Gold Investment Digest – Fourth Quarter and Full Year 2010

The World Gold Council released their excellent quarterly ‘Gold Investment Digest’. 

The research has some interesting facts and important charts and shows that global demand was robust and broad based for both the final quarter and the year. Those continuing to call gold a bubble, often based on a lack of knowledge of the gold market, and failing to advise diversification, should read the report.

*  The gold price rose by 29% in 2010. By comparison the S&P Goldman Sachs Commodities Index (S&P GSCI) rose by 20%, the S&P 500 rose by 13%, the MSCI World ex US Index increased by 6% in US dollar terms, and the Barclays US Treasuries Aggregate Index rose only by 6% over the year.

*  Gold price volatility at 16% on an annualised basis in 2010 remained consistent with its long-term trend. By comparison, volatility on the S&P Goldman Sachs Commodity Index was 21% during the year, based on daily returns.

*  Gold benefited from the continued contagion from European sovereign debt problems as investors’ hedge their currency risk. This was evidenced by strong gold buying in ETFs, bars, coins and other investment vehicles in Europe and other parts of the world.

*  Investors bought 361 tonnes of gold in the ETFs the WGC monitors in 2010, bringing total holdings to a new high of 2,167 tonnes, worth US$98 billion. This represents the second largest yearly inflow on record, after the 617 tonnes of net inflows experienced in 2009.

*  During the first nine months of 2010, global jewellery demand totalled 1,468 tonnes, increasing 18% from the same period during 2009. Gold demand for technological and industrial applications continued to recover during the first nine months of 2010, registering a 19% increase over the same period in 2009. Complete full-year data for gold demand will be available in February when the WGC publishes its Gold Demand Trends report.

*  Central banks became slight net buyers of gold for the full-year, after two decades as a steady source of supply to the market. The IMF successfully completed its gold sales programme of 403.3 tonnes without disruption to the market. The Fund sold 200 tonnes to the Reserve Bank of India, 10 tonnes to Sri Lanka, 10 tonnes to Bangladesh and 2 tonnes to Mauritius, all in off-market transactions executed at market prices. The remaining sales were conducted through on-market sales within the ceiling set by the third Central Bank Gold Agreement (CBGA3).

Key Gold Charts

Gold ETF holdings in tonnes:

Relative volatility of gold in comparison with other asset classes in 2010: 

Comex net spec positions in gold: 

American Eagle bullion sales: 

Gold’s 3-month implied lease rate: 

read more… 

An accompanying video can be viewed on the World Gold Council website.

 

Mark OByrne

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