Gold outperformed many other assets in relative price and volatility
terms in 2008, "providing a safe haven and long-term store of value for
investors in record volume," the World Gold Council said Tuesday in the latest
edition of its Gold Investment Digest.
"Despite one of the most tumultuous years in financial markets since the
Great Depression, gold ended the year on a firm footing recording its eighth
consecutive annual price increase," the WGC said in a statement.
While distressed gold sales by some institutional investors meeting
margin calls on other assets had a dampening effect on price in the first few
weeks of Q4, by mid November "broader recognition that the dire financial
situation was likely to endure for some time, fears about the credit system
and future inflationary impact of shifts in monetary policy and the dollar
resuming its secular decline, led gold to rallying by around $150/oz," it
said.
Gold closed the year at $869.75.oz, up 4% from the same period in 2007.
Gold price volatility remained high by historical standards at the end of
the year, at 37% -- gold's long-run price volatility is around 12.5% --
although still below most other asset classes, the WGC said. "However,
underpinned by robust and diverse market fundamentals, gold traded in a
tighter range than other financial assets, major world indices and most other
commodities," it added.
"Gold's performance over the year is impressive considering the massive
wealth destruction that took place elsewhere in financial and commodities
markets," said Natalie Dempster, head of investment, North America for the
WGC, in the statement. "Impacted to a lesser extent by the financial crisis,
which affected equities, and declining industrial demand, which affected
physical assets, gold outperformed global equities and all major commodities
during 2008."
During the final quarter, investors turned to physical-backed gold ETFs
in large numbers, buying 96 mt of incremental gold via exchange traded funds.
December recorded the strongest monthly inflow into gold ETFs, with investors
buying 44 mt of gold. Investment in gold ETFs, monitored by the WGC, now
stands at around $33 billion.
"As investors became increasingly concerned by the state of the economy
during the course of the year, they turned to gold as a store of value. Within
the third and fourth quarters of 2008, inflows into gold ETFs reached record
levels as investors were motivated by gold's lack of counterparty risk and the
opportunity to hold a real, physical asset," Dempster said. "As we move into
2009, continued uncertainty over the financial landscape, combined with future
inflationary fears resulting from interest rates cuts and quantitative easing
by central banks, are likely to pique investor interest in gold further."
The World Gold Council is an organization formed and funded by the
world's leading gold mining companies with the aim of stimulating and
maximizing the demand for, and holding of, gold.
source: Platts
