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PRECIOUS METALS YEAR END REVIEW - 2017

Michael Mikolay
Senior Trader
United Precious Metal Refining, Inc.

hen looking at the year 2017 in terms the corresponding selloff that follows such failures. The
of precious metals performance, it is last two weeks have somewhat reversed that trend; but
W easy to be somewhat disappointed the definitive break above the $1300 level has not yet
with its results in comparison to other investment taken place.
vehicles. With gold up 12.5% this year, it pales For 2018, it appears that one of the major influences
in comparison to stellar performances by the on the price of metals will be the actions of the Federal
United States and Global equity markets, which Reserve with regard to the inflationary outlook and
are up approximately 25% and 21% respectively. interest rate proclivity. At this time, the Federal Reserve Michael “Mike”
However, when looking at an investment anticipates three interest rate increases next year to Mikolay joined United’s
commodity such as gold and its performance keep inflation in check. This is already “built in” to the finance team in 2011
in relation to its purpose as part of an overall market’s expectations. However, should the economic having worked in the
portfolio, one should be relativity pleased with engines slow or if core inflation does not make the Precious Metals Industry
how the metal has performed. for over 30 years.
appearance that most members of the FOMC expect
The price movement in gold (and silver) this (this lack of inflation Mike began his career
year has been driven by several major factors: in the Banking Industry
topic has already been brought up by the Fed itself), a moving to the Precious
• The performances of the U.S. and Global decision not to raise rates at any given time may have a Metals field in 1981 when
equity markets have continually capped repeated positive impact of precious metals prices. he joined the trading
attempts for precious metals to rally to any great department of Morgan
On the geopolitical front, the North Korean threat is
degree. Guaranty (now JP
not going away and time soon. News that Iran may
• The burgeoning U.S. economy has given the be violating their end of the nuclear agreement will Morgan). He moved to
Federal Reserve reason for three interest rate only cause the Administration to crack down on yet Bank of Boston in 1987
increases in response to that strength, hurting another rogue nation, only increasing tensions in the to set up and run their
trading department in
investment in precious metals. world. Almost any reactions would have a negative their precious metals
• The U.S. Dollar Index has declined by 10% in 2017. impact on the value of the U.S. dollar, which would be division. He was later
constructive for gold. Lastly, and most importantly, the recruited by Union Bank
• The geopolitical effects of North Korea and U.S. and global equity markets have had a spectacular of Switzerland in New York
Iran have played and will continue to play a role move higher in 2017. A correction of some sort is likely and worked as their Chief
in underpinning the precious metal prices.
to occur in 2018. We do not know the magnitude of this Dealer until he returned
• The “Trump Effect” – The unpredictable “adjustment” but whenever it does occur, it will be a to Bank of Boston in 1997.
response to any matter which may trigger another big positive for precious metals. How high is “higher”? Mike left in 2010 as Head
unpredictable reaction. (This is not a political Hard to say of course, but gold approaching the $1400 Trader on the physical
desk at Sovereign Bank
statement – merely a fact) level at some point next year would not be out of line. (now Santander).
However, it will not be a smooth ride. The road higher
• The “BitCoin” Impact – Currently playing a Mike is currently a Board
in precious metals always has bumps and an occasional
smaller role but moving some speculators away Member of the New
pothole. Unfortunately, it is the downward moves that
from precious metals (at least for the short term). England Chapter of the
seem to occur with alarming swiftness. The first quarter
Precious Metals have generally moved in should experience that “bumpiness” as the market tries IPMI. Feel free to call him
an orderly wave-like pattern for most of this to cathartically figure out if gold belongs in the $1200’s to discuss market trends
or for more information
year, with rallies usually being thwarted by or $1300’s. The downside should likely come earlier, about market buzz or
the continuing upward movement of the stock as interest rate increases are coming and the dollar rumors.
markets. The low of the year was seen on the first may recover somewhat. But only a fool would claim
day, touching $1146 during European hours on to know.
January 3rd. Since then, after climbing above the Look for Mike’s daily
$1200 level in early February (gold has tested and Gold historically been a store of value is times of commentary on United’s
held that level throughout 2017). Seeing a rally trouble, a safe haven, a protector of assets in uncertain social media platforms
on continued dollar weakness during the summer, times. A growing economy and rallying equity markets including Facebook and
gold touched its year high of $1357 on September are generally not signs of worry or distress. However, Twitter. Feel free to call
Mike at extension 103 for
8th. However, the dollar subsequently recovered outside of the good news, there are many concerns more information.
and the equities continued their bull run, pushing about the world at large, the uncertainty about political
gold back below the $1300 level by the end of and geopolitical events; some which emerge and
that month. The last quarter has seen repeated moderate - and the others which will remain a constant
failures to break above $1300 once again, with threat in our world.
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