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Silver’s Biggest Winning and Losing Streaks

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Silver's Biggest Winning and Losing Streaks

Silver’s Biggest Winning and Losing Streaks

With global markets getting off to one of their most volatile starts in history, precious metals have benefited tremendously.

Gold started 2016 on a torrid pace, as investors scrambled to buy physical gold as well as record-amounts of gold ETFs. A quick glance at the year’s best-performing commodities has gold at the top, beating almost everything (except lumber) in dollar terms so far.

Silver, which tends to closely follow gold, has been on a slightly less-skyward ascent.

The gold/silver ratio now sits at 80, which it hasn’t reached for an extended period of time since the early 1990s. This could mean that silver is undervalued, and silver has shown over time that it can jump up in price with sudden, strong movements.

Today’s infographic, which covers silver’s biggest win and loss streaks since 1970, really helps to show the magnitude of this volatility. In fact, silver has gone on 58 such runs where it jumped more than 10% in price in a mere matter of days – compare this to gold, which has only had 31 such streaks.

Silver’s Three Biggest Runs

Silver’s three biggest win streaks all tie into the Hunt Brothers’ cornering of the silver market.

+57.0% in 1974: Silver’s biggest winning streak happened in February 1974, around the time the Hunts began accumulating silver. They were worried about the effect of high inflation on their fortunes, and saw silver as a means to combat a potential loss of buying power.

+37.4% in 1979: As the Hunt Brothers became closer to cornering the market, there were four separate silver runs all over +30% that occurred within 12 months. This was the first one, happening in September 1979.

+55.2% in 1980: This was an eventful time for silver. First, there was Silver Thursday and the Hunts’ margin-call crash, in which the metal would subsequently plummet for its longest-ever losing streak of -57% over 23 days. Then, silver would bounce back in June with its second-biggest winning streak of all-time with a +55.2% stretch over 12 days.

While the most extreme silver price movements can be traced back to the Hunt era, it has still had many big movements in modern times. About 38% of silver’s biggest win streaks (and 40% of its notable losing streaks) have happened since 2000.

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Energy

The Periodic Table of Commodity Returns

Which individual commodities were the best performers in 2019, and how do those numbers compare to the past decade of data?

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The Periodic Table of Commodity Returns 2019

In 2019, every major asset class finished in the black.

And although the broad commodity market finished up 17.6% on the year, the performances of individual commodities were all over the map. For those familiar with the sector, that’s pretty much par for the course.

That said, the lack of an obvious correlation in commodity markets also makes for a thought-provoking and humbling exercise: comparing the annual returns of commodities against the data from the past decade.

A Decade of Commodities (2010-2019)

Today’s visualization comes to us from U.S. Global Investors, and it compares individual commodity returns between 2010 and 2019.

You can use the interactive tool on their website to toggle between various settings for the table of commodity returns, such as breaking them down by category (i.e. energy, precious metals, etc.), by best and worst performers, or by volatility over the time period.

Let’s dive into the data to see what trends we can uncover.

Palladium: The Best Commodity, Three Years Straight

In 2019, palladium finished as the best performing commodity for the third straight year — this time, with a 54.2% return.

Palladium top performing commodity

You could have bought the precious metal for about $400/oz in early 2010, when it was a fraction of the price of either gold or platinum.

Nowadays, thanks to the metal’s ability to reduce harmful car emissions and an uncertain supply situation, palladium trades for above $2,000/oz — making it more expensive per ounce than both gold and platinum.

Oil and Gas: Opposite Ends of the Spectrum

As key energy commodities, oil and natural gas have an inherent connection to one another.

However, in 2019, the two commodities had completely diverging performances:

Palladium top performing commodity

Crude oil prices gained 34.5% on the year, making it one of the best commodities for investors — meanwhile, natural gas went the opposite direction, dropping 25.5% on the year. This actually cements gas as the worst performing major commodity of the decade.

“That’s Gold, Jerry!”

Finally, it’s worth mentioning that gold and silver had a bounceback year.

Gold gained 18.3% to finish with the best return the yellow metal has seen in a decade. Silver followed suit with a similar story, rallying 15.2% over the calendar year.

Gold and silver performance

Precious metals now sit at multi-year highs against an interesting economic and geopolitical backdrop to start 2020.

Where do you see the above commodities ending up on next year’s edition of the rankings?

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Energy

Breaking the Ice: Mapping a Changing Arctic

As the Arctic becomes more accessible due to reduced ice cover, countries with polar real estate increasingly viewing the region through an economic lens.

