Bullion in a Weird Year: 2021 in Review

Posted on December 15, 2021

By Paul Vanguard, for BullionMax.com

The year's winding down, and in between shipping last-minute holiday orders, we've been putting together our thoughts on the year as a whole.

2021 economic highlights

Honestly, there's not a lot of good news here. The major themes we saw:

Possibly the most reckless Federal Reserve in American history

Roaring out of the 2020 Pandemic Panic, Federal Reserve Chairman Jerome Powell kept the pedal to the metal all year long. He added another $1 trillion to the Fed's balance sheet and kept interest rates suppressed as low as possible (currently 0.08%).

The results?

  • Negative real (after-inflation) interest rates on traditional "safe haven" investments like savings accounts, CDs, Treasury bonds, corporate bonds (even junk bonds).
  • Massive inflation of the "everything bubble" that's driven stocks, bonds, housing and virtually every other investable asset even further away from their fundamental valuations. (Remember: price is what you pay, value is what you get.)
  • Some really strange asset bubbles in the last places you might expect, including but not limited to:single malt Scotch,luxury watches, the art market, computer-generated chimp portraits and even $1.3 million jpgs of rocks.
  • An increasing conviction on behalf of investors in these fringe assets that the Fed will never let markets go down.

Oh, and there's another side effect of the Fed's easy-money policies that's affecting everyone, even those of us who aren't cartoon monkey investors…

40-year record inflation

November's Consumer Price Index (CPI, the most common inflation measure) came in at 6.8% year-over-year. That crowns an 18-month surge in inflation since we flirted with zero price hikes briefly in May 2020.

Remember, the Fed likes a little bit of inflation.

Back in Victorian times, British explorers often contracted malaria in Africa or the Caribbean. There was no known cure for the disabling disease, but there was one reliable treatment: Arsenic. The trick was, you had to eat just enough arsenic to inconvenience the malaria parasites without killing yourself.

That's more or less the Fed's approach to monetary policy. When the economy is sick, like it was back in early 2020, the Fed dosed us with truly heroic quantities of "medicine."

Now, we're seeing the results. Victorians who used arsenic to treat malaria experienced euphoria and a stimulating effect, sometimes described as "frantic energy." Sounds like the American economy. Who knows what will happen next? Can we kick the poisonous habit, or are we so hooked on this artificial stimulation we'd prefer a lingering death to fiscal sobriety?

Massive government spending

After the multiple stimulus acts of 2020, you might expect America's government to slow down, just a little.

You'd be wrong.

So far this year, we've seen a $1.9 trillion pandemic relief bill, the $1 trillion infrastructure bill, and the hotly-contested "Build Back Better" budget which costs about $2 trillion or $5 trillion according to the Congressional Budget Office or $0 according to the President.

Those who understand the connection between spending and inflation are expecting more of the same in the year ahead.

The year in bullion

There was some pretty big news about gold and silver this year as well…

U.S. Mint refreshes the gold American eagle design

2021 marked the end of the classic gold American eagle design, unchanged since its 1986 launch. Henceforth the "old" design will be referred to as the Type 1 American eagle, and the updated version the Type 2 American eagle. The obverse uses the same design as before, but "remastered" from Augustus Saint-Gaudens's original design. This is likely to be the only opportunity for collectors to add Type 1 and Type 2 gold eagles minted in the same year to their collections.

U.S. Mint crushed by customer demand

The U.S. Mint kept trying (and failing) to handle overwhelming customer demand, resulting in a lot of frustration among silver enthusiasts. The launches of the first 2021 Morgan and Peace silver dollars were simply flubbed, and resulted in extreme rationing (per-household limits went from 25 to 3).

Even earlier, back in February, the Mint actually rationed sales of bullion coins to distributors like BullionMax. That made exactly no one happy.

Bullion prices moved around quite a bit

Gold prices reached a yearly high of $1,949.35 in early January, and bottomed at $1,666 just two months later. For the rest of the year it's traded mostly between $1,850 and $1,750.

Silver prices were significantly more volatile. From a high of $28.97 on February 1 to a bottom of just $21.21 on September 29, silver looks to finish out the year down some 13% overall.

What to look for in the year ahead

We're watching a few major bullion trends we expect will shake things up in 2022. Stay tuned…


Paul Vanguard is a lifelong precious metals enthusiast and a proud member of the BullionMax team.