With another year gone it’s time for our annual year in review, looking at how gold and silver in NZ Dollars performed during the calendar year. Also a chance to look at our predictions (or what we prefer to call guesses!) from last year and see how we did.
We do this every year – even if we were very wrong!
Finally we’ll pull the cover off our precious metals crystal ball and have a crack at what the next year of 2016 might have in store for gold and silver in NZ dollar terms.
Gold spent most of the year rising in NZ dollar terms. However the last quarter really took the shine off the gains against the Kiwi dollar, with gold priced in NZ dollars finishing the year up just 2.02% since 1 January 2015.
On the much longer term basis, since 2000 gold in NZ Dollars is now up 183.71%.
As seems to have been the case in recent years (and as we warned it might just before Christmas) gold bottomed out right around New Years day again this year. Since then it has actually risen sharply just as it did at the start of 2015 and is already now up almost NZ$150 per ounce.
Silver in NZ Dollars again underperformed NZD Gold. Although this year the difference was quite negligible compared to previous years.
Silver in NZ Dollars fell 2.02% from 1 January 2015 to 31 December 2015.
Over the longer term time horizon silver in NZ Dollars is up 97.48% since the year 2000.
Like NZD gold, silver in NZ Dollars also trended steadily up for most of the year, before the strengthening Kiwi dollar played a part in taking back all the gains in the final quarter of 2015.
So in the end as you can see in the chart below NZD silver just went sideways for the year. Although also like gold it has already shot back up in the first week of the year.
There’s no point in making predictions if you don’t go back and take a look at them! Even if it means a bit of egg on our face we always review our “guesses” for the previous year to see how we did.
Here’s what we said last year:
“[NZD gold] seems to have built a pretty good base at this [NZ$1460] level.Therefore our guess is that we should again see gold higher by the end of the year compared to where it started it.”
Well it wasn’t by much – only 2% but we’ll take it anyway and say we got that one right!
“It also seems to us that it is widely expected that the US dollar will continue to strengthen on the expectation that the US Fed will raise interest rates this year. As we’ve mentioned a number of times in recent months we’ll believe it when we actually see it.
When just about everyone is expecting something, the opposite is likely to happen. So maybe we’ll see the USD weaken this year, which would likely give gold and silver a boost.”
Well we were a little early with this call – the US Dollar Index finished the year higher than where it started. Although it still has yet to better the high reached in March. The Fed finally did raise interest rates too but not until the very end of the year.
But given the US Dollar index is made up of a basket of currencies, of which the NZ dollar is not one, so the NZD/USD exchange rate is the key one to follow in terms of it’s impact on the price of gold and silver here.
“Our guess is that the NZD/USD exchange rate will have a lessor impact on the local NZD gold price this year than the last. That is, it will be driven more by what the USD gold price is doing than the NZD/USD exchange rate.”
Well this wasn’t the case for the first 3 quarters of the year. As the Kiwi dollar continued to fall right through until September. While the USD price of gold was actually largely unchanged from January to September. Overall the USD price of gold was actually down for the year, so it was the weakening Kiwi dollar that gave local NZ gold prices a gain for the year. So wrong on that one too.
Here’s what we reckoned about silver:
“Silver is a little harder to pick. Given that unlike gold, it remains firmly in a downtrend still. However we’ll stick our necks out and say we think it too might finish the year higher than it starts it. To be honest maybe out of hope as much as anything!
Although there’s a good chance we could see the gold/silver ratio extend a bit higher yet. It’s currently not too far from previous highs in the 80 range.
This means gold might continue to outperform silver for a bit yet. That doesn’t necessarily mean silver will fall, but that gold could just rise faster than silver.”
Well that was another cross. Although not by so much given silver was only down a couple of percent.
However we did get the call right that silver might well continue to underperform gold. As we did see the gold/silver ratio briefly edge above 80 during the year. And as we write it is again just under that level.
So a bit of a mixed bag with our calls last year. Gold was up slightly and silver down slightly so we guess you could say we were just slightly right and slightly wrong too!
We’re gluttons for punishment so lets have a crack at what 2016 has in store then.
First up we do think that the long bottoming action in precious metals that has been in play for many years will finally come to an end this year. So the US Dollar prices of gold and silver will finally end the year higher than they began for the first time since 2011.
However given we are buyers and holders of both metals in NZ dollars, we have to factor in what the Kiwi dollar will do too.
Last year we thought the US Dollar rally was getting long in the tooth but it kept running higher especially against the NZ dollar. Although this turned around in the last quarter and the NZ Dollar made gains against the US Dollar. We think this trend may continue this year with the Kiwi finishing the year high than where it started. Although maybe not a lot higher. That is we won’t see a USD crash.
This likely goes against the grain of what most would think. As the expectation is that the Federal Reserve will continue to raise rates through 2016 so the US dollar should therefore continue to rise. But for one we’re not so sure they’ll be able to do this. And secondly maybe further rate rises are already priced into the US Dollar?
So we’re kind of sticking with our call from last year that this year it will be the gold and silver prices in US dollar terms that will have the most impact on the local precious metals prices. With a slightly higher Kiwi dollar maybe taking the edge off of some of the gains.
We’ve already pretty much covered this above with our guess that both metals will rise this year in both US Dollar and NZ dollar terms.
However we also reckon this could be the year that silver again outperforms gold. For the first time since 2012. So the gold:silver ratio pictured in the chart earlier will head lower this year.
So that’s probably more than enough guesses for one year! The odds of us getting all that lot right isn’t that high.
But we’ll throw one more in the mix for good luck. We think global sharemarkets might struggle this year which could be what gives a boost in interest in precious metals. This might finally make it a good time to have a look at a few precious metals mining companies too.
The time to buy insurance is before you need it. And we’d say the majority don’t think financial insurance is warranted right now. But it remains cheap while most people think that. So if you’d like a quote then get in touch. Odds are we will see a pullback in both gold and silver in NZ Dollar terms soon so that could be a good chance to take a position early in the year.
Check out these two articles if you want a few more reasons to consider buying gold or silver: