NEW YORK (Commodity Online): The year 2011 turned out to be another positive year for the yellow metal, marking the 11th consecutive year of price increases, according to World Gold Council (WGC).
After a tumultuous year in financial markets around the world, gold was one of few asset classes to deliver positive returns . WGC said that gold outperformed a large majority of assets, including oil, on a risk-adjusted basis during a year of marked uncertainty and increased volatility. It performed its role as a vehicle for diversification and risk management.
However, gold’s performance was not all smooth sailing throughout the year, particularly during the latter months. A cursory look at the events that unfolded during the year helps to identify what factors influenced gold’s performance in 2011.
During 2011, the US dollar price of gold rose by 9% ending the year at US$1,531/oz based on the London PM fix, marking the 11th consecutive year of price increases.1 During the first part of January 2012, the price of gold continued its upward trend above the US$1,600/oz level.
Gold’s price appreciation was generally higher in currencies other than the US dollar, especially in developing markets, with the exception of China, as they saw marked declines of their currencies against the US dollar in the latter part of the year.
Not surprisingly, the euro depreciated the most amongst developed countries relative to the US dollar, on the back of continuing sovereign debt issues, pushing gold prices up 11.6% in local terms during the year. Over the same period, gold also rose in Japanese yen terms, but only by 3.6% as Japan’s currency was one of the few to strengthen against the US dollar. In developing markets, on one hand, the Turkish lira, Indian rupee and South African rand depreciated the most and gold’s prices rose by approximately a third. On the other hand, as the Chinese yuan started to take a more important role in the international monetary system, it has experienced a consistent appreciation since June 2010. In turn, gold rose by a more modest 4.3% in local currency terms during the year, World Gold Council said in its report.
