Gold posted its largest annual advance in a decade after a turbulent year, with gains this month supported by the dollar’s slide to its lowest level since April 2018.
Bullion hit a record in August as investors fear an unprecedented wave of stimulus by central banks and governments will lead to currency depreciation and inflation. Bullion-backed ETF holdings hit an all-time high in October.
While prices fell when the launch of vaccines injected optimism into the financial markets, the continued weakness of the dollar helped support gold until the end of the year.
Looking to the future, there isn’t much consensus among the biggest names on Wall Street on the direction of bullion. Morgan Stanley believes that gold and other precious metals are under pressure as financial markets return to normal and yields on longer-maturity bonds rise. Meanwhile, HSBC Holdings Plc sees gold rising as uncertainty persists.
Much of gold’s performance in the coming year will depend on whether the eventual return to normalcy is outweighed by ongoing stimulus policies. Led by President Jerome Powell, the US Federal Reserve indicated that its overly easy monetary terms will continue throughout 2021. Efforts to pass more fiscal stimulus through the Senate have influenced barrier.
“The main factors for gold – weak US dollar and low real interest rates – are likely to provide support” even as vaccines are distributed around the world, said Vasu Menon, executive director of investment strategy, at Singapore-based Oversea-Chinese Banking Corp. “It’s too early to throw the towel on the gold,” he said in an email with the Fed’s low for a longer period.
Gold rose 0.2% to settle at $ 1,898.36 an ounce on Thursday. This was 6.8% higher for the month, and 25% higher for 2020, the biggest full-year advance since 2010. Comex February delivery futures rose 0.1% to settle at $ 1,895.10 an ounce. The Bloomberg Dollar spot index saw a third consecutive quarterly loss.
Spot silver prices are up 48% this year, while palladium has posted a fifth year in a row, up about 26% in 2020. Platinum is up 11% for this year.
– With the help of Martin Ritchie and Yvonne Yu Lee