According to an article in Tuesday’s Wall Street Journal, gold prices had their best year since 2010, rising 14 percent in value, this in spite of a stock market that seemed to set new highs almost daily during 2017 and the new bitcoin drawing investment dollars away from traditional assets. Gold started 2017 with a price of around $1,150 and ended the year at $1,306. As of the writing of this column the price was $1,313.
Experts (that’s a loose term since no one knows what is happening in the minds of buyers of the precious metal) attribute the rise in price of gold, in spite of the corresponding rise in the stock market, in part to a decline in the value of the dollar in relation to other currencies.
Since gold is priced in dollars, if the dollar declines in relation to say, the euro, holders of euros view gold as being cheaper. The “fear factor,” concern about global events, is also seen as a factor contributing to the increase in the demand for gold, hence a rising price. No one can ignore the fact that the world is becoming a more dangerous place, so having a little bit of gold in one's investment portfolio is like having an insurance policy – having it, but hoping you never need it.
Another observation I have made is when a country’s currency is falling in value in relation to the dollar, as with with the value of the Russian ruble falling as a result of the sanctions imposed due to their involvement in the Ukraine, Russia has been buying gold as an anchor to hold value. China has always been a major buyer of gold, in some cases to satisfy the demand from its growing affluent population, but also as a hedge against its currency, the yuan.
What does the future hold for the other precious metals, silver, platinum and palladium? Let’s start with silver. Silver has been range-bound the last year, trading on average between $16 and $18 per ounce. Silver has been viewed as the poor man's metal investment because of the low price in comparison to the other metals. Unfortunately, wide swings in price are usually caused by speculation and rumor, not real demand. And the silver market is subject to manipulation by day traders, buyers who are in and out of the market to make a quick buck, not to buy and hold the metal.
Platinum is another metal that has been range-bound, trading between $900 and $1,000 per ounce, mostly hovering at lower end around $900. The other white metal, palladium, has been the star this year, surpassing platinum to be valued at almost $1,200, rising from $700 several years ago. Unlike gold, these metals have a use in industry by virtue of the fact they are a component in catalytic converters used in automobiles and other equipment containing combustion engines. Both metals are rare. One estimate I read was that due to the damage caused by the hurricanes this past year, more than 2 million automobiles will need to be replaced. That’s a lot of catalytic converters.
2018 should prove to be interesting as far as the prices of the precious metals and their response to economic and world events. I am reminded of the old Chinese curse, “May you live in interesting times.” I just hope it isn’t too interesting.
Douglas Keefe is the president of Beachcomber Coins Inc. He and his wife, Linda, operate Beachcomber Coins and Collectibles, formerly in the Shore Mall and now at 6692 Black Horse Pike in the old Wawa building just beyond the former Cardiff Circle in Egg Harbor Township. They have satellite offices in Brigantine and Absecon. Between them they have more than 70 years of experience in the coin and precious-metals business. They are members of the American Numismatic Association, the Industry Council of Tangible Assets, the Numismatic Guarantee Corp., the Certified Coin Exchange and the Professional Coin Grading Service.