How Did Gold and Silver Really Do in 2016 and Where Are They Headed This Year?
Gold’s performance in 2016 was dependent on the performance of local currencies, and the year-end price was dependent on location and timing.
Gold rose 9.1% during 2016. In US prices, gold rose 8.5% over the year. In rubles, gold fell by 10.6%, as the ruble appreciated against the dollar after a sharp fall in 2014/15. In pounds sterling, gold rose 22.5%.
While geopolitics and economics all affect the dollar price of gold, the Trump presidency policies will be the primary gold price drivers going forward.
Should an equities market crash occur, gold could fall sharply as funds and investment houses struggle for liquidity. As in 2008/09, gold would likely recover faster than equities, and then go from strength to strength. If there is a major equities crash early in the year, gold could hit $1,400, but if there is an equities market crash, and it peaks in the final quarter of the year, then gold could end the period in a much weaker position, but still steam ahead in 2018.
The gold:silver ratio (GSR) is over 72, up from around 66 when silver peaked in mid 2016 (it had started the year near 80, and at one stage had risen to close to 84) but if gold does perform, then a GSR of around 65 could be seen again, given that silver tends to outperform gold in a rising gold scenario. If gold hits $1,400, then silver could rise to over $21, still a huge way short of the $50 it hit back in 2011 before a massive price takedown.
So overall, a positive view of the gold price and perhaps an even more positive one on silver. However, if there is a general equities crash, then both gold and silver could suffer in the financial fallout. The comfort here is that it would likely not be as intense a fall as the equities market, and the recovery would be far quicker.