Don't Look Now, but Gold Just Finished Its Best Year Since 2011 / Commodities / Gold and Silver 2018
Metalsinvestors may have missed it given the gloomy sentiment that plagued marketsfor much of 2017, but gold just finishedits best year since 2011.
Perhapsin a year like the one just passed, 13% gains are simply not inspiring. U.S.stocks finished about 25% higher for the year, and crypto-currencies includingBitcoin left all other asset classes in the dust. Bitcoin gained roughly 1,400%.
Diehard gold bugs enter 2018 waiting for crypto-bugsand stock bulls to see the value of precious metals. Fortunately, preciousmetals have served reliably both as an inflation hedge and as a safe haven formost of recorded history. It looks less and less probable investors will getthrough another 12 months while ignoring both inflation and market risksimultaneously.
Whileother markets were finishing 2017 strong, the U.S. dollar ended the year with awhimper. The dollar fell 10%, its worst performance in more than a decade.
Thatweakness has yet to manifest itself as price inflation in consumer goods andservices. It has instead shown up in asset prices.
Consumershave yet to feel their dollars getting weaker, which may explain much about whya traditional inflation hedge like gold isn’t getting a lot of attention. Thatmay change in the months ahead, particularly if President Donald Trump can add his debt-financedinfrastructure spending program to the tax cuts recently passed. Bothinitiatives represent fiscal stimulus for Main Street, and a shift from WallStreet oriented monetary policy including Quantitative Easing.
Fiscalstimulus programs should contribute to more weakness in the dollar, as deficitsand borrowing increase. Yes, the Republican led Congress could insist onspending reductions elsewhere to compensate for tax reduction andinfrastructure spending, but only the most naive would consider that a genuinelikelihood.
Ifthe dollar loses another 10% in the year ahead, metals ought to be significantbeneficiaries – even if most aren’t paying attention to that possibility.
Therecent strength in precious metals may be signaling that price inflation is onthe way.
TheFederal Reserve has been raising the Fed funds rate for more than two years,thus far with very little impact on bond yields and interest rates on consumerloans. When dealing with markets as centrally planned as ours are, anything is possible…in the short term.
Yet,in our view, the most likely alternative to inflation as a driving force inmarkets over the coming months is asset deflation. If investors aren’t talkingabout rip roaring asset markets at this time next year, they may be talkingabout bubbles popping instead. There are certainly a number of bubbly markets,and a near total disregard for risk. That is a potent combination.
Eitherway, don’t expect the metals markets to go unnoticed in 2018.
By Clint Siegner
Clint Siegner is a Director at MoneyMetals Exchange,perhaps the nation's fastest-growing dealer of low-premium precious metalscoins, rounds, and bars. Siegner, a graduate of Linfield College in Oregon,puts his experience in business management along with his passion for personalliberty, limited government, and honest money into the development of MoneyMetals' brand and reach. This includes writing extensively on the bullionmarkets and their intersection with policy and world affairs.
© 2018 Clint Siegner - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
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