Euro weakness has silver lining for gold investors

The weakness of the euro last year benefited European investors in gold, as bullion priced in US dollars appreciated by 11.6%, once the euro exchange rate was taken into account.

This was about one quarter better than the returns of 8.9% American investors enjoyed by buying in their own dollars, also the base measurement of bullion.

Among 12 major currencies, only Russians (up 14.4%), Turkish investors (up 34.4%), Indians (up 28.8%) and South Africans (up 33.8%) did better than euro-based buyers. The Swiss made 9.5%.

As the yen strengthened against the dollar for much of the year, Japanese local currency buyers of bullion there made just 3.6%, not far from the 4.3% their Chinese neighbours made on their ingots.

The gold price was strengthened during 2011 by the threat of several central banks printing and debasing the value of paper money, sending investors to hard assets including gold instead.

Macro-economic turbulence had a similar effect, and gold registered its eleventh consecutive annual appreciation.

It ended the year on $1,531 per troy ounce, between its 56-week low ($1,319) and high ($1,895). Intra-day, it had traded as high as $1,921 per troy ounce.

But as hopes of further US money printing faded from mid-September, gold fell.

The 15% decline was one of only seven times it fell by more than 10% over the past decade, according to the World Gold Council, which was responsible for these statistics.

The WGC said: “Central banks, which have been predominantly net purchasers of gold since the second quarter of 2009, increased their activity during 2011. Central bank net-buying is poised to have a record year, and many of these purchases happened during the third and fourth quarters of 2011.

“Additionally, investment activity remained healthy as market participants continued to access the market whether through bars and coins or other vehicles.”

Gold-backed ETFs, added 75 tonnes of gold in the final quarter of 2011, around half the full-year total addition.

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