2015 in review

As we close for business tomorrow for another year let’s do a little wrap for the year just passed.

In the US we saw:

S&P500 down 3.5% and at one stage in late August down 10%

US 10 year Treasuries – finished where they started at around 2.25% but saw lows of 1.64% in Feb and high of 2.5% in June.

The USD index started at 89.6 and finished at 99.2 reaching a high of 100.5.

Gold is down 9.9% and silver down 9.7% in USD spot terms.

In Australia we saw:

All ords down 4.8% and as low as 8.4% in September.

The AUD fell from 81.5 to 71.7, almost mirroring the rise in the USD and which of course has been positive for gold and silver.

Gold is up 2.6% and silver up 2.8%

Observations

The year provided more insights into the underlying fragility of financial markets and economies after the unprecedented monetary stimulus and debt splurge programs undertaken, particularly since the GFC but more broadly over the 40 years since we left the gold standard.  Greece, whilst a small fish in the pond, gave us a clear example of unsustainable debt levels early in the year and the need to have some of your wealth kept out of ‘paper’ and the system.  It was ‘fixed’ with more and different debt.  

The year saw growing calls of concern from the likes of the IMF and BIS about the unsustainability of the global debt v growth situation we find ourselves in and of course we saw the McKinsey Global Institute released their report showing that rather than the ‘deleveraging’ expected since the GFC ‘lesson’ we have indeed seen global debt RISE by $57 trillion to $199 trillion or 286% of global GDP.

The debt burden, rising USD, plummeting commodities and sluggish consumer demand saw most economies tepid at best and many on the brink of or in recession.  In this scene, last week’s US rate rise will be interesting to watch wash through markets early next year.

The year continued to see the monumental shift of gold from west to east with China setting a new gold consumption record of over 2500t and Indian’s starting to defiantly shrug off their draconian import restrictions to rebound strongly too.  India and China alone will have consumed over 80% of the world’s gold for the year.  The US Mint saw a record year of 1oz silver eagle sales at 47m, easily surpassing last year’s record of 44m.   In contrast to all this real metal, the futures market through COMEX saw an all-time record of 294 contract claims to each available ounce of gold.  

As for what 2016 will bring, no one knows but the scene is an interesting one.  Simplistically it is still a global economy founded on credit and stimulus over substance.  Whilst the so called US recovery is heralded as the saviour, regular readers and listeners to our podcasts know it is anything but robust.  It now needs to deal with a dollar strengthening rate rise and fracturing global markets to which it is inextricably linked.  But let us repeat, no one knows.  And it is for that reason having an allocation of gold and silver in your portfolio balances and protects your wealth.  We escaped the muted crash of September but even that ‘wobble’ exposed the thinness of the physical gold and silver market.  Waiting to pick the bottom when the real crash comes may mean you simply can’t get it at all.