Commodities - AUGUST 4, 2016

My Precious

by Larry Gray

Just when investors were about to lose faith, precious metals regained their luster during the first half of 2016. Silver posted a 35.05 percent return and gold returned 24.57 percent. As of early August, the S&P GSCI Precious Metals Index boasted a year-to-date return of approximately 29.5 percent. The positive performance represents a much-needed and welcomed turnaround following three years of negative returns: 2015, –11.08 percent; 2014, –4.11 percent; 2013, –29.75 percent.

Silver has benefitted from a recent jump in demand, while interest in gold has been fueled by macroeconomic and geopolitical concerns — prices skyrocketed after the Brexit result and the Federal Reserve’s decision to maintain current rates. In addition, all-time low government bond yields have been highly constructive for gold and silver, as the two tend to be inversely related.

Since the first of the year, the price of gold has climbed approximately 28 percent and was at $1,370.20 per ounce as of Aug. 2. The price of silver has jumped 49 percent since the first of the year and was at $20.74 per ounce as of Aug. 2.

Also during the first six months of the year, platinum produced a return of 14.71 percent, and palladium turned in a more muted performance with a mark of 6.53 percent.

Whether precious metals can continue their strong performance through the end of the year remains to be seen. The current environment appears to be friendly, but much will hinge on future developments with the U.S. economy and strength of the dollar, as well as the outcome of the November presidential election. And news on the Brexit front and the direction and strength of China’s economy will also bear watching.

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