever. Like trillions moved, trillions of dollars. So if

it's a safe haven, like how can it drop 10% in a day? How safe is it when positioning is crowded? Just quickly, if you're ready to take control of your finances but feel stuck on where to start, I have a solution. My book, Money Buys Happiness, simplifies investing

and wealth building with practical steps to help you achieve financial peace. Get your copy via the link in the show notes and let's get your money working for you. Now back to the episode. So here's what I want to talk to you about and explore this with you. So you have a bit of an anchor or something to understand the price moves of gold. So you know if you're getting like, this will keep you out of trouble. Okay, if you're gonna play there, here's some rules, right?

Here's the gold and silver to oil ratio. And this is why I believe metals are still gonna fall because of this ratio. So this will help put some bumpers on your metals investments, if that's something you wanna participate in, right? And here's what most people don't understand or ignore, right? Gold doesn't move in isolation, it moves relative to other real assets. Fact. So here's one of the key lessons, the gold

to oil ratio. How many barrels of oil, which is the most productive commodity in the world, how many barrels of oil equal one ounce of gold? This is the gold to oil ratio, right? Historically, the ratio has often sat around the mid-teens. So around 15, okay? So that means 15 barrels of oil will buy an ounce of gold. Does that make sense? So 5,000 roughly goes into, what was it, 60? Yeah, we're looking at like, it's a lot more. It's not 15. So

you can understand where I'm going with this, right? So does it does this make sense to you? 15 barrels of oil will buy an ounce of gold. So since the 1980s, it's typically traded in a broad range between six and 40. So it just oscillates, yeah, with extreme spikes in either direction. And that's what you have to understand. Where are we in that ratio? Okay. So if we look at The extreme valuation of

The usual is 15, we're at 80. So if you think about that, if that's the case and 80 was going to be steady, 80 barrels, all we have to do is take 5,000 an ounce divided by $60 a barrel. So right now we're at 83, literally. As I record this, we're at 83 barrels of oil per one ounce of gold. Now normally it's 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 make sense? So if oil is at $333 a barrel, we'll be at the 15 to 1 ratio. So

either oil has to, divided by 63, either oil has to 5x from here, which would pretty much kill the economy. Oil, yeah, ain't no one be driving petrol cars at that point. 5x, that's what has to happen, or gold must fall. Now what I've experienced in my life, and you may take this as a bit of a gold nugget of wisdom, I hope you do, because

I learnt it and I'm like, that's helped me so much in my life, is this. The answer to these difficult questions is typically found in the middle somewhere, okay? So if we can say, well, what's going to happen? Well, what if it's in the middle? What if gold falls to, say, $3,000 an ounce and oil dries up to $200 a barrel? Yeah? We're back at $15. Look at that. Dead on $15. I just did that quick sum on my phone. $3,000 an ounce of gold and oil at $200 a

barrel. We're back at the ratio. So one or two things can happen. Oil may go to 200 and it probably will. And Warren Buffett's also said that, which is likely because there's a huge structural undersupply in oil. I've done episodes on this before, so go back and check out my oil episodes. And also gold will fall. So I'm anticipating gold will come down from 5,000 ounce down to 3,000. And I can't wait to

do an episode on that because I'm pretty sure that's going to happen. And it's going to show you that this show is not just about entertainment and education. It's actually about, you know, we know what we're talking about here a little bit too. I'm using data to help you understand this myriad of difficulty in the financial world. You can see it very clearly, oil

is going to go up. And you can see it very clearly, gold is stretched. And so some of these things in politics start to play out in real life, right? So oil is a catalyst that can push it up. It'll start to shift, all right? So here's the logic. If oil rises, the ratio normalizes, and gold will probably come down, okay? It's a combination of the two things. So what does that mean for you? Well, here's the summary of this. Here's why I'm

doing this episode. Obviously, my view is that oil is a stronger trade, and you can buy wonderful companies at great prices that you can make money

from that are very predictable. On the opposite side, it's very unpredictable to play in gold and silver. Very. Okay. I don't buy gold or silver for that reason that it's actually very difficult to understand or plan what's going to happen. Okay. Not because they can't go up and so forth, but because I want consistency to be able to build wealth over time, right? There's no cash flowing metals. I want assets to

produce something while I'm waiting for the value to go up. I want earnings, dividends, rental income, free cash flow. That's what I want. And you should want that too. Gold and silver produce nothing. You need to pay someone else or you need someone else to pay more for it to go up. That's not a compounding machine. Metals are the greatest fear cycles, right? They're not great for compounding wealth because over decades, they just go up and down with

uncertainty. Volatility is completely underestimated. People call gold safe, but you just watch it drop 10% in a day, right? So I'll give you a real example of how it can impact people's life. This topic of gold, how people can get sucked into the narrative out of fear

and how it can actually have a consequence in their personal finances, right? So I've had a few students of mine ask me recently, they've said, Lloyd, Should I buy gold or silver because everyone's gone crazy for it and they're lining up That's the first question and I've had another one say hey, I actually hold this

it's gone up 40 or 50% What should I do? Right and so there's two things happening People are getting seconded or seduced into it without knowing and those who have participated in the boom the jackpot Unknowingly and they don't know how they made the money now. They're stuck and So you can see here very clearly, you're damned if you do and you're damned if you don't. So that's why I just do not touch it. Does that make sense? It'll be

an unwinnable game. So if you want to trade the fear cycle, trade it in real assets. I know that no matter what happens in the economy, people are going to come into my laundromat and want to wash their clothes and they'll pay me. I know in a real economy and no matter what happens, railroads will have to move stock. I know in any economy, people will need oil. I know in a real economy, they'll need healthcare. There's certain businesses that you just want to be a part of and

certain assets you want to be a part of. I even, I know I beat up real estate a lot because I don't like buying it when it's overvalued, but even shelter and real estate is a good asset in the worst of times because it's solid. It's not going to evaporate and it doesn't drop 70% in a single day. So this is how it can affect you. So I hope that makes sense. The questions are coming out from various students of mine because it's on everyone's mind.

It's a hot topic. And I would say if you don't understand the rules, don't play the game. So just based on that, you know where I stand. If you own gold or silver and you're like, what do I do with it? It's a fair question. I can't give you any advice. But I would say is don't play in games where you don't understand the rules. So I hope you can take this episode and the data I've shared with you as to where it will go, what will happen, and how I think about it.

And I anticipate and hope that this will give you some level of education as to what you're playing in, why you're playing in it, and whether you should be or not. So I hope you've enjoyed the episode. It's a shorter one. Leave me a comment below. Are you an investor in gold or silver? Do you agree with me? Do you disagree? Where do you stand on this topic? I'd love for you to leave a comment,

and we can come and debate in the comments. Hit the subscribe button, and I'll see you in the next episode. Thanks for listening to Money Grows on Trees. If you enjoyed the episode, leave a five-star review on Apple Podcasts and Spotify and subscribe to us on YouTube so you never miss an episode. And if you're serious about building wealth, make sure to check out the links in the show notes and follow me on all social media platforms at LloydJamesRoss for