Gold heads for best year in a decade


SINGAPORE: Gold is starting the new year with the biggest annual advance in a decade after a tumultuous 2020, with gains in December aided by the dollar’s decline to the lowest level since April 2018. Silver has surged almost 50% last year.

Bullion hit a record last August as investors sought haven assets amid the pandemic. The surge was buttressed by unprecedented waves of stimulus, including from the Federal Reserve, which fanned concerns of currency debasement.

Holdings in bullion-backed exchange-traded funds set an all-time high last October, although they have since ebbed with the roll-out of vaccines.

Gold, which doesn’t typically offer interest, has benefited as the US central bank cut interest rates to near zero and bought billions of dollars of bonds every month.

That has helped to drive real interest rates – which reflect expectations for inflation – well below zero. Led by Chair Jerome Powell, the Fed has signaled that its ultra-easy policy will last throughout 2021.

“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, said Vasu Menon, executive director for investment strategy, at Singapore-based Oversea-Chinese Banking Corp.

With the lower-for-longer Fed, “it is too early to throw in the towel on gold, ” he said in an email.

Bullion for immediate delivery was 0.3% lower at US$1,888.99 an ounce at 12:55pm in Singapore yesterday. That’s up 6.3% on Dec 31,2020, and 24.5% higher over 2020, poised for the biggest full-year advance since 2010. The Bloomberg Dollar Spot Index is heading for a third, straight quarterly loss.

Looking forward to this new year, some banks have signaled that the traditional haven may now struggle to extend its gains. Gold and other precious metals will likely come under pressure in 2021 as financial markets normalise and the yield curve steepens, Morgan Stanley said in a note in December 2020.

Others have struck a more positive tone. While bullion’s rally has been blunted by vaccine progress, there is still support from monetary and fiscal policies, according to HSBC Securities (USA) Inc.

A Joe Biden administration may be gold-positive from a fiscal-spending perspective, it said in a Dec 9 note. — Agencies

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 46
Cxense type: free
User access status: 3
   

Next In Business News

Boustead sells Jalan Cochrane land to Sunway�
Dutch Lady contracts Royal HaskoningDHV to develop dairy hub in Negeri Sembilan
Thailand's Gulf Energy plans US$5.4bil bid for control of nation's biggest mobile operator
FBM KLCI bucks regional trend to end lower
Microsoft signs five MoUs under Bersama Malaysia initiative
CGC, StanChart launch RM70mil financial facility for SMEs
Asian stocks hit 1-mth highs, Bitcoin climbs
Microsoft regional data centre to create 19,000 jobs, says Muhyiddin
Hong Leong AM bags 8 awards at Refinitiv Lipper Fund Awards 2021
MAVCOM approves 24 ATRs in 1Q21

Stories You'll Enjoy


Vouchers