This Article is From Jan 06, 2021

Year 2020: Gold Posts Second Best Annual Return Since 2008 Financial Crisis

Typically, gold takes support from a sense of risk aversion, especially when investors exit from stocks and rush to safe-haven bets such as precious metals and bonds

Year 2020: Gold Posts Second Best Annual Return Since 2008 Financial Crisis

Gold's annual return in 2020 is only the second best since 2008, the year of the global financial crisis.

Gold registered a good run in calendar year 2020 thanks to uncertainty around the coronavirus pandemic which caused a global equity selloff. While optimism on development of COVID-19 vaccines backed a recovery in the share markets, gold took a breather after months of a broader surge. The yellow metal clocked a return of 31 per cent, making 2020 its best year since 2011, when its price had appreciated 38 per cent. Analysts say gold is poised for further peaks in the near future, riding on a broader uptrend that began in 2018.   

Gold's annual return in 2020 is only the second best since 2008, the year of the global financial crisis.

Domestic benchmark rates began the year around Rs 39,600 levels and moved within a range of 3 per cent until the coronavirus outbreak, which took the precious metal to unprecedented levels of Rs 46,000 in April, followed by Rs 47,000 in May and June, and Rs 49,000 in July.

Typically, gold takes support from a general sense of risk aversion, especially when investors exit from stocks and rush to safe-havens such as precious metals and bonds.

In August, domestic gold prices soared to an all-time high of Rs 57,100 following months of uncertainty around the pandemic, before giving up some of those gains in the following months on account of optimism around COVID-19 vaccines. Still, gold held the Rs 50,000 per 10 grams mark till November, before cracking to lower levels in the last month of the year.

Analysts say gold's record run in 2020 reflects the degree of uncertainty around the coronavirus pandemic. 

"If we look at the price action on COMEX, gold has consolidated for almost nine years from 2011 to 2020 and has recently broken out of the range taking out the 2011 highs near $1,920 per ounce," Ravindra Rao, VP-head commodity research, Kotak Securities, told NDTV.

Here's how gold has performed over past few years:

YearMCX FuturesAnnual Return
2020Rs 50,15131.05%
2019Rs 38,26920.71%
2018Rs 31,7027.11%
2017Rs 29,598-1.61%
2016Rs 30,08217.11%
2015Rs 25,686-6.53%
2014Rs 27,481-7.86%
2013Rs 29,826-6.14%
2012Rs 31,77816.15%
2011Rs 27,35937.52%
(Source: MCX data)

"Structural Bull rally On Cards"

Gold has been appreciating since 2018 on account of uncertainty around the US-China trade conflict, say analysts.

"It seems a structural bull rally in gold is on cards with every corrective dip remerging as a buying opportunity. Going ahead, we expect investment demand to dominate from a portfolio diversification perspective as compared to physical demand," Mr Rao of Kotak Securities added.