Gold is poised to cap the biggest annual advance in a decade after a tumultuous year, with gains last month aided by the US dollar’s decline to the lowest level since April 2018.
Silver has surged almost 50 percent last year.
Bullion in August last year hit a record as investors sought haven assets amid the COVID-19 pandemic.
The surge was buttressed by unprecedented waves of stimulus, including from the US Federal Reserve, which fanned concerns of currency debasement.
Holdings in bullion-backed exchange-traded funds set an all-time high in October last year, although they have since ebbed with the roll-out of COVID-19 vaccines.
Gold, which does not typically offer interest, has benefited as the US central bank cut interest rates to near zero and bought billions of US dollars of bonds every month.
That has helped to drive real interest rates — which reflect expectations for inflation — well below zero.
Led by Fed Chairman Jerome Powell, the US central bank has signaled that its ultra-easy policy would last throughout this year.
“Gold’s main drivers — weaker US dollar and low real interest rates — are likely to provide support” even as vaccines are distributed around the world, Vasu Menon, executive director of investment strategy at Singapore-based Oversea-Chinese Banking Corp, said yesterday in an e-mail.
With the lower-for-longer Fed, “it is too early to throw in the towel on gold,” he said.
Bullion for immediate delivery was 0.3 percent lower at US$1,888.99 per ounce at 12:55pm yesterday in Singapore. That is up 6.3 percent month-on-month and 24.5 percent higher year-on-year, poised for the biggest full-year advance since 2010.
The Bloomberg Dollar Spot Index is heading for a third straight quarterly loss.
Ahead of the new year, some banks have signaled that the traditional haven might now struggle to extend its gains. Gold and other precious metals would likely come under pressure this year as financial markets normalize and the yield curve steepens, Morgan Stanley said in a note last month.
Others have struck a more positive tone.
While bullion’s rally has been blunted by COVID-19 vaccine progress, there is still support from monetary and fiscal policies, HSBC Securities (USA) Inc said.
The incoming administration of US president-elect Joe Biden would likely be gold-positive from a fiscal-spending perspective, it said in a note on Dec. 9.
Spot silver traded at US$26.3869 per ounce, up 48 percent year-on-year. Palladium is on course for a fifth consecutive annual gain, with a rise of more than 20 percent last year.
Platinum has climbed 10 percent year-on-year.
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