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Silver is just getting started as investors start to bail on cryptocurrencies - Silver Hammer CEO
(Kitco News) - Silver prices remain caught in a wide range, unable to hold above $24. But the precious metal is destined for higher prices as market liquidity dries up and investors see value in real assets again, according to one mining executive.
In a recent telephone interview with Kitco News, Morgan Lekstrom, president and CEO of Silver Hammer Mining Corp., said that while silver's price action was disappointing in 2021, there will be plenty of opportunities for the precious metal to shine in 2022 as risk and volatility reenter the marketplace.
Lekstrom added that the de-risking trend could already be seen in cryptocurrencies. The digital marketplace has lost more than $1 trillion in market cap since reaching a peak in November of $3 trillion.
Lekstrom explained that the Federal Reserve's impending rate hike means that liquidity is drying up.
"People had access to cheap money for a very long time and that changed their risk tolerance," he said. "And when they saw what was happening in cryptos, people started piling in. A lot bought into this almost new American dream. They bought into the dream that 'I'm going to be able to make a lot of money in cryptos.' They forgot a lot about silver and gold and specifically silver, but you will start to see that trend reverse."
Lekstrom added that silver is in a unique position because it is a monetary metal with strong industrial demand. He explained that silver is a hedge against rising inflation and provides some upside exposure in the industrial sector impacted by the ongoing global supply chain issues.
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Hold something real like gold and silver as risks, volatility rise - abrdn |
Although Lekstrom is bullish on silver, he said that the key to unlocking the precious metal's potential remains gold.
"If gold prices can get back above $1,900 and push towards $2,000, that is when we will see silver soar," he said.
Despite his positive outlook, Lekstrom said that the precious metals also face some difficult hurdles, specifically the Federal Reserve's interest rate hike in March. Markets are getting more and more comfortable with the idea that the U.S. central bank will raise interest rates by 50 basis points. At the same time, markets are pricing in the potential for six rate hikes.
Although markets are pricing in aggressive action from the Fed, Lekstrom said that he doesn't see how that will solve the current economic issues that are created unprecedented inflation.
"When you look at the macro inflation model, hyperinflation does not fit right now," he said. "It could be counterproductive for a while, but I don't think interest rates hikes will solve that.
The comments come as Silver Hammer starts to ramp up its 2022 exploration program and as it celebrates its first year since going public. The company is currently developing four projects: the Silver Strand in Idaho's silver valley, the Eliza Silver and Silverton Mine projects in Nevada and its Lacy Gold Project in British Columbia.
"We believe our 2021 drill program has given us an early indication of the massive potential at Silver Strand and look forward to completing a second phase of drilling from our underground drilling bay and testing surface targets in the near future," said Lekstrom in a company presentation published last month.
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