A year like no other for precious metals

Well, it’s been a year like no other in so many ways. “Unprecedented” is an often-overused term. But there truly is no precedent for much of what transpired in public health, politics, the monetary system, the economy, and markets.

More than 300,000 Americans reportedly lost their lives while infected with COVID-19.  Less widely publicized was a spike in deaths of despair due to lockdowns and related social ills that drove all too many into depression and drug addiction.  Or the deaths that were caused, or will be caused, by Americans putting off or avoiding doctor’s visits.

America’s cities burned while the mainstream media egged on anti-police protests. In their aftermath, record surges in murders and other violent crimes followed across the country.

And irreplaceable historical monuments, some of which had stood for more than a century, came down one after the other. First they came for Robert E. Lee, then they came for Francis Scott Key, Christopher Columbus, Thomas Jefferson, and even Abraham Lincoln.

Amid all the suffering and turmoil, Wall Street celebrated new record highs in stocks. An unprecedented tsunami of liquidity generated by the Federal Reserve pushed asset prices higher across the board.

In late July, gold ascended to new all-time highs in nominal terms. Even the Wall Street-centric financial media had to stand up and take note

Gold prices lost momentum in the fall as rising equity markets stunted safe-haven buying. But the monetary metal still finished 2020 with strong gains – outperforming the S&P 500 for the year overall.

Gold ends 2020 at $1,900 per ounce. That’s a record high close for a calendar year and comes on the heels of a 25% annual gain.

Turning to silver, the market experienced an even wilder ride than gold in 2020. 

Silver got historically oversold versus gold in March at the height of the COVID panic. The gold to silver ratio spiked to an historical extreme of 130:1.  

At that time silver prices plunged briefly below $12 an ounce. Bargain hunters flooded into the bullion market, clearing out dealer inventories and driving premiums markedly higher.

Spot prices soon followed suit. Silver embarked on an epic rally that took prices all the way up near the $30 level in early August.

The white metal is finishing out the year at $26.50 an ounce to record a yearly advance of over 45%.   

Looking ahead to 2021, the monetary macro backdrop and fundamental drivers for precious metals are likely to remain favorable. 

The Fed has effectively taken a rate hike off the table for 2021 and beyond. It has no plans to curtail its $120 billion in monthly asset purchases.

And the federal budget deficit will continue to skyrocket under the next administration – perhaps to $4 trillion per year.

Uncertainties remain and investors should be prepared for anything. We still don’t know how exactly the globalist Great Reset will play out.

Part of the agenda, though, is a reimagining of monetary policy to include globally coordinated central bank action on climate change and social justice – whatever that’s supposed to mean. 

The Fed may begin more formally embarking on Modern Monetary Theory -- or print-on-demand financing for government. 

It has already announced it will no longer pursue price stability as it used to be understood. Instead, central bankers will allow prices to run above their 2% target for an undefined period before they even think about tightening.

As the virus fades later in the year, inflation risks may come into focus. Of course, at the core of any inflation protection strategy is physical gold and silver.

Silver could also benefit from rising industrial demand as the economy improves and officials push more aggressively for “green” energy. 

Solar power and battery technologies are experiencing explosive growth, and with that growth comes a need for lots more silver. In fact, solar panels are one of the fastest growing sources of silver demand.

Some analysts expect to see widening supply deficits for silver and platinum in 2021 as the battered mining industry struggles to increase production.

A new nominal high in silver could be in the cards for 2021. And the gold price could begin to trade sustainably above $2,000 an ounce. That could happen quickly if it gets off to a good start to the year.

We will get some clues as to how the New Year will treat precious metals and other asset classes when markets open next Monday.