2016 Year-End Gold Report

Gold finished the year up 9.12%1, with Silver up 17.51%.

Year-end-2016Gold FIX at $1159.10 USDUp $96.85 USD on the year

1 Precious metal prices are defined and sourced from LBMA London FIX as well as Johnson Matthey and may differ from OTC, SPOT, Forward, and Future metals contracts

Gold Chart 2016

Precious metals in 2016 showed favorable returns. Gold was up 9.95% on in 2016.

Year-end analysis for metals in 2016

Here is a look at the 2016 end-of-year returns (“EOY”) across the precious metal markets.

Gold traded lower in the last quarter of 2016 and managed to finish the year higher by $96.85 EOYper ounce for a 9.12% EOY gain. Gold prices were fixed at $1159.10 USD at the of the year.

Silver reached a three-year high of $20.71 USD in early August. The momentum however quickly diminished on news of the FED’s hawkish position towards the FED fund target rate. Silver still managed to close out the year at $16.24 USD higher only by $2.42 EOY per ounce, a 17.51% EOY gain.

The gold to silver ratio was also lower by -$5.49 from $76.86 to $71.37- per ounce. The lower gold/silver ratio is indicative of a stronger silver price in 2016.

Platinum finished at $906.00 USD on Wednesday, up $20.00 EOY per troy ounce that is a 2.26% EOY gain.

Palladium managed to finish maintain the significant gains settling marginally lower at $676 USD up $116.35 EOY per ounce for a significant 20.79% EOY return.

At the end of the year platinum to palladium ratio moved lower by -$0.24 from $1.58 to $1.34 per ounce

Historically, platinum has been priced well over gold prices. However, recent economic circumstance has forced the platinum price -$253.10 EOY under gold.

On October 20, 2016 Gold traded as high as $340.50 over platinum, before closing out the session at 324.60 on the CME’s continuous Gold and Platinum contracts.

   Dates applied
Metal 12-30-15 OP1 12-30-16 CP2 YTD Change
Todays Gold Price Charts Gold $1062.25 $1159.10 +96.85 9.12%
Todays Silver Price Charts Silver $13.82 $16.24 +2.42 17.51%
Todays Platinum Price Charts Platinum $886.00 $906.00 +20.00 2.26%
Todays Palladium Price Charts Palladium $559.65 $676.00 +116.35 20.79%

FIX prices are shown in the USD and paired on a troy ounce basis for each metal category from data sourced from LBMA as well as Johnson Matthey

1 (“Opening Price”) referring to the applied opening price extracted from said date(s)
2 (“Closing Price”) referring to the applied closing price extracted from said date(s)

The rise of gold in 2016

While 2016 was a positive year for gold, it was more of a critical turnaround point for what has been a three-year losing streak for the yellow metal. The year marked a directional reversal along with signs of support for gold and silver for 2017. We were looking for a shift in momentum last year and we got it. Although it is still too early to conclude any feelgood support scenarios for gold  in 2017, the months ahead can still provide us with a much better insight for precious metals for the next three to five years.

Milestone1 at 20,0002

1 Closing Milestones for the Dow Jones Industrial Average is 20,000. The previous high point was 19,974.62 on 26 December 2016 and inter-day high of 19,99.63 on 6 January 2017
2 Closing Milestones for the S&P500. The previous high point was 2,276.98 on 6 January 2017

The Dow is getting closer to the 20,000 mark. Is this sustainable (growth based on organic progress)? Or is it pump (exasperated growth based on artificial injection)?

“…the national debt at about 75 percent of the gross domestic product, a ratio not seen since 1950, after the budget ballooned during World War II.

Congressional Budget Office has estimated that by mid-century our debt will rise to 140 percent of G.D.P., far above that in any previous era, even in times of war.”— Ignoring the Debt Problem by PAUL A. VOLCKER and PETER G. PETERSON Released Oct. 21, 2016 NYT

The world is anticipating change in the form of positive growth and the U.S. market seems to be rather optimistic on the anticipated outcomes. At times even over-reactive to what could be argued as inconsequential economic data. The FED has been giving us serious grounds for further rate hikes through out the year. The fundamental logic behind move is to wane off inflation concerns with intermediate increases in the FED Fund rate. This counter measure could introduce elements of concern for the stock market that Greenspan, Bernanke, and now Yellen have been tasked to protect against. Introducing expensive money into what is already a frail market could be disastrous for stocks and painful for growing national debt and high lending rates led to a substantial rise in federal net interest costs.

Gold in 2017

We are facing the highest level of debt inflation ever seen in the U.S. or any other market known to man. Debt held by the public is now $14 trillion, almost 76% of Gross Domestic Product1. Debt held by government accounts or intragovernmental debt adds another $4 trillion to the gross federal debt. This is more than 104% of GDP or $54 thousand per citizen. The total debt is approaching $20 trillion and it should not be taken lightly. This run-up is absolute due to the certainty of increasing debt. The problem ensues because of the sheer size of of our debt. At $20 trillion, a 50% increase would add another $10 trillion which is a little more than $90 thousand per citizen. Wage growth can help alleviate some downward stress to this daunting debt but it would mean more inflationary pressure. Further easing could still be part of the reality. The national debt has grown at an average rate of 11.95% since 1980 with the Great Communicator adding more than 174% during his eight-year term and President Obama adding more than $8.25 trillion.

1 This is a product of data extracted from FRED on Q3-2016
National debt chart

National debt chart

We are still in a very fragile economic state. The uncertainties around debt and inflation with respect to economic policy will play a big role in the overall economic outlook. Flight-to-quality investments are going to play a major role in governmental balance sheets. Unfortunately corporate action has become a resolve of access to capital and not innovation. The measure of corporate action will be a product of consumer confidence and the next psychological milestone that may appear as support and be revealed a resistance. sometimes a ceiling.

Commodities2 may prevail once again in 2017.

1 This is a product of data extracted from FRED on Q3-2016
2 Brent Crude was the leading assets class in 2016 with a 52.5% return. ROI leaders include Brazil Bovespa Stocks 68.9% Russia MICEX Index Stocks 51.0% WTI crude oil Commodity 45.3% Sugar Commodity 27.9% Silver Commodity 17.5% Soybeans Commodity 17.1% High-grade copper Commodity 16.5% Bloomberg Commodity Index Commodity 11.6% S&P 500 Index Stocks 10.1% Gold Commodity 9.12%

 

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