Gold and Silver Projection | Ask the Expert with Tavi Costa

Craig Hemke (00:00)
Kicked in, and then I'll sit up straight like my mother always used to tell me, and we'll go.

Greetings again from Sprott Money, SprottMoney.com. It is time for your December Ask the Expert segment. Ready to start wrapping up the year, that's for sure. I'm your host, Craig Hemke. Joining us to discuss things here in December of 2024 is my good friend, Tavi Costa of Crescat Capital in Denver. Tavi, thank you for carving out some time. I've got some stuff I want to make sure I visit with you this month.

Tavi Costa (00:34)
Craig, it's my pleasure to be here talking to you, so thanks for having me.

Craig Hemke (00:38)
Hey, before we get started, a couple of things. Again, this is all brought to you by Sprott Money, SprottMoney.com. Still time to do some holiday shopping. We're recording this here on the what? The 13th? Taylor Swift's birthday, by the way. My daughters would remind me of that. Twelve days to Christmas, so there's still time to go to SprottMoney.com, check the holiday gift guide, give the gift of sound money and even education this Christmas.

Again, SprottMoney.com—buy some silver, some gold, give it to your kids, your grandkids, your friends. If you buy more than $500 worth, shipping is free and comes with insurance as well. SprottMoney.com or give them a call at 888-861-0775. Tavi, before we get started, tell everybody a little bit about what you do as a partner at Crescat, how they can follow you on Twitter, and what Crescat Capital is.

Tavi Costa (01:33)
See, I'm always learning with you. Happy birthday, Taylor. No, I'm with Crescat Capital. Well, you can find my work on Twitter. I share a lot of macro views there as well. I advise macro ideas at Crescat in a big way and focus on identifying large trends that we tend to express in the markets.

One of them has been, obviously, precious metals and the metals and mining industry, where we have a lot of investments. So yeah, you can find my work at @TaviCosta on Twitter and also Crescat.net is where we share our letters.

Craig Hemke (02:22)
Great follow on Twitter (or X) for sure. You always put out some really mind-opening charts and reminders about the fundamentals, particularly in the mining sector. But you’re also a very good macro analyst. That's what I wanted to start with today. Because as we wrap up this year and head into next year...

We're down to the dollar, which is up probably 6 or 7 percent year to date as measured by the dollar index, which obviously just measures the dollar versus all this other basket of fiat. So you never know if the dollar's getting stronger or if those other fiat currencies, like the euro, are getting weaker. But nonetheless, even with higher rates and a higher dollar, gold's had a great year. There’s this thought out there that ever since the election of Trump, the dollar is going to continue to be strong, and that’s led to some of the weakness in gold over the last month.

I think you've got some ideas as to where you think the dollar's headed. So I'll just kind of let you take it from there as to what you think 2025 has in store for us.

Tavi Costa (03:25)
Yeah, I think that the dollar trade will probably be the most important investment idea of 2025. It's my biggest focus right now. I remember being focused on inflation right after the COVID recession and the stimulus we saw during that time. And then looking at the issuances of treasuries, seeing how that could cause interest rates to rise. I think the next chapter of this book will be the dollar.

The dollar, to me, looks extremely peaky, overvalued, overbought, and over-positioned. I’m extremely skeptical about that, especially relative to hard assets, which has been a view I’ve shared for many years now. But now I'm starting to add to that idea the possibility that other fiat currencies may actually perform better than the US dollar. A lot of people forget that there are periods in history when the US dollar devalues versus other fiat currencies. I think we are getting close to the apex of this dollar strength.

When that happens, it unleashes macro trends. Gold will lead the way, but emerging markets could perform very well. We could see the rest of the world’s equities outperform the US. The mining industry and resource companies will likely benefit too. South America, for instance, is one of the places I’m focused on because it’s set to benefit tremendously from the current macro trends and de-globalization.

If you step back and look at the DXY chart, it’s harder to see these trends at first. But if you take a 10-year rolling change of the DXY index, you’ll notice very clearly that we go through these phases—10-year secular shifts where the dollar peaks and then declines.

Craig Hemke (07:11)
That’s where I wanted to go next—fiscal and monetary policy. What do you expect in 2025 that would help drive this weakening of the dollar?

Tavi Costa (07:55)
Well, first of all, what is obvious is usually wrong in markets. Since Trump got elected, we’ve had this American exceptionalism narrative. But we’re now at a point where US equities are priced at unprecedented levels relative to the rest of the world. Historically, these extremes lead to capital flowing out of the US into undervalued markets elsewhere.

I’m watching Scott Batson’s nomination as Treasury Secretary very closely. He’s mentioned that a weaker dollar is essential for US growth—and that’s key. I think we’re about to see something similar to a modern-day Plaza Accord, where coordinated efforts lead to a significant dollar decline.

Craig Hemke (12:29)
Let’s switch to the mining sector, one of your specialties. Physical metals have rallied, but mining shares haven’t kept up. What do you expect in 2025?

Tavi Costa (12:29)
The gold rally is the first wave. Silver and other metals like copper are forming the second wave. The third wave will be emerging markets, and the fourth—a speculative tsunami—is yet to come. The M&A cycle has already started, which is a big signal.

The US needs to rebuild its mining industry. Mining was once 20% of GDP; now it’s just 0.3%. Given the critical nature of metals for AI, onshoring, and electricity demand, I think mining will be seen as a key industry under Trump’s administration.

Craig Hemke (20:22)
Tavi, tell everyone where they can find more information on Crescat and get that newsletter you mentioned.

Tavi Costa (20:29)
You can find us at Crescat.net. We run three funds: global macro, long-short, and a mining-focused fund. Our letters, including one on the history of dollar cycles, are available there as well.

Craig Hemke (22:08)
Thanks, Tavi, and Merry Christmas to you. And everyone, don’t forget to hit like or subscribe. We’ve got some year-end content coming up, so stay tuned.