Gold News

Gold Price Rises for 11th Year Running vs. World's Major Currencies, Trend Is "Too Strong to Fight"

The Gold Price ended 2010 with an AM London Gold Fix of $1410.25 per ounce on New Year's Eve, racking up its 11th consecutive annual gain vs. the world's major currencies.

Bullion Vault's Global Gold Index – which measures the average Gold Price in the world's top 10 currencies, each weighted by the GDP of the issuing economy – showed a rise of 29.9% for the year.

Gold scored both a quarterly and annual gain vs. all GGI constituent currencies, rising 29.7% against the US Dollar and adding 39.2% vs. the Euro from the last day of 2009.

In the Dollar price alone, the 26 bullion-market experts and traders surveyed a year ago by the London Bullion Market Association missed both the peak and average Gold Price of 2010 by 2.3% on average.

The LBMA survey's forecast low in the Gold Price was more than 6% beneath this year's actual bottom at $1052 per ounce.

Silver Price forecasts were proven more cautious still, with the year's high standing almost 25% above the bullion market's expectations at a 3-decade record above $30 per ounce.

"In the near-term, the upward trend [in Gold Prices ] is too strong to fight," writes Russell Browne in his daily analysis for Scotia Mocatta.

"There are several indicators which leave us cautious about the medium term...and speculators are scaling back their long positions. [But] gold is still a long way from overbought."

"We expect the Gold Price rally to continue into 2011 on the back of strong fundamentals, including inflationary pressures (notably in China), ample liquidity and concerns about the value of the Dollar," says Anne-Laure Tremblay at BNP Paribas.

"There is sufficient demand from investment perspective to maintain a relatively bullish trend, in gold in particular," says Darren Heathcote at Investec Australia in Sydney, also speaking to the Reuters newswire.

Global stock markets meantime rose some 9% in 2010 on the MSCI Barra index, while crude oil rose 13%, reaching its highest annual finish since 2007 at more than $90 per barrel.

The US Dollar Index – which measures the US currency's strength against a basket of other currencies, weighted for trade volumes – crept almost  1% higher in 2010, buoyed since the spring by the Eurozone's deficit crises, first in Greece and then in Ireland.

Government bonds fell hard in December, however, cutting the annual return to US Treasury bond holders to 5.5%.

Looking ahead, "The worst investment is in US long-term bonds," says Swiss money manager and investment author Dr.Marc Faber, interviewed by Bloomberg on Thursday.

"This is a suicidal investment. Over time, interest rates on US Treasuries will go up. Investors will gradually understand that the Federal Reserve wants to have negative real interest rates."

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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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