(EDITOR'S NOTE: To help advisors efficiently plan for their clients and themselves in the New Year, the editors of AdvisorOne.com, Investment Advisor and Research magazines have canvassed some of the best individual minds and institutional thinking to deliver Outlook 2011, an online series from the end of December through the first days of January.)
Analysts following precious metals, mining and commodities are generally bullish for the group in 2011, but they note the metals are prone to swings.
Volatility for spot gold, for instance, has been about 18% over the past 10 years, while that of palladium is roughly 31%, explains ETFS Securities in their report “The Fundamentals of Precious Metals,” published in late November.
Since 2000, the group notes, the cumulative performance of gold has been 332% vs. negative returns of 30% for palladium.
Also, precious metals in the past decade have not been highly correlated with the movement of the S&P 500. The spot price of gold, for example, has had a correlation of -0.05 with the S&P over the past 10 years, says ETFS Securities.
Goldman Sachs predicts that precious metals are poised to give investors the best returns among commodities in 2011, with a 28% gain expected in the group next year, due to strengthening U.S. demand, according to a Bloomberg report.
The investment bank also expects gold to reach $1,690 an ounce in 12 months, from about $1,390 now, and it should peak in 2012.
“Absolute faith in fiat currencies remains shaky, [and] gold is currently behaving as a currency rather than a commodity,” wrote U.S. Global Investors analysts in their weekly investor alert of Dec. 17.
Volatility & More