Silver Is the Top Commodity Pick for 2025 as Money Printing Accelerates

2025 will see a very delicate balancing act between higher growth, lower fiscal spending and deficits, and contained inflation. 

This is a rather tall order, as it assumes that everything will go superbly well such that the economy can keep humming along without any risks to inflation or growth. If history is any guide, we know that is never the case. We all know the U.S. debt is on an unsustainable fiscal path, over the last 100 days we have added yet another $1 trillion to the total figure and there is no stopping that for now. 

As Donald Trump gets into the White House, it remains to be seen what Elon Musk and Vivek Ramaswamy can achieve, but getting rid of $2 trillion in government spending will not be as easy as first suggested. The view is that U.S. productivity will take a leap big enough to offset the negative impact from a lower fiscal spend while reducing the debt-to-GDP ratio and retaining its ability to service that debt. That level of productivity can be achieved in the future, but in the very near term, debt is a real concern and the U.S. economy has not been able to function over the past few years without the extra liquidity injections. 

Something is bound to snap next year and that may be inflation. The Fed is nowhere near achieving its 2% target on inflation with the last month averaging closer to 3.3% year over year and it has been showing signs of being rather sticky over the past few months. Despite this, the Fed has cut rates by 75 BPS, along with another 25 BPS pencilled in for Wednesday. If one were to look at the federal funds rate over the nominal GDP rate, rates are not restrictive at all. In fact, one can argue that the Fed has been quite accommodative. 

In 2008, the U.S. central bank printed about $150 billion to resolve the Lehman crisis and during COVID, it was printing $150 billion a day to support the markets. The next time a crisis comes, the amount of money that will need to be printed will be multiples of what we have seen in the past, just to keep it afloat. Each dollar printed is giving back a lot less than before. This is essentially the story of fiat currency debasement and why investors need to think about owning hard assets. "Stagflation" is not a term used by many, perhaps because it is something that has not been witnessed by most within the recent generation of traders. It is an environment that is extremely difficult to navigate and certainly not bullish for equities nor bonds. 

As we enter this new phase, the market is extremely concentrated in a handful of names, and has been over the past year or so. Today, U.S. households hold about 40% of their net worth in equities, the highest ever. So, the Fed cannot afford to let the market break for too long. The only possibility to deal with its debt is to inflate it away. The flip side of the coin is to have a total debt or system reset, but that would mean financial catastrophe, worse than the depression era, even. 

Silver is up 27% this year. It lost 10% since Trump won the U.S. presidential election with talk of austerity cuts and more trade tariffs taking the dollar sharply higher. It has lagged gold and Bitcoin, the other two bellwethers for protecting oneself against fiat currency debasement. The domestic consumer needs help and so do small- to medium-sized businesses. Today, the U.S. economy is showing robust growth but at the cost of higher inflation. 

To get the engine moving again, it may come at the expense of inflation and more money printing. The U.S. economy is like an opioid addict that needs a constant fix, and next year, with all of its challenges, it will be no different. When that happens, hard assets like gold and silver benefit greatly as they are the only true store of value and inflation hedges where see upside of 15% and 30%, respectively.

At the time of publication, Bengali had no positions in any securities mentioned.