Silver remains the best asset to own and it's a 'steal under $30' - Crescat Capital
In a recent interview with Kitco News, Tevi Costa, partner and portfolio manager at Crescat, said that silver remains his favorite commodity as it will benefit as both an industrial and monetary metal. He added that he expects it's only a matter of time before silver sees higher prices.
"It's a steal to be able to buy silver under $30 an ounce," he said.
Although silver remains his favorite commodity Costa said he is bullish on all commodities, including gold, copper and tin. He added that another good trade is being long commodities against general equities.
"As a portfolio manager, I'm looking at this, and I'm trying to protect capital and grow capital. I think the best way to do this is still on the commodity side. It is with monetary metals and cyclical commodities. Dips in gold and copper are to be bought."
Costa added that he expects monetary metals like gold and silver to have an advantage over other commodities like base metals as investors focus on protecting their wealth in an environment of rising inflation and low interest rates.
Costa said that central bank officials are underestimating inflation pressures, and there are indications the rising threat will be more permanent than expected. He added that because of government policies, the bottom 50% of consumers are seeing their wealth rise faster than the top half.
He added that American workers are also demanding higher wages, which will lead to increased consumer demand. However, with rising demand comes inflation, he noted.
Because of the pent-up consumer demand as a result of the COVID-19 pandemic, Costa said that the economy is on the precipice of a shift where inflation pressures will overwhelm deflationary forces.
He added that the only thing that could change the current environment would be a major correction in equity markets, which would be deflationary. But for now, investors have to deal with the looming inflation threat, he said.
"It's difficult for me to even paint a deflationary environment right now," he said.
Coupled with the rising inflation pressures, Costa said that the Federal Reserve will maintain interest rates at historically low levels. He added that the central bank's dual mandate to support the labor market and price stability is simply a justification to supply interest rates.
"This creates a supercharged environment for gold and silver," he said. "The Federal Reserve will continue to keep interest rates low, so the government can continue to borrow more money without going broke."
Costa added that the government's new green agenda will lead to further spending, and the development of green technology will need more silver.
Along with maintaining low interest rates, Costa said that he also expects the Federal Reserve to maintain its bond-purchase program for the foreseeable future as it provides important stability for financial markets.
"Right now, capital markets are calm because they know that the Federal Reserve would step up if conditions changed."
While Crescat Capital is bullish on commodities, Costa said that the firm prefers to pay the market through the junior equity space. He added that this provides the best potential for investors.