Despite the uncertainty and challenging times this year because of COVID-19, many investors flocked to defensive assets such as silver and gold.
This has paid off handsomely, particularly given that the All Ordinaries Index is down over 10 per cent.
Since 1 January 2020, gold is up around 24 per cent while silver has performed even better, as it is up over 40 per cent for the year.
While these figures indicate that these were great investments this year, you cannot compare an index of stocks, such as the All Ordinaries Index against a single commodity.
This is because there were three stocks in the ASX top 100 that performed better than gold and silver, which include Evolution Mining (ASX: EVM), which is currently up 62 per cent, while Fortescue Metals Group (ASX: FMG) and Domino’s Pizza (ASX:DMP) are both up over 50 per cent.
In addition, six stocks are up over 20 per cent for the year, but the challenge for investors is identifying those stocks that are likely to perform well.
So is gold and silver a good investment right now and where are these commodities heading in in the last quarter of 2020 and into 2021?
Gold and silver are very safe, long-term investments; in fact, when it comes to gold, the long-term trend shows that it grows at an average rate of around 10 per cent per annum.
That said, these assets have an inverse correlation to world markets. In other words, if the stock market is rising, gold and silver are generally flat or down. Therefore, if you decide to invest you need to expect there will be years of limited to no growth.
So where are gold and silver heading in the next year?
Both will continue to rise until mid-next year but before you get too excited, most of their current run is over, so the growth will most likely be around 10 per cent or possibly a little more. That said, if the stock market falls heavily again, anything is possible.
Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also author of the award winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good bookstores and online atwww.wealthwithin.com.au.