It’s time for our annual review of the performance of gold and silver in New Zealand dollars. We’ll also look back on our predictions from the start of 2021. Then finish off by making a few guesses as to what 2022 might hold in store for us…
Table of Contents
Estimated reading time: 8 minutes
2021 was indeed a surprising year. COVID continued to pay a major role in everything and perhaps to an even greater degree than it did in 2020. Despite this sharemarkets continued to power higher, as did real estate prices.
Here’s a great table care of visualcapitalist.com that shows the performance of many asset classes for 2021.
You’ll see our assets of interest, gold and silver, were at the bottom of the chart for 2021. Bitcoin was at the top, followed by oil and commodities. With the real estate index and various stock market indexes not far behind.
But the above table looks at gold and silver in US dollars. As we are in New Zealand we should track the NZ dollar gold and silver price, not the US dollar price. So how how did precious metals fare in 2021 in New Zealand Dollar terms?
Gold in $NZ – Performance During 2021
The chart for gold in New Zealand dollars shows that gold finished the year pretty much where it started it. Although what a difference a number of days can make. As gold has boosted higher in the middle part of January.
The start of 2021 was a different story. Gold fell sharply from $2700 down to $2350 in March. Before then fully retracing that loss through to June. From there, gold just zig-zagged lower and higher again for the remainder of the year. Finishing the year of 2021 just under 1% higher than it started it.
Looking back to the start of the millennium, gold is now up a decent 386.26%.
Silver in $NZ – Performance During 2021
2021 was an about face for silver though. Silver in NZ dollars was down 8% over the course of 2021. This was in stark contrast to 2020 when NZD silver was up over 37%.
NZD silver bottomed out in late September at just above NZ$31 per ounce. To our eye it looks like silver is back in an uptrend since that bottom. So far this early into 2022, silver has regained a good chunk of the 2021 loss. Now it remains to be seen if it can eke out further gains in 2022.
Over the much longer term silver also has underperformed gold. With silver up 232% since the year 2000. This is not a surprise really. As past bull markets show that silver makes a lot of gains in a short period of time. So the major gains could come towards the tail end of this current precious metals bull market.
How Did We Go With Our 2021 Predictions?
Now, let’s see how accurate we with our 2021 predictions or perhaps more accurately “guesses”? No point making any if we don’t take a look back!
Here were our 2021 predictions:
1. We think both gold and silver will once again end 2021 higher than where they began the year.
50/50 on that one and only just. With gold barely up and silver down 8% in 2021.
2. The precious metals correction in the latter part of 2020 saw silver not do so badly as we might have expected. So in 2021 we’ll take the punt that silver will again outperform gold.
Wrong on that one. Guilty of the common error of using past performance as an indicator of the future there perhaps? As it happens the fall in late 2020 was just the start of what has been a much longer correction or consolidation period for silver.
3. Now to the direction for the New Zealand dollar. 2020 saw the US dollar go down against just about every other currency. We get the impression that just about everyone is negative on the USA currently. Likewise most are expecting the US dollar to continue to fall and maybe even to lose its role as the global reserve currency in the near future. But when everyone is thinking the same markets like to surprise! So while we may see the NZ Dollar continue to rise against the US dollar in the early part of 2021, our guess is that by the year end it will have reversed course and be headed down. That may seem unlikely right now but our experience says currencies often do the unexpected.
Well, we got that one right at least! The NZ dollar was down 5% in 2021. In fact, the US dollar rose against all currencies in 2021. For example, FXE (the Euro ETF) fell by 7.84%, and the Aussie ETF FXA fell by 6.17%. So the weaker Kiwi dollar held local prices of gold and silver up. Or perhaps a better way to think about this is that holding gold avoided the loss in the New Zealand dollar. Even if we couldn’t say the same about silver. A good reason why we say to own some of each.
4. Here’s a bonus 4th prediction for 2021. Maybe it will be the year that we see general consumer inflation finally peak its head out from the hole it has been hiding in? 2020 once again saw many asset prices rise on the back of the huge increase in currency printing across the globe. We have also seen major responses from governments. More stimulus payments are about to be sent to US citizens. So we think some of this free money is likely to push prices up by more than the 1-2% we’ve seen in recent years.
We’d have to give ourselves a tick for that one too. The New Zealand Consumer Price Index (CPI) surged 2.2 per cent in the September 2021 quarter.
“Excluding quarters impacted by increases to GST rates, the September quarter movement was the highest since the June 1987 quarter, which saw a 3.3 per cent rise, Stats NZ said.
Annual inflation was 4.9 per cent in the September 2021 quarter when compared with the September 2020 quarter.”Source.
Numbers for the full 2021 year aren’t out yet. But we’d guess we are headed for a record year in 2021 inflation rates. This would follow in the footsteps of the USA where inflation hit a 39-year high of 7% in 2021 (for some reason a much bigger country seems to be able to get their numbers out much faster than us?). Also similar to the United Kingdom where CPI rose 5.1 percent year-on-year in November 2021.
So overall we come in with a 2.5 out of 4. Not exactly Nostradamus like! But as we say these are just punts we make for the fun of it more than anything.
Our “Punts” for 2022
- In 2019 and 2020 gold and silver had a couple of stellar years. So we guess with hindsight it wasn’t a big surprise that 2021 saw them take a breather. Therefore we’ll say that gold and silver will finish 2022 higher than they started them. Just so we’re not copying and pasting last years we’ll also predict that they will both have double digit rises. So the bull market was just on pause last year and should bounce back in 2022.
- Unlike 2021, silver will outperform gold in 2022.
- Inflation won’t just be “transient”. We’ll see high
- 2022 will finally see a stock market fall with a bear market correction (i.e greater than 20%). (Hat tip to our secret investment advisor for this one) This will come as complete surprise to many, as central planners have gotten everyone so used to seeing everything go up.
- Central banks will cause the stock market crash by withdrawal of stimulus. So we will see them promptly reverse course and pump more back into global economies. Hence real interest rates will continue to be negative.
So that is 5 predictions for 2022. Odds are we won’t go so well as the more predictions you make, the more room you have to be wrong! It’s notoriously difficult to predict the markets over a defined timeframe. A better bet is to use dollar cost averaging and make regular purchases of gold and silver throughout the year.
Or use some technical indicators to time your purchases after a pull back in the precious metal prices.
Gold and silver are up since the start of 2022. So sign up to our daily price alerts if you want to hear when other pull backs occur throughout the year.