Few asset classes were as hated as precious metals at the end of 2013 as gold saw its 12-year streak of higher prices come to an end.However, gold and silver have rebounded early this year and caught many traders off guard. For example, SPDR Gold Shares ETF ( GLD) was up 10% year to date as of Feb. 20 and iShares Silver Trust ETF ( SLV) gained 12%. Miner stocks — perennial laggards in recent years — have performed even better. Market Vectors Gold Miners ETF ( GDX) is up 26% and Global X Silver Miners ETF ( SIL) is up 31%.
SPDR Gold Shares ETFHard and Soft Commodities portfolio on Covestor, thinks one reason gold and silver are rebounding is investors simply got too bearish heading into 2014. He owns SPDR Gold Shares ETF and iShares Silver Trust ETF is the portfolio. "Sentiment got overly bearish on precious metals and we've seen a snap-back rally of late," Sparrow said. He said there are several drivers of metals prices, including demand from jewelry and central banks, investors seeking disaster insurance, inflation forecasts and central bank monetary policy. Gold and silver prices fell in 2013 as Europe's debt crisis receded somewhat and inflation as measured by consumer prices remained low. However, Sparrow said one theme to keep an eye on this year is gold demand from emerging markets, especially China, which has surpassed India as the world's biggest consumer of the precious metal. "Economic activity has picked up in Asia and we've seen record gold buying in China, mostly for jewelry consumption and investment," Sparrow noted.
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