Gold: Gold returns have been positive in 26 of the last 40 years, averaging roughly 12.5% a year, rising by 400% over the last decade to reach $1750 at the end of 2012. Gold hit a nominal high of $1900/oz in September 2011 amid the U.S. debt ceiling debate and fears of a U.S. default as the U.S. had its credit rating downgraded, at the same time, fears of a double dip recession came to the fore, while EZ periphery country yields also spiked. In real terms (adjusted for inflation) gold is not close to its all-time high, which is equivalent to a nominal high of around US$2,400/oz in today's dollars, set in 1980. The gold price is incredibly volatile, reacting to the perceived risk of fat-tail events, inflation/deflation concerns, movement in the U.S. dollar, exchange margin hikes, and broader selloffs within the commodity space (as investors look to cover losses by raising cash through selling gold). Investor crowding and speculation, via ETF's, add to the volatility of a commodity that is highly financialized, and rarely moves in sync with its supply and demand fundamentals, behaving more like a currency. After reaching its nominal high in 2011, gold collapsed to $1,601 in 21 days to be outperformed by U.S. Treasury’s by 7% for the year with over three times less volatility. Similarly, gold fell from US$1790/oz in February 2012 after rising on the back of Iran tensions before falling to $1530 by May.
Silver: Over the past ten years silver’s performance has been impressive, with the price of the metal rising 800% from $5/oz in 2003 to around $36/oz in 2011—a return in excess of any other precious metal, or indeed commodity. Although the price of silver hit its nominal high of $47/oz in spring 2011, like gold, silver recorded its high in real terms in late 1979, when fears over double digit U.S inflation were most acute. Nevertheless, like other commodities, silver suffered a setback in H2 2008, with prices falling 40% in the space of six months as the global financial crisis took hold and both investor and industrial appetite waned. The silver market is smaller and thinner than the market for gold, translating into greater price volatility; the high of late April 2011 was quickly reversed when an 84% increase in the margin requirement on COMEX silver futures caused the metal to lose a third of its value in just a week.
Platinum: Prices rose from $640/oz in 2003 to $1750/oz in 2011, an impressive absolute return, but still only half that of gold, which rose 400% in the same period. There are two reasons for this relatively lacklustre performance. First, almost 45% of platinum demand comes from its use in autocatalytic converters on new cars, ensuring that the metal trades in line with the business cycle. Indeed, during the 2008 financial crisis the price of platinum plummeted 50% versus a fall of roughly 20% in the price of gold. Second, unlike gold, platinum is not perceived by investors (who account for a much smaller percentage of platinum demand than is the case for gold) to be as a useful hedge of inflationary/deflationary tail risks.
Palladium: Palladium underperformed both gold and silver in the global financial crisis. However, palladium soon recovered, rallying 400% from lows of $165/oz in December 2008 to hit $857/oz in February 2011.beating gold, platinum and even silver. The price of palladium hit a nominal high of $1,045/oz at the end of January 2001, before Nymex tripled margin requirements on palladium futures sending the spot price tumbling by 35% in the space of there months.
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