January 08, 2012
BY: Robert Hallberg, Topics: Market Outlook
2011 was an interesting year for investors. Gold was up for the 11th year in a row and silver finished slightly lower. The Precious metals were soaring early in the year but they ended the year without any noteworthy gains. Gold finished the year with a 12.5% return, silver was down 4.8%, while the equity markets in the US closed flat for the year.
The correction in the metals towards the end of the year were largely a result of the ongoing sovereign debt crisis playing out in Europe, and investors were dumping any so called ârisky assetsâ and swarmed into cash and US treasuries. As a result US treasuries were among one of the best performing assets in 2011. But given the weak fundamentals for the dollar and US government bonds I donât suspect this asset class will continue to outperform. Below is a table of the performance of difference asset classes over the past three years.
Equities have done reasonably well over the last three years but if you consider their performance over the last decade they are miles behind precious metals and most other commodities. Silver is slightly ahead of gold with an average year over year return of 18.7%, but gold has offered more stability and has been up for eleven years in a row.
What can we expect moving forward?
Gold has always done well in an environment of economic uncertainty and stagflation. Silver on the other hand is heavily used in industry and is therefore very volatile and negatively affected by a weak economy. I suspect that gold will continue to outperform and silver will catch up once see some economic growth or higher inflation.
The gold mining shares have not done particularly well during recent years and many of them offer substantial bargains at the current valuation levels. Many industry veterans such as Rick Rule and John Embry expect a rally in this sector or consolidations as the senior minors acquire the juniors in an effort to expand production.
As growth slows or remains stagnant I donât expect much out of the general equity market. US government bonds is a temporary save haven but it this is a bubble waiting to pop and itâs artificially pumped up by the Feds bond purchasing program.
In the next article we will discuss what will be in store for gold and silver in 2012. Stay tunedâ¦
To learn about trends and spot the next investment opportunity read the Casey Report from Casey Research. It's a monthly investment news letter that breakdown economic trends in a way that is easy to understand. They make recommendations based on economic reality and their track record is several times better than the market or any mutual fund for that matter.
blog comments powered by Disqus