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Weaker dollar helps to seal best year for gold since 2010

Bullion gained 19% last year as central banks embraced looser monetary policy to boost growth

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Brexit, unrest in regions from Chile to Hong Kong and buying sprees from key central banks and exchange-traded funds have helped to support the price of gold.

Singapore

GOLD climbed to a three-month high to clinch its best annual performance since 2010, as a weaker dollar helped cap a year marked by global economic jitters and trade frictions.

Bullion gained 19 per cent last year as central banks globally embraced looser monetary policy to boost growth. Brexit, unrest in regions from Chile to Hong Kong and buying sprees from key central banks and exchange-traded funds have also helped to support prices.

Spot gold climbed as much as 0.7 per cent to US$1,525.38 an ounce on Tuesday, the highest since Sept 25. It traded at US$1,520.13 at 1.40 pm in New York. Gold futures for February delivery rose 0.3 per cent to settle at US$1,523.10 on the Comex. The Bloomberg Dollar Spot Index fell for a fourth straight session.

The metal managed to hold on to gains even after US President Donald Trump said he will sign the first phase of a trade deal with China on Jan 15, easing uncertainty that has fuelled haven demand for bullion.

"It is not really a surprise" especially after headlines that Chinese Vice-Premier Liu He is coming to Washington to sign the so-called 'Phase One' trade deal, said Tai Wong, the head of metals derivatives trading at BMO Capital Markets.

Still, some analysts doubt that gold's strength will stick this year and JPMorgan Asset Management cautioned that bullion may not offer sound portfolio protection.

"There are very few certain environments in which gold does well, and it's not necessarily the case that 2020 won't be any of those," Hannah Anderson, a global market strategist at JPMorgan, said in an interview with Bloomberg. "In the next downturn, I do believe that bonds still could be defensive assets." JPMorgan has come out last month to make the case for a risk-on investment allocation for 2020 as the global economy gathers momentum in the wake of the recent slowdown. On Tuesday, data showed China's manufacturing sector continued to expand output in December, adding to evidence that the world's second-largest economy is stabilising.

Commentary out of China and the US suggests that both countries are committed to their "Phase One" trade pact. However, haven asset demand in 2020 could be supported by other brewing global tensions, DailyFX strategist David Song said in a note.

"The threat of a US-EU trade war may become a greater concern," he said.

In other precious metals, silver rose 15 per cent last year, poised for its best performance since 2010. Platinum is up 22 per cent, its biggest annual gain since 2009, while top performer palladium ended 2019 with an annual gain of 54 per cent. BLOOMBERG