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From Adrian Ash

BullionVault

Vs. World’s Top 10 Currencies

THE PRICE OF GOLD ended 2010 with an AM London Gold Fix of $1410.25 per ounce on Friday, racking up its 11th consecutive annual gain vs. the world’s major currencies.

Bullion Vault’s Global Gold Index – which measures the gold price in terms of the world’s top 10 currencies, each weighted by the issuing economy’s GDP – showed a rise of 29.9% for the year.

Gold scored both a quarterly and annual gain vs. all GGI constituent currencies on New Year’s Eve, rising 29.7% against the US Dollar and adding 39.2% vs. the Euro from the last day of 2009.

In the Dollar price alone, the 26 bullion-market experts and traders surveyed a year ago by the London Bullion Market Association missed both the peak and average gold price of 2010 by 2.3% on average.

The LBMA survey’s forecast low in the gold price was more than 6% beneath this year’s actual bottom at $1052 per ounce.

Silver price forecasts proved more cautious still, with the year’s high standing almost 25% above the bullion market’s expectations at $30.70 per ounce.

“In the near-term, the upward trend [in gold] is too strong to fight,” writes Russell Browne in his daily analysis for Scotia Mocatta.

“There are several indicators which leave us cautious about the medium term…and speculators are scaling back their long positions. [But] gold is still a long way from overbought.”

“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,” says Anne-Laure Tremblay at BNP Paribas.

“There is sufficient demand from investment perspective to maintain a relatively bullish trend, in gold in particular,” says Darren Heathcote at Investec Australia in Sydney, also speaking to the Reuters newswire.

Global stock markets meantime rose some 9% in 2010 on the MSCI Barra index, while crude oil rose 13%, reaching its highest annual finish since 2007 at more than $90 per barrel.

The US Dollar Index – which measures the US currency’s strength against a basket of other currencies, weighted for trade volumes – crept almost  1% higher in 2010, buoyed since the spring by the Eurozone’s deficit crises, first in Greece and then in Ireland.

Government bonds fell hard in December, however, cutting the annual return to US Treasury bond holders to 5.5%.

Looking ahead, “The worst investment is in US long-term bonds,” says Swiss money manager and investment author Dr.Marc Faber, interviewed by Bloomberg on Thursday.

“This is a suicidal investment. Over time, interest rates on US Treasuries will go up. Investors will gradually understand that the Federal Reserve wants to have negative real interest rates.”

Adrian Ash

BullionVault

Gold price chart, no delay |   Buy gold online at live prices

Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 and now backed by the mining-sector’s World Gold Council research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2010

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

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