Precious Metals Year In Review & An Unconventional Look Forward

As 2017 winds up, I look back on what was yet another grueling year for gold and silver investors. As cryptomania exploded around the middle of the year, it seemed like those, including myself, who were battle fatigued with the languishing, albeit sound and prudent instrument of metals heaved their last breaths and started engaging with coins.

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Unlike many, I didn't end up selling a single piece of metal as I firmly believe that it is a safe and time tested way to lock away purchasing power in what is an increasingly fast paced and volatile investment landscape. That said, I wanted to share some highlights that put the year's metal experience succinctly. Credit goes to the article published here.

From the US perspective:

• Gold was up 10%
• Silver up 1%
• S&P500 up 19.9%
• Dow up 24.6%

Some staggering stats on the Dow from Lance Roberts below:

• 70 new highs
• A 5000-point advance in a single year
• 12-straight months of gains

The source article correctly concludes that a positive return for gold in such a stock friendly environment is actually very impressive given the traditional uncorrelated nature of the metal. We also saw near endless war-mongering surrounding North Korea and Russia to a lesser extent yet failed to see the traditional shift into the metals that such moments in time are usually associated with. This likely speaks to a case of "the boy who cried wolf" where investors become accustomed to a certain perennial risk to the point that they become numb to it. Equally likely is the fact that, and even despite the lack of fundamentals, investors just allocated capital to "go along for the ride".

Impressively also, the even more unloved cousin, silver, remained out of negative territory for the year. This is actually a win given the monumental tide of negative sentiment that's been growing and the shift of capital into the crypto space. According to the article...

Silver held off entering negative territory (again, good for an uncorrelated asset when financials hitting all time highs) but that 79:1 gold silver ratio tells the whole story for silver. Silver historically has lower lows which slingshot into higher highs when the market turns. Only 5 times in the last century has this ratio exceeded 79:1 and 3 of those occasions by less than 1. History shows this is it’s ‘resistance line’ and that might well make silver investors very excited….

The story for Aussie investors must factor in the local currency.

• Gold up 3%
• Silver down 5%
• All Ords up 7.6%

I'd written earlier in the year about the lackluster local market performance proving that different geopolitical regions really do result in different market realities. While many of the US-centric alt media outlets discussed the roaring ride in stocks, other countries have found equity investing to be less that impressive. For me, I've now moved fully away from equities activity, holding only two positions. Again according to the article...

Our market continued to reflect a nation trying to deal with a post mining boom reality, near zero wage growth and largely hitched to a property market looking decidedly shaky. The falling USD saw the AUD up and hence taking the shine off our metal returns.

Now for something different, I watched an interview on USA Watchdog with Clif High earlier today. Now Clif is on the fringe of what I consider a sound source, but on the other hand I do like to vary what I subject myself to in terms of sources of information. Here's the interview.

For those interested, gold is discussed at about 38 minutes in and silver at about 42 minutes in. Here are the summary points.

• Silver will be associated with an Energy Coin / Token designed for the movement of silver into more industrial usage.
• Future sees high prices of silver ahead - he sees $600 / oz silver next year and going to $1000 past 2018.
• His predictive data shows a "dehoarding" of monetary silver as it shifts into the industrial space.
• Cryptocurrencies facilitate this transition.
• He sees an explosion of new tech which will boost industrial silver consumption. I think he's going down the IoT path.
• Sentiment will be changing. What's now a negative mood on metals will become much more positive.
• Gold in February will apparently be one third of the value of Bitcoin. There's going to be a relationship between gold and bitcoin.
• New physical gold supply will be coming onto the market. He discusses the Road to Roota hypothesis here.

It'll be an interesting year approaching and to wrap up, I'd like to quote Ainslie with a phrase that mirrors my own thinking...

for most, precious metals are an investment in an uncorrelated hard monetary asset. When financial assets are bouncing along the top, it should be neither a surprise nor disheartening to see metals bouncing along the bottom if you have a balanced portfolio. Unless, for the first time in history, we don’t get a correction to a hot financial market…