Categories: Precious Metals
Topics: General Precious Metals

How Did Gold and Silver Perform in 2011?

On Friday, gold (NYSEARCA:GLD) prices managed to climb $25.90 higher, breaking its six-day losing streak.  Although gold has been in a slump during the final months of the year, gold continued its 11-year winning streak.  Gold prices finished 2011 at $1,566.80, representing a 9.3 percent annual increase.

Investor Insight: Should Gold Investors Worry About Euro Currency Weakness?

As the chart below shows, gold prices bottomed in February and experienced another record-breaking year.  In September, gold prices reached a new all-time nominal high above $1,900 per ounce.  In the following months, gold declined as liquidity concerns dominated the market.  The fundamentals still remain in tact, and gold is currently finding support near its 300-day moving average.  “Given the ongoing debt problems facing many economies and record low interest rates, we still expect the bull-run in gold to continue with the metal to rebound across 2012,” said James Moore, an analyst at TheBullionDesk.com.

Silver (NYSEARCA:SLV) prices also climbed higher on Friday to end the final trading day of 2011 on a positive note.  However, silver prices finished 2011 at $27.92, representing a 10.7 percent annual decrease.  The silver market is a lighter volume market than gold, and is more susceptible to wild price swings.  Furthermore, silver has an industrial component that was hindered by global slowdown fears.  The MF Global bankruptcy also shattered confidence and many traders faced margin calls or lost access to their gold and silver positions, dampening interest in silver contracts.

As the chart above shows, silver prices peaked near $50 in late April.  In the following months, it was a bumpy ride as markets were driven more by euro zone headlines than fundamentals.  Silver experienced a sharp sell-off in September, but found support near $26 per ounce.  Silver found support again near $26 in December.  Although silver underperformed gold in 2011, the fundamental reasons to hold silver remain in tact as well.  Legendary commodities investor Jim Rogers believes governments will continue to print more money when the economy fails to improve.  “When things don’t get better they are going to print a lot of money, Rogers explained. “When they print money, you have to own silver, you have to own rice and you have to own real things.”  If Rogers had to buy just one precious metal, he would go with silver “because silver is more depressed.”

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To contact the reporter on this story: Eric McWhinnie at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com