Gold & Silver in NZ Dollars: 2017 in Review & Our Punts for 2018

2017 was all about bitcoin and cryptocurrencies. Although most financial assets also went up. Such as shares both globally and here in New Zealand. Here and in many parts of the world property also rose during 2017.

This scenario, where all assets are rising, is generally seen as not being that favourable to financial insurance assets like gold and silver. So it’s time for our annual review of the performance of gold and silver in NZ Dollars to see if that was the case.

We’ll then look back at the predictions from the start of 2017 and see if we rivalled Nostradamus. As well as making a few punts as to what 2018 might hold in store.

 

Gold in $NZ – Performance During 2017

Much like in 2016, NZD gold spent the first few months of the 2017 year rising sharply. Then in May and June it corrected sharply before rising to new highs in September and November. Then just as occurred in the previous 6 years gold fell during December. Much like a year ago NZD gold then rose in the later part of December.

The upshot of all those cycles up and down was that NZD gold finished the year up a somewhat surprising 10.57%.

Why surprising? Because in an environment where most other asset classes are rising we’d expect gold to be struggling.

Casting our eye back to the start of the current bull market in gold, on a much longer term basis NZD gold is up 235%.

It looks like we may be seeing a repeat of early 2017. With gold rising since mid December, look for gold to continue to rise over the next few months.

 

Silver in $NZ – Performance During 2017

Silver in NZ Dollars switched from 2016 and underperformed gold in 2017. Like gold it rose sharply for the first few months of the year, but then had a very sharp correction through the middle of the year booking new lows. Before then moving higher to finish with a pretty measly gain of 1.59%.

In the longer run silver is also underperforming gold since 2000. Up 135% versus golds 236%.

But as we said for gold, in an environment where just about every investment class is rising we would expect silver to be struggling to eek out any gain at all. So this is not a bad result considering the circumstances.

 

A Look Back at Our 2017 Predictions

So how did we go with our predictions or rather as we like to say guesses from 2017?

We made 4 guesses in January 2017:

“In NZ Dollar terms, we reckon both gold and silver will end 2017 higher than they began. The drop in prices in the second half of 2016 has likely scared many people away, who probably believe that the rise in the first half of 2016 was just a short term jump higher in the longer term trend of gold falling.

But we believe we have seen the bottom in both metals and the trend has likely turned so we will see a number of years of rising prices now.”

We got that one right. Both metals ended the year higher in NZD terms. Although only just for silver but we’ll take that.

“We also believe silver will again outperform gold like it did in 2016.”

We struck out on that one though. Silver lagged golds gains due to the sharp mid year silver correction.

“Our guess is that the NZ Dollar again ends the year higher than it began against the US Dollar. But again gold and silver will rise more than the Kiwi does, so local precious metals prices will end the year higher.”

Thanks to a sharp December rally we also got that one right – but only just. The NZ Dollar rose from 0.6886 to 0.7082 in 2017.

“A final thought but perhaps not a prediction for 2017 is that at some point we will see precious metals rise at the same time as interest rates (Government Bond rates) do. We saw precious metals rise in the first half of 2016 and interest rates rise in the second half. In the later 1970’s we saw these trends coincide and we reckon it will happen again before too long.”

As we suspected when we wrote this, it’s still a little early. With NZ govt bond rates actually drifting lower during 2017.

However US Treasury Bonds while down overall were moving higher in the second half of the year.

So we still think at some stage in the next year or 2 we will see precious metals rise at the same time as interest rates.

Overall we were 50/50 then. But with the last of our guesses, on interest rate rises, one that we didn’t really expect to come to pass in 2017 anyway.

 

Our “Punts” for 2018

Now onto our punts for 2018. What does the new year have in store for precious metals and the world of finance?

1. We expect both silver and gold to again end the year higher than they began. Given they seem to have bottomed out and be rising, perhaps not a huge call to make.
2. Silver and gold will perform better than they did in 2017. So silver up more than 1.59% and gold up more than 10.57%
3. Silver will this year outperform gold. A turnaround from 2017 year.
4. The New Zealand Dollar will end the year lower than the US Dollar this year. In 2017 it was only the rally at the end of the year that saw the Kiwi Dollar end the year higher. We think the dollar is actually already in a downtrend and the current rally is likely just a short term move before the longer term downtrend resumes.

We’ll see how we go with those!

There seems to be so little interest in precious metals. Our guess is that this sets them up to surprise and out perform expectations. So far they’re off to a good start.

 

For more help on when to buy precious metals check out: When to Buy Gold or Silver: The Ultimate Guide