With another year past it’s time to reflect on the performance of gold and silver in New Zealand dollar terms. You may have read recently about how gold has again ended the year higher than it began. No big deal except for the fact it is the 11th year in a row that gold has done so! (In USD terms that is).
Richard Russell the “grandfather” of Investment Newsletter writing recently noted that…
“This year’s close for gold marks the 11th year for higher year end gold closing. To my knowledge this is the longest bull market of any kind in history in which each year’s close was above the previous year. This fabulous bull market will not end with a whisper and a fizzle. I continue to believe that the upside gold crescendo of this bull market lies ahead. We are watching market history.”
We’ll it started the year at NZ$1821 and finished 2011 at NZ$2037.77 for a gain of 11.90%. Or rather as we prefer to put it your good old kiwi dollar lost 9.25% of it’s value for the year! NZ dollar gold was briefly as low as $NZ1710 at the end of January and reached over $2300 on 3 occasions during the second half of the year.
How about over a longer timescale – say the first 11 years of this millennium?
Gold began the millennium on 1 January 2000 at $551NZ and finished last year at $2037.77 for a gain of 269.83%. Not too bad.
What about gold’s sister metal silver? Silver started 2011 at $39.60 and ended it $36.18 for a loss of 8.64% for the year. Silver certainly lived up to it’s reputation as more volatile than gold last year. Silver reached as high as $62.50 and on 3 occasions briefly dipped below $35.00 for a range of $27.50.
How has silver fared over the last 11 years then? Not too differently from gold as it happens – coming in at a gain of 250.58% for the millennium. So 2 and a ½ times your money over the past 11 years is not too bad again.
If we knew the answer to that we’d be lying on a beach somewhere sipping something cold!
Since just before Christmas when we wrote gold was approaching it’s 200 day moving average it proceeded to drop below this level over the holidays while most of our suppliers were closed. It is now back above the 200 day MA (the red line in the chart above) but only just. We’d guess that in the long run the current price is likely to be a pretty good entry point we’d say.
Silver too dropped lower over the holidays down to about the next level of support we talked about in our last article of around $35. It’s currently sitting just above this level at about $36.60. Again if we had a gun to our head we’d guess this will likely end up being a good entry point. We put our money where our mouth was just before Christmas and added to our personal holdings also.
So with gold up slightly for the year and silver down slightly you can see why when people ask us should I go for gold or silver we prefer to answer “Both!”.
The 2 often don’t perform in exactly the same way at exactly the same time. So having some of each can smooth out the volatility somewhat. If you’d had a bit of both last year you’d have come out slightly ahead of where you started the year – which is a good result in a year of extreme volatility and where most global share-markets have actually lost money.
Who knows exactly what 2012 will bring – but some surprises are almost certain. It wouldn’t surprise us to see it take a good part of the year before gold and silver beat their previous highs. During previous corrections it has taken many months to get back to old highs. But there’s plenty of uncertainty in the world still. Talk of war with Iran. Unresolved debt burdens in the Eurozone. And the US is again approaching it’s debt ceiling already (Yes in case you’d forgotten it’s not all beer and skittles over there either).
So there’s plenty of catalysts brewing for further gains in gold and silver.
That’s not to say we couldn’t see further falls. As we’ve mentioned before, in the 1970’s gold and silver both dropped by half in the middle of that bull market before the big gains were in.
And like it or not the masses still run to the USD, when things get sticky.
But if we had to guess we’d say we may well have seen the lows in both already over the holiday break – a big call to make when the years only 10 days old! But as we mentioned earlier if you look at the chart above you can see that when gold dropped below it’s 200 day moving average (the red line) it was a good time to buy last year, so we reckon that could make now a good time to buy too. We’ll look to see if we have egg on our face a year from now!