Skip to main content

Gold rose on Friday in London, notching its strongest annual performance since 2007 and marking a fifth straight month of gains in December, driven by a weaker dollar and global economic uncertainty.

The precious metals complex has had a stellar run this year, led by palladium's 95-per-cent rise, in a broad commodities rally which has pushed up the 19-commodity Reuters-Jefferies CRB index up 15 per cent.

Spot gold gained 0.5 per cent to $1,411.57 an ounce by 1045 GMT, on course for a 29-per-cent annual gain and a fifth straight month of gains, the longest stretch of monthly increases since late 2001. U.S. gold climbed 0.5 per cent to $1,412.30 an ounce.

The dollar fell 0.4 per cent against a basket of currencies, having fallen by 12 per cent against the yen and by more than 9 per cent versus the Swiss franc this year.

"The gold price remains well supported by a weaker dollar and solid investment demand," said Anne-Laure Tremblay, precious metals strategist at BNP Paribas.

"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," she added.

Traders and analysts expect gold to break above $1,500 in 2011, particularly if the dollar extends its decline, the U.S. economy remains unable to generate enough jobs to lower unemployment and Europe's debt crisis is not diffused.

"It is still a positive picture for metals next year. There is sufficient demand from investment perspective to maintain a relatively bullish trend, in gold in particular," said Darren Heathcote, head of trading at Investec Australia in Sydney.

Tempering some of the enthusiasm, holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell to 1,280.722 tonnes by Dec 30, its lowest since early June.

Spot palladium rose 0.6 per cent to $790.47 an ounce, after rising to a nine-year high of $795.47 on Thursday.

Spot silver was the second-best performer in precious metals, up 82 per cent on the year. It was trading at $30.64, retreating from a 30-year peak of $30.88 hit on Thursday.

Interact with The Globe