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A Changing Arctic

Breaking the Ice: Mapping a Changing Arctic

The Arctic is changing. As retreating ice cover makes this region more accessible, nations with Arctic real estate are thinking of developing these subzero landscapes and the resources below.

As the Arctic evolves, a vast amount of resources will become more accessible and longer shipping seasons will improve Arctic logistics. But with a changing climate and increased public pressure to limit resource development in environmentally sensitive regions, the future of northern economic activity is far from certain.

This week’s Chart of the Week shows the location of major oil and gas fields in the Arctic and the possible new trade routes through this frontier.

A Final Frontier for Undiscovered Resources?

Underneath the Arctic Circle lies massive oil and natural gas formations. The United States Geological Survey estimates that the Arctic contains approximately 13% of the world’s undiscovered oil resources and about 30% of its undiscovered natural gas resources.

So far, most exploration in the Arctic has occurred on land. This work produced the Prudhoe Bay Oil Field in Alaska, the Tazovskoye Field in Russia, and hundreds of smaller fields, many of which are on Alaska’s North Slope, an area now under environmental protection.

Land accounts for about 1/3 of the Arctic’s area and is thought to hold about 16% of the Arctic’s remaining undiscovered oil and gas resources. A further 1/3 of the Arctic area is comprised of offshore continental shelves, which are thought to contain enormous amounts of resources but remain largely unexplored by geologists.

The remaining 1/3 of the Arctic is deep ocean waters measuring thousands of feet in depth.

The Arctic circle is about the same geographic size as the African continent─about 6% of Earth’s surface area─yet it holds an estimated 22% of Earth’s oil and natural gas resources. This paints a target on the Arctic for exploration and development, especially with shorter seasons of ice coverage improving ocean access.

Thawing Ice Cover: Improved Ocean Access, New Trading Routes

As Arctic ice melts, sea routes will stay navigable for longer periods, which could drastically change international trade and shipping. September ice coverage has decreased by more than 25% since 1979, although the area within the Arctic Circle is still almost entirely covered with ice from November to July.

RouteLengthIce-free Time
Northern Sea Route4,740 Nautical Miles6 weeks of open waters
Transpolar Sea Route4,179 Nautical Miles2 weeks of open waters
Northwest Passage5,225 Nautical MilesPeriodically ice-free
Arctic Bridge3,600 Nautical MilesIce-free

Typically shipping to Japan from Rotterdam would use the Suez Canal and take about 30 days, whereas a route from New York would use the Panama Canal and take about 25 days.

But if the Europe-Asia trip used the Northern Sea Route along the northern coast of Russia, the trip would last 18 days and the distance would shrink from ~11,500 nautical miles to ~6,900 nautical miles. For the U.S.-Asia trip through the Northwest Passage, it would take 21 days, rather than 25.

Control of these routes could bring significant advantages to countries and corporations looking for a competitive edge.

Competing Interests: Arctic Neighbors

Eight countries lay claim to land that lies within the Arctic Circle: Canada, Denmark (through its administration of Greenland), Finland, Iceland, Norway, Russia, Sweden, and the United States.

There is no consistent agreement among these nations regarding the claims to oil and gas beneath the Arctic Ocean seafloor. However, the United Nations Convention on the Law of the Sea provides each country an exclusive economic zone extending 200 miles out from its shoreline and up to 350 miles, under certain geological conditions.

Uncertain geology and politics has led to overlapping territorial disputes over how each nation defines and maps its claims based on the edge of continental margins. For example, Russia claims that their continental margin follows the Lomonosov Ridge all the way to the North Pole. In another, both the U.S. and Canada claim a portion of the Beaufort Sea, which is thought to contain significant oil and natural gas resources.

To Develop or Not to Develop

Just because the resources are there does not mean humans have to exploit them, especially given oil’s environmental impacts. Canada’s federal government has already returned security deposits that oil majors had paid to drill in Canadian Arctic waters, which are currently off limits until at least 2021.

In total, the Government of Canada returned US$327 million worth of security deposits, or 25% of the money oil companies pledged to spend on exploration in the Beaufort Sea. In addition, Goldman Sachs announced that it would not finance any projects in the U.S.’s Arctic National Wildlife Refuge.

The retreat of Western economic interests in the Arctic may leave the region to Russia and China, countries with less strict environmental regulations.

Russia has launched an ambitious plan to remilitarize the Arctic. Specifically, Russia is searching for evidence to prove its territorial claims to additional portions of the Arctic, so that it can move its Arctic borderline — which currently measures over 14,000 miles in length — further north.

In a changing Arctic, this potentially resource-rich region could become another venue for geopolitical tensions, again testing whether humans can be proper stewards of the natural world.

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