‘Pretty insane to buy silver’ at these levels, but ‘resource nationalism’ means ‘there's definitely upward scope for gold’ – UBP’s Kinsella

Kinsella was asked by Bloomberg what investors should do with silver up over 30% on the year.

“Well, you don't buy it at current levels, that's for sure,” he said. “I think you'd want to be pretty insane to buy silver, given the 50, 60% rally since literally two or three months ago. But more so when you look at the volatility profile: Implied vol 65%, going to be probably 70%. So if you're buying at current levels – at what's already an all-time high for many, many years – on top of that vol profile, you've got to be very brave to do so.”

Kinsella said last week’s announcement that the U.S. would not levy tariffs on silver is “a pretty big deal.”

“What we've seen in recent months, big huge increase in U.S. stockpiles, it strikes me now that those stockpiles are likely to flow elsewhere, in part, thus reducing global leasing rates somewhat,” he said. “Certainly, the narrative about a significant shortage in physical silver probably doesn't stack up when you do the maths on it. We're at the moment where clearly silver’s beta to gold has kicked in in a very big way.”

“I think it's more of a rerating story for silver, but to go much higher from current levels you basically have to assume that the gold/silver ratio goes to like 40, or 30, which is stupidly low from a historical level, with historical averages of roughly 65,” he added. “If we see, for example, gold continuing on a modest upward swing towards, say, $5,000 per ounce by the end of the year, and you assume a modest increase in the gold/silver ratio, it gives you silver roughly at current levels by year end. So I really struggle to buy silver at current levels.”

But it’s a very different story for gold, with Kinsella saying the yellow metal is a buy even at these all-time high prices.

“For sure, it's no question,” he said. “If you think of what we've seen in the first three weeks of the year, the kidnapping of the Venezuelan President, now threats about Greenland, etc. We've entered an era of, I would say, very clear resource nationalism between the major powers. We're seeing that explicitly in Venezuela, next up in Greenland.”

“What it tells you is that this geopolitical theme can move at any time,” Kinsella said. “And currencies are not necessarily the best way to play it.”

“The best way to play it is through precious metals exposure, and hence there's definitely upward scope for gold.”