The end of 2011 was a letdown for many precious investors as both gold and silver ended the year well off their respective yearly highs. 2012 has seen these memories overshadowed by a stellar start for precious metals, with gold and silver trouncing all other asset classes.
|Gold||$ 1,567.40||$ 1,744.00||$ 1,656.12||11.20%|
|Silver||$ 27.96||$ 33.60||$ 30.76||20.17%|
Gold's 10.28% advance in 2011 masked a very poor end to the year. From its highs of $1,920 per troy ounce in September of 2011, gold limped into the year end with a 18.43% decline. Nonetheless, gold extended its winning ways to 11 straight years, and with gold's strong start to 2012, extending this streak to 12 years looks like its in the cards. In fact, January's 11.20% run has more than halved the fourth quarter decline, and many market forecasters are predicting another run at the $2,000 per troy ounce level sometime in 2012.
Silver lived up to its reputation of being a more volatile precious metal in 2011, with silver investors enduring dramatic volatility. Silver had started 2011 with a flourish, rising 55% and reaching a multi-year high of just under $48 per troy ounce on May 1st before suffering some dramatic plunges in the wake of two series of CME margin rate hikes, and escalating fears over the global economy.
January of 2012 has seen silver sprint 20.17% higher, easily recovering from 2011's declines, and outpacing virtually all other asset classes and commodities. Whether 2012 represents a break-out for silver, or perhaps a repeat of 2011 remains to be seen. There is no doubt that if silver continues to advance at this rate, fears that the CME will step in with another series of margin increases will be sure to follow.
While providing a definitive answer to this question is impossible, there is no shortage of opinions on this topic. Among the most compelling has been the actions of central banks. Both Europe's ECB, and the U.S.'s Federal Reserve have undertaken a series of monetary operations to ease tensions within the global financial system, and spur general economic activity.
On December 8th, 2011, the ECB's provided European banks with 489 billion EUR of much needed liquidity. This operation, known as long term refinancing operation (LTRO) coincided with the end of gold and silver's downturn in 2011.
On January 1st, 2012, the Federal Reserve extended its Zero Interest Rate Policy (ZIRP) from mid-2013 to at least late 2014. The Fed also laid the groundwork for another round of quantitative easing, or QE3. Both gold and silver immediately rose following this announcement.
A good gauge of investor demand for silver are the U.S. Mint's annual silver eagle sales numbers. Despite a drop-off in November and December, 2011 was easily a new record as just under 40 million silver eagles were sold, or 39,868,500. The prior record was 2010's 34,662,500 silver eagle coins sold.