Sprott is a Toronto-headquartered asset manager specializing in precious metals and critical materials (NYSE/TSX: SII), tracing its roots to Sprott Securities founded by Eric Sprott in 1981 and now led by CEO Whitney George. It runs physical gold, silver and uranium trusts, ETFs, active strategies and resource lending, with about $65bn in AUM. The Insights column carries monthly commentaries and white papers on uranium, gold, silver, copper and critical materials by Paul Wong, Jacob White and John Hathaway (ex-Tocqueville gold manager) — note the house's structurally bullish commodity stance, as it sells the corresponding trusts and ETFs.
This report looks at April 2022, when markets were under heavy pressure from Fed rate hikes, war in Ukraine, China lockdowns, and a shrinking US economy. Gold dipped but stayed up for the year, and the author thinks this is just a pause, not a sell-off—driven more by low liquidity than real selling. Silver fell harder but could be a buying opportunity in coming months, partly because gold tends to lead silver by about four months, and silver demand from solar panels is growing fast. Bonds had their worst drawdown in 50 years, losing their safe-haven role, so gold looks more attractive. The key takeaway: keep gold as a core holding, cut bonds, and watch for a liquidity crunch as the Fed tightens.
In April 2022, the precious metals sector corrected alongside risk assets, with the US Dollar Index (DXY) rising 4.73%. As of April 30, spot gold was still up 3.70% year-to-date, closing at $1,896.93, but fell 2.09% for the month; spot silver was down 2.28% year-to-date, closing at $22.78. Gold mini
This chapter focuses on the monthly performance and market environment of the precious metals sector in April 2022. The report notes that a large-scale deleveraging event occurred in the second half of April, leading to outflows across all asset classes and a sharp 4.73% rise in the US Dollar Index. Gold entered a consolidation phase after its breakout. The market faced multiple pressures, including the Federal Reserve's hawkish stance, the ongoing Russia-Ukraine conflict, COVID-19 lockdowns in China, and an unexpected 1.4% contraction in US Q1 GDP, exacerbating stagflation risks.
The author argues that gold is in a consolidation phase following its March breakout, with short-term price fluctuations driven more by a lack of liquidity than by selling pressure. Counterintuitive judgment: despite inflation data hitting multi-decade highs, market consensus on the inflation outlook is surprisingly low, and uncertainty is likely to continue rising. Meanwhile, the bond market is experiencing its largest drawdown in nearly 50 years, rendering traditional safe-haven assets ineffective and highlighting gold's value as an alternative safe haven.
| Indicator | 4/30/2022 | 3/31/2022 | Monthly Change | Monthly % Change | YTD % Change |
|---|---|---|---|---|---|
| Gold Spot | $1,896.93 | $1,937.44 | ($40.51) | (2.09)% | 3.70% |
| Silver Spot | $22.78 | $24.79 | ($2.02) | (8.13)% | (2.28)% |
| Gold Mining Stocks (SOLGMCFT) | 138.17 | 150.10 | (11.93) | (7.95)% | 12.01% |
| US Dollar Index (DXY) | 102.96 | 98.31 | 4.65 | 4.73% | 7.62% |
| S&P 500 Index | 4,131.93 | 4,530.41 | (398.48) | (8.80)% | (13.31)% |
| US Treasury Index | $2,287.44 | $2,360.57 | ($73.13) | (3.10)% | (8.50)% |
| US 10-Year Treasury Yield | 2.93% | 2.34% | 0.60% | 60 BPS | 142 BPS |
| US 10-Year Real Yield | (0.01)% | (0.49)% | 0.49% | 49 BPS | 110 BPS |
This chapter focuses on the exchange rate risks arising from the divergence of global monetary policies, as well as the pricing logic of silver under its dual attributes of industrial and monetary value. The report points out that the extreme divergence between the Fed's hawkish rate hikes and the accommodative stances of Japan and China is driving sharp depreciations of the yen and the renminbi, which could trigger a competitive devaluation crisis among Asian currencies similar to that of 2015. Meanwhile, due to the structural growth in industrial demand (especially from photovoltaics), silver is forming a high correlation with the energy transition sector.
The author's core judgment is that the current global monetary environment is more dangerous than the market perceives — the simultaneous weakening of the yen and the renminbi, combined with a strong dollar, could ignite an Asian currency war and transmit to all asset classes through high correlations. Regarding silver, the author believes its current weakness is temporary: gold ETF holdings lead silver ETF holdings by approximately 4 months, and the 0.82 R-square correlation between silver and the energy transition sector implies that the long-term demand growth thesis remains intact.
