When you become a member at the SRSrocco Report, you will gain access to original material and content found nowhere else on the internet. While many of the topics covered on the SRSrocco Report are also covered by other websites, we typically dig deeper to provide a more comprehensive “Connect-the-dots” type of analysis.
As the world has become so specialized, many analysts and technical experts have lost touch with the reality that energy is the main driver of the economy. Unfortunately, the overwhelming majority of analysts do not understand what is taking place outside their focus areas. Many times, the left hand has no idea what the right hand is doing.
The infographic below describes this perfectly and why most analysts provide incorrect and unreliable forecasts for the future.
Most precious metals analysts fail to understand energy, while energy analysts tend to ignore precious metals. However, it seems that the worst of the bunch is the financial and economic community, whose members typically don’t understand or care to learn about energy or precious metals. Thus, investors who are trying to figure out how to best maneuver through their financial futures are being advised by a group of highly-specialized analysts that fail to connect the “Energy Dots.”
For example, very few precious metals analysts make the gold-oil price parallel. If we look at the following gold-oil price chart, their prices moved in tandem. Oil is the leading driver of the economy, and when the price surges, it impacts the cost to produce gold, and therefore, the market price.
For instance, it should be a surprise to individuals to learn that when the oil price increased 16 times in value from 1971-1980, the gold price increased 15 times over the same period. However, very few precious metals analysts point out this remarkable gold-oil price rise relationship.
The Annual Average Gold & Oil Price Change from 1971 to 1980:
- 1971 Oil Price = $2.24 barrel
- 1980 Oil Price = $36.83
- Oil Price Increase = 16 times
- 1971 Gold Price = $40.80
- 1980 Gold Price = $612.56
- Gold Price Increase = 15 times
As we can see, the oil price was the main factor that pushed the gold price to new highs in 1980. Yet, I see the gold price continuing to disconnect from the oil price in the future, as it is showing presently. Why? Even if the oil prices remain low, my forecast is for higher gold and silver prices as the market begins to understand that precious metals are a “Store of Energy Equivalent value.” I will be providing a more-detailed analysis of this topic for Silver and Gold Members.
Moreover, we are one of the only websites that provide detailed analysis of the primary silver mining industry’s average production yield. Why is this important? Because the average cost per ounce to produce silver has increased from $5 in the early 2000s to a current price of over $15. While rising energy costs impacted the cost to produce silver, falling ore grades were also a significant factor.
From 2005 to 2019, the top primary silver miners’ average yield fell from 13 ounces per ton (oz/t) to 6 oz/t. As highlighted in the graph above, the top primary silver miners had to process more than twice the amount of ore to produce just 14% more silver. Extracting, transporting, and processing twice the amount of ore to produce the same amount of metal considerably pushes up the costs to produce silver.
This is just a sliver of the quality of research and original analysis we provide at the SRSrocco Report. Again, failing to include in-depth energy analysis and how it impacts all sectors of the economy is a disservice to the investing community. However, please note that I am not saying analysts who do not include energy in the forecasts are purposely misleading investors; rather, they are likely doing so naively.
Here is another example as to why energy should be a factor in all analysts’ forecasts, even if the analysis only focuses on certain sectors of the economy and market. Over the past decade, the U.S. Shale Oil Industry was responsible for the overwhelming majority of global oil production growth. This is of great importance to market analysis because without oil production growth, there can be no GDP growth. Unfortunately, most economists tend to overlook this important relationship.
The United States Shale Oil Industry has accounted for 85% of the net increase in global oil production since 2008, so it’s extremely important to understand the future dynamics of the domestic shale industry and its impact on market trends. Moving forward, I have to say, it doesn’t look good.
One of our research resources is the excellent database at Shaleprofile.com, which utilizes real-time information from over 100,000 horizontal wells in the United States. We access these trusted sources to synthesize information so that we can produce the types of charts exampled below.
Each year, the U.S. Shale Oil Industry suffers a near 50% production decline rate. To attempt to reverse this trend, it took the shale industry the addition of more than 14,000 wells to increase production to 7.3 million barrels per day (mbd) by the end of 2018. Yet, the investment was futile, and yielded a stunning 3.5 mbd decline in just one year. Regrettably, the U.S. shale oil industry is not a long-term sustainable business model, due to the ramifications of its rapid decline rate, which has been a constant trend for more than a decade.
When the U.S. Shale Boom turns to Bust, it will negatively impact global oil production and GDP growth. Investors need to understand the relationship between oil production and GDP growth–summarized in detailed analysis that you will receive as an SRSrocco Report Member.
Lastly, the Falling EROI (Energy Returned On Investment) and the peak of global oil production will change the world as we know it. We created this platform to help you to understand how these energy forces will impact the precious metals, mining, economy, stocks, bonds, and real estate markets. And, we welcome/suggest that/encourage you to become one of the Members at the SRSrocco Report, an online platform designed to give you real-time, real-world updates to strengthen your personal or corporate investment analysis and strategies.