READ TIME: 8 MINUTES
Garrett Goggin highlights silver and gold’s compelling investment case amid a backdrop of spiraling U.S. debt, persistent inflation, and historically significant Commitment of Traders data signaling a bullish setup for silver. He emphasizes the importance of high-grade, profitable projects, noting that only a few mines meet the necessary economic thresholds. Goggin champions royalty companies for their resilience and long-term value creation, contrasting them with the operational risks and dilution challenges faced by traditional miners. His investment strategy focuses on identifying undervalued companies, relying on detailed economic models, and exiting positions when market caps align with intrinsic valuations. With the debt-fueled economic machine accelerating, Goggin sees gold and silver poised to reclaim their monetary importance.
The U.S. is $37 trillion in debt, and we’re at the accelerating phase of spending—debt must grow exponentially to keep this economy going. This isn’t sustainable, and gold will ultimately be the refuge when the system falters.
Garrett Goggin, CFA, Founder of http://www.GoldenPortfolio.com
5 Main Takeaways
- 1. Silver’s Time Is Near: Commitment of Traders data signals a historically significant setup for silver, reminiscent of its 2008 rally to $40 per ounce.
- 2. Focus on High-Grade and Profitable Projects: Only a handful of silver and gold projects, with exceptional grades and margins, are truly profitable, making careful project selection critical.
- 3. Debt-Driven Economics Fuel Gold’s Case: The U.S. debt trajectory, combined with persistent inflation, creates strong tailwinds for gold and silver prices.
- 4. Royalties Outperform Traditional Miners: Royalty companies offer long-term value with less risk and have consistently outperformed miners in both bull and bear markets.
- 5. Valuation-Driven Investment Strategy: Success lies in investing based on detailed economic models and selling when a company’s market cap matches its intrinsic value.
Why Does Garrett Goggin Believe Now Is Silver’s Moment?
Garrett Goggin, a Chartered Financial Analyst and seasoned mining analyst, argues that silver is poised for a significant move. He bases this prediction on Commitment of Traders (COT) data, highlighting that “net other holders” of silver—a category distinct from managed money and commercial traders—are at their highest net long position since 2008. Back then, silver soared to $40 an ounce, marking this as a potentially critical signal.
“Silver moves in spikes,” Goggin explains. “It lags behind gold most of the time, but when it catches up, the moves are dramatic, taking silver from $30 to $50 or even higher in a short period.”
However, he cautions, such moves are often short-lived, requiring strategic timing for investors to capitalize.
What Are the Risks and Realities of Silver Mining?
The silver mining industry faces unique challenges, primarily stemming from thin operating margins. “The number of truly profitable silver mines can be counted on one hand,” Goggin notes, pointing to a need for exceptional grades to make projects viable. He references Archie Bell’s rule, which suggests that a mine’s revenue must double its operating costs to justify development. This is particularly critical in an environment where grades and jurisdictional factors weigh heavily on a project’s success.
“Grade is the only thing that moves the needle in silver mining,” Goggin asserts. He points to high-grade operations such as Mag Silver’s Juanicipio and SilverCrest’s Las Chispas as models of profitability. “SilverCrest paid back $40 million in debt in under a year and banked $100 million in cash, leading to its acquisition by Coeur Mining,” he explains. This starkly contrasts with low-grade projects that struggle to generate meaningful returns.
How High Can Silver and Gold Prices Go?
While Goggin hesitates to make precise price predictions, he sees room for silver to break through historical resistance levels. “Gold and silver have been in a decade-long cup-and-handle formation, with gold breaking out first. Silver often follows, and the upside could be explosive,” he says.
However, Goggin tempers expectations with a reminder of silver’s volatility. “Silver spikes are short-lived. Unless backed by fundamentals like high-grade production or transformative discoveries, those spikes don’t sustain,” he warns.
What Will Drive the Next Bull Run for Gold and Silver?
The foundation of Goggin’s bullish case lies in macroeconomic dynamics: spiraling government debt, persistent inflation, and diminishing returns on each dollar of new debt. “The U.S. is at $37 trillion in debt, and it’s only going to accelerate,” he argues.
