Silver’s Brilliant Year Validates Longtime Bugs’ Enthusiasm

Eddie Spence September 6, 2020

(Bloomberg) -- Ned Naylor-Leyland has been all-in on silver for 18 years, earning derision along the way from fellow investors favoring the more glamorous gold. Now, with silver’s price skyrocketing 51% this year, he’s got reason to feel vindicated.

The manager of the $1 billion Merian Gold and Silver Fund in London proudly calls himself a “silver bug,” a term describing an investor whose fervor for the precious metal is more extreme than the typical bullion enthusiast’s. The bugs foresee a crash of the fiat cash system in the aftermath of unprecedented monetary stimulus, putting silver back in play as a viable currency. Their core tenet is that gold’s cheaper, more volatile cousin will continue surging in value.

“I’ve been waiting since 2002 for the inevitable demise of this monetary system,” Naylor-Leyland said. “I’ve been standing there waving on the top of a hill for the last 20 years, and suddenly everyone’s pointing at me saying, ‘That man’s a genius.’”

They have plenty of forebears. The Coinage Act of 1873 demonetized the metal in the U.S., sparking backlash against the government and allegations of corruption from the “Silverites.” The most notorious speculators were the Hunt brothers, three sons of a Texas oil billionaire whose fear of inflation and belief in the metal as a store of wealth prompted them to try corner the global market in 1980. They stockpiled more than 200 million ounces, driving the price to $49.45 before it crashed below $11.

Now, the bugs are having another moment. The metal has had an outstanding year, with its gain almost double gold’s. The rise has come off the back of a weakening dollar, plunging real rates and geopolitical tensions -- all of which give investors motivation to seek haven in precious metals.

But that gain is nothing to most silver bugs, who foresee even higher prices because they believe more people will lose faith in the value of government-issued currency. Just read their Reddit Inc. message board with 47,000 members or the online Silver Forum with almost 12,000.

“Silver’s got its animal instincts back,” Naylor-Leyland said. “People have spotted it, and they’re interested in it.”

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