2021 Year in Review & 2022 Looks Amazing!

Today is our last day for 2021, returning 4 January 2022.  As usual we look back at the calendar year performance of various assets.  Hardly a spoiler alert but 2021 was not one to remember for precious metals investors in terms of returns.  However this consolidation sets up an epic technical launch pad.  Let’s break it down…

2021 was a year of buying risk in search of yield and hopping on the ‘growth’ train, and of course property at near zero interest rates amid early signs of inflation.

In terms of returns it looked like this:

Gold –  +0.6% (or +14% if you entered at the low in March)

Silver -  -9% (or +5% if you entered at the low in September)

ASX200 –  +10%

AUD/USD -  -6.5%

Bitcoin –  +78%

Ethereum –  +489%

Aussie houses –  +22% (Domain's End of Year Wrap for 2021)

Overseas we saw the S&P500 up an incredible 27%.  In the US it was the so called TINA trade (there is no alternative) despite weak fundamentals and gross concentration and lack of breadth.  All that printed money had to go somewhere right!?  The implied Fed ‘Put’ meant it was seen as a risk-free trade – the Fed will step in to save the day if the market tanks.  Now that the Fed is openly talking about tightening and already tapering (arguably too late), that Fed Put is looking shakey and market volatility over the last few weeks is back.  Don’t discount a sustained rally though, these are far from normal times.

Gold didn’t do as it would normally do on inflation fears but per yesterday’s article, the financial market may well be on the sidelines about whether this is sticky inflation or not.  Either way, if inflation does stick you would expect a huge catchup rally from the world’s oldest inflation hedge. The Fed has VERY little room to raise rates amid such a debt burden and subtracting this near half century high inflation leaves us deep in negative real rate territory for some time yet – gold’s sweet spot.  If it is indeed transitory and the Fed tighten into a weakening economy, markets will crash hard and they will then almost certainly flip to monetary stimulus again. Hold your hats on gold if that happens…

Stepping back, looking at the 10 year chart for gold below, this is the ‘cup and handle’ formation that Raoul Pal and others have been talking about in gold. A decade long cup and handle pattern saw 2021 as the year of consolidation to form the base of the handle. If this plays out as predicted, 2021 was the year ‘we had to have’ to see the breakout to big gains ahead.

Throw in that set up on the COMEX we wrote about this week and a Gold Silver Ratio back up near 80 and the fundamentals looks amazing.

Despite those still huge gains above, the crypto markets have seen a deep consolidation of late but the onchain setup is insanely bullish. Many predicted a sell off late this year as all the institutional money not previously in the market but now heavily invested, took profits and success fees. It is anticipated they will pile back in at the start of 2022.

In 2022 investors are facing massive uncertainty amid a myriad of financial distortions. 2021 saw enormous gains in certain assets.  The old adage of buy low, sell high may be one to seriously consider.  Gold and silver’s underperformance this year has some seriously good analysts scratching their head as it doesn’t make sense.  Such situations don’t normally last. 

As we ended yesterday as well, BALANCE amid such uncertainty is prudent.

Can we take this opportunity to thank all our readers and customers for all your business, your wonderful company and great feedback, and of course your understanding amid such a trying year for so many.  We have been overwhelmed by the feedback from all our new Melbourne customers with the opening of our store there in July and welcome you all to the Ainslie family.

We wish you and yours a very merry Christmas, festive season and hopefully a well deserved break.  All the best for a very fruitful 2022 too!