The year 2020 has been rather (very) positive for precious metals, gold and silver in the lead … and 2021 promises to be just as profitable – if not more.
Everyone has said it before, I can only repeat: the year 2020 is a year that will be remembered. It is obvious.
Stock markets at their highest despite a health crisis that never ends despite a ridiculous death rate, a collapsing real economy, an increase in social tensions, money creation and an unprecedented accumulation of debt …
We all saw it, we were there. What if this is all just beginning? What if we were to witness an attempted controlled demolition of the system in place since the Bretton Woods agreements? So, in this more than troubled context, what does 2021 have in store for gold and silver?
Beginning of the year, let’s first take a quick look at the past year.
Gold gained + 14.8% in 2020
This is a little worse than its + 21% in 2019, when we saw the recovery of the long-term bull market in June after six years of consolidation.
However, we remain on a generally positive year, with a new high of € 1,749.26 in August 2020 and an annual gain of 14.8%.
In comparison, the S&P 500, the flagship American index, did not do much better (+ 15.76%) and the CAC 40 lost with a drop of -7.73%.
It should still be noted that the Nasdaq really exploded, with an annual gain of 46.4%.
A very high concentration of indices on only a few stocks indicates a high risk. Indeed, the five largest stocks of the S&P 500 represent 22% of the index and are all part of the technology sector: Apple, Microsoft, Facebook, Google and Amazon.
You have to go back to World War II to find such a level of concentration …
The printing press can still make the illusion of solidity last, but it is better to have a safety net with good risk management: we are dealing with a house of cards that holds up in high winds!
The yellow metal was therefore a very relevant asset to own in 2020 to diversify and protect your portfolio …
… Even essential.
Indeed, it delivers an attractive annual performance while offering value protection that other asset classes are unable to guarantee.
Continued bull market
The bull market should continue despite the correction that began after the peak in August.
Or through the correction, should I say.
Yes, because between October 2018 and August 2020, gold went from € 1,020 to € 1,749, an increase of 71.5%, accounting for 17 months of increase for only six months of decline.
A correction was therefore necessary to take a healthy breath, recover and accumulate energy before resuming a new bullish leg.
For the moment, gold seems to have found a low and establish support around € 1,475, hit twice in June and November 2020.
We will see how he continues to manage his consolidation.
Now, can gold fall further? Of course.
It could even drop to its long-term support around € 1,400 – € 1,388 and thus retest its previous peak of October 2012 at € 1,386 without invalidating the bull market.
Now, if you think things are likely to remain complicated in 2021, physical gold is an asset to consider or accumulate more.
You can also split entries in position and buy on pullbacks to smooth costs.
Money gained + 35.8%
It is the precious metal that performed the best in 2020!
Besides gold and its + 14.8%, platinum gained + 2.19% and palladium + 16%.
Unlike gold, the gray metal has not yet caught up to its April 2011 peak at € 34.15. At the time of this writing, Friday January 8, 2021, the price of silver is at € 21.5; he still has to gain 60% to recover from his peak in 2011.
This indicates great potential for 2021.
Usually, silver follows the trend of gold, but with greater volatility. In 2020, the difference between its low point and its high point is 137.47% – against 34.43% for gold!
Silver resumed its bull market in July 2020 by breaking long term resistance around € 18.5 which had been in place since August 2013.
We can allow ourselves to think that after consolidating for seven years, he really wants to stretch his legs.
We must add to this another very important figure to take into account concerning money: investment demand in the USA has reached 62% of the market, while it usually hovers around 10%.
This is the first time this has happened!
This figure reflects an awareness of a growing section of the population seeking the security of real assets in a very uncertain world.
Let’s take a look at the gold / silver to metal ratio; the year 2020 was, again, an unprecedented year.
First, the ratio peaked at 126/1 in March, in the midst of the Covid-19 storm. This is a historic record, so it took 126 ounces of silver to buy one ounce of gold.
Never has money been so cheap.
After their low in March 2020, the price of silver rose more violently than that of gold. Logically, the ratio has fallen. He closed the year 2020 at 72/1. It’s a dramatic drop, but the money is still cheap.
We remember that at the peak of money in 2011, the ratio fell to 31.7 / 1. For information, the ratio between the quantity of silver and gold present in the earth’s crust is 17.5 / 1. In 1792, the law fixed the gold / silver ratio in the United States at 15/1 and a ratio of 15.5: 1 was promulgated in France in 1803.
If the ratio hits 46/1, I will probably trade some silver for gold.
Now, what about 2021?
Of course, I don’t have a crystal ball, but the context that looms for 2021 looks favorable for gold and silver.
The chances that the situation will not improve remain great.
In the United States, the economic, political and social divide seems too deep not to end in civil war.
The real economy of the western world is collapsing to such a level that no return to normal is possible in the short term.
State aid can only delay the problem, while making it even worse.
The ECB and the Fed have increased their balance sheets like never before in history.
Trillions of billions were created and injected into the system which has bloated the markets and made them completely addicted. An astronomical amount of debt has been added to a stock that was already irredeemable and a double-digit recession is looming.
The pandemic has lit the fuse of a powder keg that has been waiting to explode for a long time.
We can doubt the ability of the leaders, or even their real will, to restore the situation.
In fact, they know it well and start telling us about the big reset – the big one reset – and the establishment of a digital euro, a kind of cryptocurrency directly issued by the ECB.
They will attempt a controlled demolition of the monetary system… and we will be collateral damage.
It is difficult to say precisely what to expect, but the visible trend is clearly towards a reduction in our freedoms.
The paradigm shift will be violent.
We will soon see if a vaccination passport will be necessary to leave our home, to go to a restaurant, to the cinema or simply to go to work.
Some people will not accept to be imposed a global collectivism without reacting.
What price will gold or silver reach in 2021?
I do not know. In fact, it doesn’t matter: since we know that currencies like the euro and the dollar lose their value over time, so they are a very poor measurement tool.
Price matters when trying to optimize your entry point to get as much metal as you can against your euros, or to accumulate more.
Moreover, not to mention the manipulation of gold and silver prices of which major banks such as JP Morgan, Deutsche Bank or HSBC have been guilty, we have seen liquidations of precious metals during the mini-crash. March 2020 to respond to margin calls.
Prices had fallen sharply, yet in the physical market prices were showing very high premiums – especially for the money.
A supply shock and increased demand had caused the prices of gold and silver coins to soar.
Worse, it was impossible to get hold of it. All the merchants were out of stock.
In this case, yes, the price does matter.
It was a reminder (no pun intended): we take out insurance before the house is engulfed in flames!
But afterwards, we do not seek to make a gain in euros with physical precious metals.
We are interested in what our metal will allow us to buy: the next undervalued asset class or the next healthy reserve currency, if it ever exists.
Yes, it is the value of gold and silver that interests us and not its price. Its purchasing power.
We buy precious metals precisely to demonetize ourselves, that is to say no longer to depend on bogus currencies like the euro or the dollar … and not to have our eyes riveted on the price in euros or in dollars thereafter .
Counterintuitive, but logical.
In short, the trend remains intact for 2021.
And we wish each other good luck and courage because it will shake!
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