He points to historical parallels and sentiment indicators. For example, shares in GLD, a gold ETF, are 60% below their 2011 peak despite gold prices nearing record highs. “Retail investors aren’t in yet. When they flood back in, it will be a game-changer,” he predicts.
Could Gold-Backed Bonds or Pegging GDP to Gold Be Part of the Solution?
In discussing potential solutions to the U.S.’s debt woes, Goggin highlights ideas gaining traction, such as gold-backed 50-year treasury bonds. “Trump is a fan of Judy Shelton, who proposed these bonds,” he says. While he sees merit in the concept, Goggin is skeptical of its implementation. “A gold-backed bond might restore some confidence in the dollar, but without addressing the debt, it’s a temporary fix.”
He also references the European practice of pegging GDP to gold, where central banks hold reserves equal to 4% of GDP. “The U.S. would need to double its gold reserves to match Europe’s benchmarks,” Goggin notes. While this could signal gold’s reemergence as a monetary asset, he believes it’s insufficient without a broader systemic overhaul.
Why Does Goggin Favor Royalty Companies Over Traditional Miners?
Goggin champions royalty companies as the best way to capitalize on the gold and silver markets. “Royalties are the ultimate asymmetric bet,” he explains. “They benefit from rising gold prices without being burdened by operational risks like inflation or mining cost overruns.”
He cites Franco-Nevada as a prime example, noting its resilience during the recent Cobre Panama dispute. While the operator, First Quantum, saw its shares plummet 75%, Franco-Nevada’s stock declined just 20%. “Royalties pay upfront and take a cut of production. They have no exposure to operating costs, making them the best way to play gold over the long term,” Goggin argues.
What Does Goggin Look for in a Mining Investment?
With over 20 years in the mining sector, Goggin has honed a disciplined approach to evaluating investments. His criteria center on three pillars: people, grade, and value creation.
“It all starts with management,” he says. “You need proven operators who understand how to drive value, not the types running five companies out of a single Vancouver office and mining their investors instead of the ground.”
For exploration and development companies, drill results are paramount. “One good drill hole can change the trajectory of a company,” he explains, noting that high-grade discoveries often lead to years of value creation as resources are delineated and developed.
What Makes Goggin’s Portfolios Stand Out?
Goggin manages two portfolios: the Golden Portfolio, focused on royalties, and GP 10x, a collection of high-potential juniors. The Golden Portfolio prioritizes long-term stability, while GP 10x is tailored for the high-risk, high-reward dynamics of a bull market.
“Royalties are the cornerstone because they outperform miners in both bull and bear markets,” Goggin explains. “GP 10x, on the other hand, is where the explosive gains can happen. But you need to be selective and diversified because not every company will succeed.”
When Does Goggin Decide to Sell?
Selling decisions are driven by valuation. “I build an economic model for each company. When the market cap matches my valuation, I consider selling,” Goggin says. He emphasizes that timing is crucial, particularly for miners with depleting assets.
“SilverCrest is a textbook example,” he notes. “The stock peaked when Las Chispas entered production and only recently exceeded that level when it was acquired.”
What Are the Risks to This Bull Case?
While confident in his thesis, Goggin acknowledges potential risks, including political changes or unexpected deflationary pressures. “If someone like Elon Musk came in and magically cut trillions from the deficit, the economy would collapse in a deflationary spiral,” he says. However, he sees such scenarios as unlikely given the entrenched nature of debt-driven economic growth.
Final Thoughts: Why Patience and Strategy Matter
For Goggin, the current environment offers a rare opportunity in the gold and silver markets, but success requires discipline. “The average investor chases hype, but value is found in high-grade projects, royalty companies, and experienced management teams,” he concludes.
As the debt-fueled economic machine continues, Goggin believes gold and silver are poised to reclaim their monetary roles. For investors willing to navigate the complexities, the rewards could be substantial.
Garrett Goggin Full Interview
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