Forget Gold Stocks! Silver Has Been Posting Explosive Gains in 2021

Should investors dump gold stocks and take positions in the First Majestic Silver Corp. stock? The shiny white metal is posting explosive gains and could outpace the yellow metal in 2021.

| More on:

The mining sector celebrated when Warren Buffett, for the first time, took a position in a gold stock. Berkshire Hathaway bought shares of Barrick Gold in the second quarter of 2020 when COVID-19 was wreaking havoc in the financial markets. However, did the GOAT of investing make the right call?

In February 2021, silver is outshining gold. The price of the shiny white metal is surging of late due to rising demand and limited supply. Some mining analysts believe this year could be the year silver will outpace the world’s most precious metal.

History could be repeating itself because back in the late 70s, the silver price soared due to rising inflation rates. Retail investors rushed to the safety of the lower-priced metal. Silver cost $5 in 1978 before reaching $49 in 1980.

Unexplained surge

According to Pan American Silver Corp CEO Michael Steinmann, one reason for the sudden surge of silver is the worry over loose monetary policy globally. He adds that there’s a lot of pressure on the industrial demand. Steinmann is also amused as it could be the perfect storm for silver.

Endeavour Silver Corp CEO Brad Cooke said the rally could be brief. Still, shares of Pan American (+13%) and Endeavour (+21%) rose following silver prices ascent to eight-year highs.

A report from analysts at RBC Capital Markets points out that there was no normal reason to justify the increase in silver prices over the past few days. The same analysts warn the sharp move could be an offshoot of the commotion in various markets similar to the GameStop drama in the United States.

Flying under-the-radar

On the TSX, First Majestic Silver Corp. (TSX:FR)(NYSE:AG) could be the next hot mining stock. The $4.75 billion Canadian firm owns three producing silver mines in Mexico. The silver stock’s total return in 2020 was 7%, and thus far, in 2021, the gain is 26%. When silver prices soared on February 1, 2021, First Majestic climbed 24%.

The company’s website shows Goldman Sachs’ Jeffrey Currie’s tweet that reads, “Silver is the turbocharged version of gold.” Currie is the investment bank’s global head of commodities. He believes that silver has far more upside than gold. The metal is a key component for solar panels and should benefit from green energy spending soon.

First Majestic aims to be the world’s purest silver producer. In Q3 2020 (quarter ended September 30, 2020), the company posted a record quarterly revenue of $125.9 million, a 30% increase versus the Q3 2019.

According to President and CEO Keith Neumeyer, the new record quarterly revenues, cash flows and earnings was due to higher metal prices, improved production rates and good cost control management. The company has yet to report its full-year 2020 results, although Neumeyer is confident that last year would be one of the company’s strongest in its 18-year history.

Pros and cons of silver

While many view silver as the poor man’s gold, it could also be a safe haven and hedge against inflation. The price-performance and outlook hinge on its use as an industrial metal. Finally, it’s cheaper than gold but more thinly traded. Hence, volatility is elevated, and liquidity is suspect.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares) and recommends the following options: short January 2023 $200 puts on Berkshire Hathaway (B shares), short March 2021 $225 calls on Berkshire Hathaway (B shares), and long January 2023 $200 calls on Berkshire Hathaway (B shares).

More on Metals and Mining Stocks

Piggy bank and Canadian coins
Metals and Mining Stocks

Everyone’s Talking About Silver Stocks: Here’s 1 ETF to Consider

iShares Silver Trust (NYSEARCA:SLV) and the silver stocks could be in for some summertime strength.

Read more »

Person slides down a stair handrail
Metals and Mining Stocks

Tariff Shockwave 2025: US Stocks Crater While Canada Rides the Wave

Canadian stocks have collectively displayed resiliency against the US tariff shockwave in 2025.

Read more »

nugget gold
Metals and Mining Stocks

Should You Buy Kinross Gold While it’s Below $21?

Kinross is a gold mining stock that has delivered market-thumping returns to shareholders in the past decade. Is the TSX…

Read more »

nugget gold
Metals and Mining Stocks

Should You Buy New Gold Stock While It’s Below $8?

New Gold is a TSX mining stock that has more than doubled in the last 12 months. Is NGD stock…

Read more »

Metals
Metals and Mining Stocks

Should You Buy First Majestic Silver Stock While It’s Below $12?

First Majestic Silver is a TSX mining stock positioned to deliver outsized gains to shareholders over the next 18 months.

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Metals and Mining Stocks

A $7,000 TFSA Investment Strategy That Focuses on Quality

TFSA investors could consider holding quality undervalued TSX stocks and benefit from outsized gains over time.

Read more »

dividends can compound over time
Metals and Mining Stocks

3 Reasons This Sold-Off TSX Stock Is Primed for a Big Rebound

Teck stock is trading well below its peak, but here’s why its next leg up could be closer than most…

Read more »

Super sized rock trucks take a load of platinum rich rock into the crusher.
Metals and Mining Stocks

1 Magnificent Materials Stock Down 3% to Buy and Hold Forever

Allied Gold is a TSX materials stock that offers significant upside potential over the next three years, given its growth…

Read more »