Gold heading for worst year since 2015 as safe-haven appeal fades

Prices fell more than 4% in 2021 after rising 48% over previous two years as global economic recovery reduced demand

Gold traded between $1,676 and $1,959 an ounce in 2021, after its best annual performance in a decade last year. Reuters

Gold was set on Friday for its worst year since 2015 as a global economic recovery from last year's contraction robbed the metal of safe-haven flows and as central banks prepared to raise interest rates to contain inflation.

Spot gold rose 0.1 per cent to $1,817.40 per ounce by 06.47 GMT, hovering close to Tuesday's one-month high, as a dip in US Treasury yields boosted the metal's appeal by reducing its opportunity cost. US gold futures rose 0.3 per cent to $1,818.90.

"Year-end risk hedging has pushed gold higher overnight and is keeping gold supported in Asia, despite a modest US dollar rally overnight. Gold is now just below resistance at $1,820," said Jeffery Halley, a senior market analyst at Oanda.

A stronger dollar makes bullion more expensive for buyers who hold other currencies.

Gold prices have declined more than 4 per cent so far this year after rising 48 per cent over the previous two years, as the global economic recovery reduced demand for the safe-haven metal.

This year gold traded between $1,676 and $1,959 an ounce, following its best annual performance in a decade last year, in which the metal touched an all-time high of $2,072.50.

Year-end risk hedging has pushed gold higher overnight and is keeping gold supported in Asia, despite a modest US dollar rally overnight. Gold is now just below resistance at $1,820

Jeffery Halley,
senior market analyst at Oanda

"Gold held up reasonably well given all the pro-growth development and all the normalisation in monetary policy," said Dominic Schnider, head of commodities and Apac forex at UBS Wealth Management in Hong Kong.

"You could argue that if we did not have inflation, gold prices would already be much lower," Mr Schnider said. Gold's performance for the year was quite positive for euro or yen investors, he said.

Spot silver rose 0.4 per cent to $23.12 an ounce and platinum rose 0.3 per cent to $964.38, while palladium fell 0.9 per cent to $1,948.70.

Silver was on track for its worst year since 2014, falling more than 12 per cent. Platinum dropped more than 9 per cent, and palladium was headed for its biggest yearly decline since 2015, falling more than 20 per cent.