1. Extreme Co-movement of the Yen and Renminbi:
2. Silver's Lagging Pattern:
3. Structural Changes in Silver's Industrial Demand:
4. Price Ratio Between Silver and Industrial Metals:
Comparative Data Table:
| Indicator | Value/Description | Time Period |
|---|---|---|
| R-square of USDJPY vs. US 10-year Treasury yield | 0.93 | Since summer 2021 |
| Lagged R-square of gold ETF vs. silver ETF holdings (adjusted) | 0.94 | 2016-2022 |
| Silver ETF holdings | Approximately 906 million ounces | As of April 2022 |
| Photovoltaics' share of silver demand (2022 estimate) | 11.5% | 2022 |
| CAGR of silver usage in photovoltaics (past 9 years) | 10.8% | 2013-2022 |
| Annualized change in other silver demand | -0.4% | 2013-2022 |
| R-square of silver vs. energy transition sector | 0.82 | 2017-2022 |
| BCOM Industrial Metals/Silver ratio | Touched +2 standard deviation upper band | 30-year data |
1. Beware of Contagion from an Asian Currency Crisis: The simultaneous depreciation of the yen and the renminbi could trigger a global liquidity contraction, amplifying volatility across all asset classes. Investors should reduce exposure to commodities reliant on Asian demand (e.g., industrial metals) and rotate into safe-haven assets such as gold.
2. Silver Has Catch-Up Potential: Based on the pattern that gold ETF holdings lead silver ETF holdings by approximately 4 months, if gold remains strong, silver ETF holdings are likely to increase significantly in the coming months, pushing silver prices out of the current consolidation range (the lower chart in Figure 7 shows the consolidation is about to break upward).
3. Short the Industrial Metals/Silver Ratio: This ratio has reached an extreme 30-year level. Both technicals (overbought RSI) and fundamentals (slowing global demand) point to mean reversion. A pair trade of shorting industrial metals and going long silver could be considered.
4. Hold Silver Long-Term as an Energy Transition Asset: Silver demand from photovoltaics and electric vehicles is growing at an annualized rate of over 10%. With a 0.82 correlation to the energy transition sector, silver serves as a hard asset allocation within the clean energy theme.
This chapter discusses the investment logic of silver in the current macroeconomic environment, focusing on the impact of the global liquidity inflection point on the relative performance of industrial metals and silver. The report argues that liquidity is shifting from a tailwind to a headwind, but silver's monetary attributes will re-dominate pricing when the Federal Reserve's policy pivots.
The author's core judgment is: Silver will offer an excellent buying opportunity in the coming months, but short-term prices may experience sharp volatility due to insufficient liquidity. The counterintuitive point is that when the macro environment deteriorates (slowing economic growth, a strengthening US dollar, hawkish central banks), industrial metals (such as copper and aluminum) will come under pressure, while silver, due to its monetary attributes, will instead benefit from expectations of massive future central bank stimulus.
1. Global Liquidity Pulse Has Peaked: The report's constructed global liquidity pulse indicator (global M2 year-over-year growth + global credit impulse, leading by 12 months) shows that the tailwind effect from money and credit has ended. Headwinds are intensifying: slowing global growth, a significantly stronger US dollar, brewing Asian currency wars, and hawkish central bank stances.
2. Divergence Between Silver and Industrial Metals: Historically, when liquidity shifts from easing to tightening, the industrial metals/silver ratio reverses (Figure 9b). Currently, this ratio is at a high level, suggesting silver is undervalued relative to industrial metals.
3. Macro Risks Are Far from Priced In: The S&P 500 index has only fallen 13.86% from its all-time high (as of the end of April), while risk factors including geopolitics, global stagflationary pressures, potential currency wars, earnings misses, China's COVID lockdowns, and the Fed's hawkish quantitative tightening (QT starting in May) are not fully reflected in asset prices.
4. Silver's Liquidity Characteristics: Silver's liquidity is roughly one-tenth that of gold, with CFTC speculators dominating short-term pricing, but long-term pricing is determined by fundamentals. Gold first rises as a safe-haven asset, and then when central banks restart easing, silver, as a monetary asset, will quickly catch up.
| Asset/Indicator | Role | Key Data | View |
|---|---|---|---|
| Silver | Core analysis target | Liquidity is 1/10 of gold; CFTC speculators dominate short-term pricing | Bullish: Buying opportunity in coming months; monetary attributes will dominate |
| Gold | Leading indicator for silver | Safe-haven asset → monetary asset | Bullish: Supported by macro risks; central banks will eventually restart easing |
| Industrial Metals (Copper, Aluminum, etc.) | Comparison reference | Ratio vs. silver is at a high level | Bearish: Economic deterioration will suppress demand |
| S&P 500 Index | Macro risk reference | -13.86% from all-time high | Implied risks are not fully priced |
| Federal Reserve | Policy variable | QT starts in May; Eurodollar futures have priced in a future policy pivot | Hawkish in the short term, but a pivot to easing is inevitable in the long term |