Gold and Silver Chart Best Year in a Decade
On New Year’s Eve 2019, gold was trading at $1520.90. It closed the year at $1892.90 for a 24.5% gain.
Gold endured a lot of volatility in 2020. After pushing above $1,650 in early March, it dropped below $1,500 briefly as economies locked down for the pandemic, but quickly rebounded and charged to a new record over $2,000 an ounce in August. The fall months saw some profit-taking and gold fell as investors went risk-on with optimism about the coronavirus vaccine. But the yellow metal rallied late in the year primarily driven by the promise of more stimulus and a weakening dollar.
In his last podcast of the year, Peter Schiff said he thinks dollar weakness will continue to drive gold higher in the coming year.
You need more dollars if you want to buy euros or if you want to buy Swiss francs, or Japanese yen or Australian dollars, or any of these other fiat currencies. But if you want to buy an ounce of gold or you want to buy an ounce of silver, well then you need even more money. Because all fiat currencies are losing value. It’s just that the dollar is losing it even faster than most of the other ones. And that is the trend that is really going to accelerate in 2021.”
Gold big 2020 gains follow on the heels of a 19% gain in 2019.
Silver enjoyed even bigger rally in 2020, gaining about 48% of the year. In August, silver briefly pushed above $29 an ounce, but that wasn’t near its all-time record of $50. A lot of analysts believe silver will take out that all-time high in 2021.
Both Saxo Bank and Bloomberg Intelligence project silver will break that record in 2021, meaning the price would double within the next year.
The white metal actually has a double-top of around $50. It first got to that level in 1980 and then again in 2011. Historically, that would indicate once it breaks that level a third time, it has a long way to run up.
The fundamentals are really good for silver as well. The push toward solar power and other green energy initiatives will support the silver market in the coming years. Solar power generation is expected to nearly double by 2025 according to a report released last summer by the Silver Institute. Meanwhile, silver mine output was hit hard by the pandemic. Production is projected to fall by 6.3% to about 780.1 million ounces in 2020. The big drop in silver output is largely a function of mine shutdowns due to coronavirus, but mine output was already trending down before the pandemic. Global mine production fell by 1.3% in 2019.
Fundamentally, both silver and gold are monetary metals and monetary policy is the primary driver behind their gains. The Federal Reserve increased the money supply by a record amount last year. At the same time, the Fed’s balance sheet has increased right along with the money supply. As of the week before Christmas, the balance sheet was at a record $7.404 trillion. The central bank has more than double the amount of Treasuries on its balance sheet since the beginning of the year.
The Federal Reserve has no exit strategy for this extraordinary and inflationary policy. Last year, the Federal Reserve moved the goalposts to allow inflation to run hot. There is no reason to think that the Fed will slow down the money printing in 2021 and that would indicate another good year for both gold and silver could be in the cards.