Silver and Gold are ranked number one and number four respectively in numerous listings of best performing assets in H1, 2016. Silver was the highest ranked asset showing a 38% price increase since the first of the year while Gold reflected the fourth highest increase in valuation this year with a 26% jump year to date. Only sugar and soybeans barely kept gold out of second place. They were the top ranked assets prior to Brexit and in the subsequent market turbulence since Brexit have retained their lofty status compared to other assets. Platinum and Palladium fared well too with 2016 gains of 16% and 6% respectively.
Policies, Economic Turmoil Contribute to Growth of Silver and Gold
Gold and Silver made these gains due to continuing loose monetary policies, diminished U.S. rate increase expectations, concerns about global economic growth, U.S. and global geopolitical concerns and Q1 market turmoil. The UK decision to leave the EU has exacerbated these risks and highlighted them for the complacent investors who seem blissfully unaware of growing of geopolitical and macroeconomic risks.
There is also the inconvenient truth that many European banks, notably in France, Italy and Ireland, are woefully under capitalized and borderline insolvent. It’s not just banks in the aforementioned countries that are vulnerable. The current share price of both Germany’s Deutsche Bank and Switzerland’s Credit Suisse Bank should give even the most complacent equity bull cause for concern. Both of these banks have massive derivative exposure and the bankruptcy of either one could be the EU’s version of the 2008 Lehman Brothers fiasco. That scenario could lead to the collapse of the EU and severely damage the global banking system as we now know it. To those that say a global banking crisis could never happen should remember that we came extremely close to that situation just eight years ago.
Popularity of Gold & Silver Reflects Global Financial Bubble
Gold and Silver are reflecting the fact that we have a massive global financial bubble, especially in the U.S. stock and bond markets, based on loose monetary policies and the creation of currency to artificially support global markets.
The global financial and geopolitical situation is one big mess. Recent national and international turmoil played out daily in all forms of media reinforce this notion. Historically. in turbulent times, many investors consider a position in tangible Gold and Silver as a hedge against economic uncertainty.
By Douglas Trinder, Precious Metals Analyst, Jack Hunt Gold & Silver