Safe-haven gold outperformed equities and most commodities in 2011 when debt crises in the US and Europe crimped global economic growth, and the precious metal capped an eleventh straight year of rise with a 9% increase in value in the dollar term from a year before, according to the World Gold Council.
Gold prices gained 9% in 2011 to $1,531/oz, and the price continued its upward trend above the US$1,600/oz level in the first half of January, the council said in a commentary. The precious metal rose at a faster pace than key global indexes such as MSCI Emerging Markets, MSCI EAFE, S&P 500, S&P GSCI as well as key commodities such as silver. MSCI Emerging Markets, MSCI EAFE, S&P 500 and silver posted negative returns last year.
Brent crude, however, rose by around 14% in 2011 from a year earlier.
?Gold?s price appreciation was generally higher in currencies other than the US dollar, especially in developing markets, with the exception of China, as they saw marked declines of their currencies against the US dollar in the latter part of the year,? the Council said in
the report.
A sharp depreciation of the Indian currency against the dollar resulted in the gold prices soaring by close to 29% in the rupee term, it added.
A strong Chinese yuan, however, kept gold?s advances in 2011 at a modest 4.3% for Chinese investors. The euro weakened the most among developed nations against the US dollar, helping gold gain 11.6% in the regional currency during the year.
?Between January and August and particularly during the summer, further deterioration of Greek finances and its potential ripple effect on larger EU member countries coupled with the possibility of a technical default by the US on its government debt, helped push gold prices higher,? WGC said.
By early August, gold had broken the $1,800/oz level and scaled a fresh peak of $1,895/oz on September 6, as concerns mounted over Europe?s debt contagion spreading to other regions.
?However, gold?s performance was not all smooth sailing throughout the year, particularly during the latter months,? it said. Gold prices, too, retreated, falling to the $1,600/oz level, due to a stronger dollar and also because of the fact that it was ?one of the few liquid assets with positive returns which investors could use to cover some of their losses?.
However, the price retreat of around 15% is no sign of warning as the metal has withstood various pullbacks over the last 10 years, the council said.
During the fourth quarter through December, gold demand remained robust, partly due to recurring concerns about European economy and central bank purchases poised to hit an all-time high. However, towards the year-end, gold again came under some pressure on profit-booking and the rebalancing of portfolios, it added.
?Gold provided liquidity when investors needed it the most, acting as a risk management vehicle. It also served as a currency hedge throughout the year, in particular against the US dollar,? the council said.
?While such inverse relationship pushed gold prices down toward the end of 2011, in part driven by profit taking and portfolio rebalancing, we believe gold fundamentals of supply and demand remain robust,? it added.
India gold on Tuesday turned weak after two day?s rise and shed R30 to R27,930 per 10 gm, owing to slackened demand at prevailing higher levels. Silver staged a strong recovery by jumping R3,100 to R55,300 per kg,on brisk buying by stockists and coin makers for the marriage season amid increased offtake by industrial units.
