2016: The Year Gold and Silver Bulls Roared Back
Despite the pullback in gold and silver prices in the second half of 2016 both precious metals are still ringing up year-to-date gains for the year.
-Silver is the leader in 2016 scoring a 13.90% ytd gain
-Gold is closing out the year with a solid 6.75% increase
Precious metals investors may be disappointed by the price slide in the second half, but it is useful to take a look at the long-term view.
The significant rally which took gold from a low at $1,065 per ounce at the start of 2016 to a summer high just above $1,385 per ounce revealed a resurgence of long-term bullish investor in both gold and silver.
Gold had been declining from its all-time high above $1,900 per ounce (hit in September 2011) and 2016 was the year that broke the multi-year downtrend in the metals.
What Does This Mean For 2017?
Gold and silver are retreating to a long-term "value area" for buy-and-hold physical metals investors. The multitude of factors that woke up gold and silver bulls in 2016 largely remain intact and will provide a floor for the markets in 2017.
6 Factors That Will Support Metals Prices Ahead
-The Federal Reserve May Not Raise Rates As Much As The Market Expects
-Inflation Is Expected To Rear Its Ugly Head Next Year
-A Variety of Geopolitical Flash Points Are Heating Up
-A Number Of European Elections Could Leave The Stability and Future Of the EU In Question
-Negative Interest Rates Remain Intact in Europe and Japan
-Increased US Protectionism Policies Could Restrain American and Global Growth
2017 Growth May Under perform
Morningstar released its quarter-end insights report and projected an anemic 1.9% Gross Domestic Product pace in 2017. Has Wall Street overshot reality?
Don't forget the current U.S. economic expansion phase began in June 2009 and is old at 73 months. That is well above the average 58.4 months of expansion seen during the 11 cycles since 1945, according to the National Bureau of Economic Research. It's simply getting late in the cycle and markets will need to adjust in 2017.
As the year comes to a close, gold and silver have tumbled off their mid-year highs as stocks climb in what some say is another bout of irrational exuberance.
Investors should brace for a stock market correction in the first quarter of 2017. When those pullbacks in equity markets around the globe begin to unfoldthe rush toward silver and gold will begin anew.