The evolving global economy, geopolitical risk, growing inflation and sovereign debt are major challenges for any emerging nation as this leads to higher commodities prices. Silver, precious metals and gold have been the best performing asset classes in recent years outperforming equities, REIT and most asset classes over 3, 5 and 10 year periods.
The performance of silver, gold, and precious metals looks set to continue in the coming months due to bullish fundamentals. The recent consideration of downgrade of credit rating of USA just adds fuel to the fire.
The table below clearly indicates the strength of the commodities with silver, precious metals and gold leading.
| Description | Symbol | 1 Week | 4 Weeks | 13 Weeks | 26 Weeks | 52 Weeks | Trend Score |
|---|---|---|---|---|---|---|---|
| Silver | SLV | 4.97% | 22.09% | 50.83% | 76.17% | 140.32% | 58.88% |
| Precious Metals | DBP | 1.94% | 8.88% | 17.68% | 20.71% | 48.28% | 19.5% |
| Energy | DBE | -2.13% | 6.37% | 17.49% | 34.13% | 22.8% | 15.73% |
| Commodity | DBC | -2.35% | 4.88% | 11.24% | 24.98% | 28.54% | 13.46% |
| Agriculture | DBA | -1.48% | 0.68% | 3.64% | 18.83% | 37.88% | 11.91% |
| Gold | GLD | 0.97% | 4.83% | 9.31% | 8.51% | 30.39% | 10.8% |
| US Oil | USO | -3.19% | 6.69% | 12.31% | 23.23% | 7.66% | 9.34% |
| Base Metals | DBB | -3.63% | 1.27% | 0.49% | 8.06% | 8.06% | 2.85% |
| Natural Gas | UNG | 4.11% | -0.86% | -9.71% | -3.04% | -23.29% | -6.56% |
Silver and the gold are major commodities used to hedge against microeconomics, and to reduce the risk of inflation as it provides added potential for significant capital gain. According to Ibbotson Associates, precious metals are the most positively correlated asset class to inflation. From a strategic point of view, Ibbotson determined that portfolios could reduce risks and improve returns with a 7-15% allocation to precious metals.
Many investor uses gold for wealth preservation and silver for a return. Over the next ten year or more, metal prices are predicted to remain high. This is mostly due to increasing demand from countries undergoing intensive levels of development and infrastructure building. In particular China and India will drive the cost of metals across the board. Analyst predicts that 2011 and 2012 will be year of silver we will see higher trend in silver in these years. As long as the systematic devaluation of dollar by the Fed (i.e. interest rates near zero) broad base commodities trends will continue positive. Once interest rates start to increase the dollar will gradually pick up, pushing gold and silver down.
Today, commodities are a long term investment proposition as inflation is a present and continuing reality that will drive commodity prices and stocks higher. Over the past decade the gold and silver were used as a major hedging commodity in microeconomics. Today the continuing high demand over limited supplies and the change of basket of international bank reserves will cause the prices of gold to continue to trend upward.
Symbols: DBC, DBA, DBE, DBB, DBP, GLD, SLV, USO, UNG
Exchange Tickers: (NYSE: DBC), (NYSE: DBA), (NYSE: DBE), (NYSE: DBB), (NYSE: DBP), (NYSE: GLD), (NYSE: SLV), (NYSE: USO), (NYSE: UNG)
Disclaimer:
MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.