The price of Gold is on track to record its 11th consecutive annual rise, despite a disappointing final few weeks for market bulls that have significantly pared the market’s gains and clouded the short-term outlook for the precious metal.
After a somewhat turbulent 12 months, during which the spot market traded as high of $1,920.94 a troy ounce, an all-time best, the Gold looks set to record a gain of around 10% for the year. While still a positive result for the market–as other many other commodities, including its precious metal peers, close lower year-on-year–the increase is a far cry from the 35% gain the market had recorded at its peak.
The metal’s performance has been dulled by a particularly poor month in December, during which its price has tumbled around 10%. Gold, a darling of the commodity scene in recent years, has been struggling to attract buyers after volumes thinned for the holiday season and cautious investors cashed in their positions.
Fears of a liquidity squeeze have spurred the pullback in Gold, with fund managers keen to take cash, rather than ride their positions into the new year. News that the European Central Bank’s lending to banks has been significantly increased underpinned this risk aversion, market participants say. A lack of demand from India, the world’s largest buyer of the Gold, has meanwhile also left prices languishing.
Still, other precious metals are set to close the year lower after concerns over industrial demand pushed them out of favor with investors. At 1438 GMT, spot silver traded at $28.002/oz, down 9.3% on the start of the year. Platinum looks set to be the biggest loser of the year. Trading at $1,379.75/oz, it has so far posted a fall of more nearly 22% this year. Sister metal palladium, however, isn’t far behind. At $637.50/oz, it traded down about 20% for 2011. Platinum and palladium are widely used in vehicle auto catalysts.
The markets are likely to end the last trading session of the year on a positive note, though, after encouraging U.S. economic data lifted investor spirits, driving metal markets higher alongside world equity markets.
At 1506 GMT, the spot price of Gold was $1,572.00/oz, up 1.8% on the day. Silver and the platinum group metals were also up on the day.
Despite the recent washout in the precious metals markets, most industry participants seem certain Gold is set for another strong year in 2012.
U.S. investment bank Morgan Stanley has cited Gold as its top commodity play for 2012, and many analysts are forecasting a break above $2,000/oz for the first time as bullion becomes a popular alternative store of value once again.
Demand for safe assets is expected to reemerge on concerns over the health of the Eurozone and U.S. economies, analysts forecast, while threats to major currencies like the dollar and the Euro, from potential new quantitative-easing measures and the Eurozone debt crisis, will also push investors toward Gold, particularly if developed economies continue to keep interest rates low.
While other precious metals may take support from a higher Gold price next year, silver, platinum and palladium are likely to struggle more than the yellow metal as global economic growth concerns weigh on prices across all industry-linked metals.
EasyForexNews Research Team