The biggest frustration to many precious metals investors, is why have the gold and silver prices under-performed the market since 2011? Actually, for gold it was since 2012. Even though gold hit a new record high of $1,900 in September 2011, its average annual price was higher in 2012 at $1,669 compared to $1,571 the prior year.
Regardless, the precious metals analysts back in 2012 were forecasting the market was going to experience even higher gold and silver prices, especially after the Fed announced QE 3 at the end of 2012. However, the precious metals community was taken by surprise as the gold and silver prices were hammered at the end of 2012 and into the beginning of 2013.
…“it appears that the markets have made a structural shift towards higher levels of complacency in the last six years.” Here, Kocic reverts back to his old, cautious self, warning that this decoupling will end in tears. This is how he frames it:
PG View: This is an important article. It’s perhaps understandable that speculators are frustrated by the performance of gold and silver. However, investors that buy gold and silver as a hedge know that it continues to do exactly what it is supposed to do. As gold corrected and then stabilized in recent years, their other assets appreciated. When that is no longer the case — when the current state of complacency eventually unwinds — those frothy other assets will correct and gold and silver will rise. It’s okay to be frustrated with the current mispricing of risk, but for heavens sake, don’t be complacent.
When the mean reversion comes, and it will come, you’re going to want some gold.