Gold News

Gold beats paper hands down as 2006 ends

Gold closed 2006 trading in New York above $635.70 per once, its final London Fix of 2006.

That took gold to its second highest annual price ever, averaging $603 per ounce. On the spot market it closed 23% higher from the beginning of January '06.

For US investors, gold's performance was matched only by a handful of other precious and base metals. Silver gained 46% in Dollar terms. Palladium leapt 124%. Copper rose 42%.

But the broader commodities complex actually dipped in 2006, losing 7.7% in Dollar terms according to the CRB index of 19 major commodities. Crude oil closed the year 1.3% lower, despite hitting record highs around $80 per barrel in August. Non-US investors suffered twice, as the value of the Dollar dropped nearly 8% against the other major world currencies.

Paper assets also failed to keep pace with gold, most notably those stocks denominated in US Dollars. Even as the Dow Jones equity index hit new all-time highs as the year came to a close – rising nearly 17% for US stockholders – foreign investors would have been better buying European shares (up 16% in Euro terms) or the Hang Seng in Hong Kong (up by one third to new record highs in HK Dollars).

The best performing major market for global investors was London's FTSE100. This blue-chip index gained only 11% this year, but the Pound rose 14% versus the Dollar. Yet that still only just beat the return offered to US investors by gold in 2006.

Government bonds lagged gold and global equities miserably. US bond indices show a gain of around 4%. Yet the size of the global bond market has exploded this year. America alone has now issued $6.4 trillion in bonds backed by outstanding home loans.

What might 2007 hold in store for fixed income assets – as well as the hedge funds, central bankers and ordinary pensioners all trying to skim a decent yield from paper promises? If history is any guide, gold looks a solid asset to buy as insurance. Click here to get the full story now...

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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