Goldheads for the best year in a decade with Dollar on the Ropes

Photographer: Andrey Rudakov / Bloomberg

Gold is scheduled for the biggest annual advance in a decade after a tumultuous year, with gains this month helped by the dollar’s slide to the lowest level since April 2018.

The bullion hit a record in August as investors feared an unprecedented wave of stimulus from central banks and governments would lead to currency devaluation and inflation. Holdings in bullion-backed exchange-traded funds set an all-time high in October.

While prices fell as the launch of the vaccines injected optimism into financial markets, the continued weakness of the dollar helped support gold through the end of the year.

Looking ahead, there is little consensus from the biggest names on Wall Street on the direction of the bullion. Morgan Stanley expects gold and other precious metals to come under pressure as financial markets normalize and yields on longer-maturing bonds rise. Meanwhile, HSBC Holdings Plc expects gold to rise due to continued uncertainty.

Much of gold’s performance next year will hinge on whether the eventual return to normal is offset by ongoing stimulus policies. Led by President Jerome Powell, the US Federal Reserve has signaled that its ultra-easy monetary conditions will last until 2021. Efforts to pass more fiscal stimulus through the Senate have had another impact. barricade.

“The main drivers of gold, the weaker US dollar and low real interest rates, are likely to provide support” even as vaccines are distributed worldwide, said Vasu Menon, executive director of investment strategy at Oversea Chinese Banking Corp, based in Singapore. With the Fed lower for longer, “it is too early to throw in the towel on gold,” he said in an email.

Gold added 0.3% to trade at $ 1,900.31 an ounce at 10:40 am in New York. That’s 6.9% higher this month and 25% higher than in 2020, poised for the biggest full-year advance since 2010. The Bloomberg Dollar Spot Index is heading for a third straight quarterly loss.

Spot silver was trading at $ 26.48 an ounce, up 48% this year. Palladium is on track to win a fifth year in a row, with an increase of over 20% in 2020. Platinum is up 11%.

– With the assistance of Martin Ritchie and Yvonne Yue Li