Gold prices have ended the year 2021 down 4%. This is the largest decline since 2015.
As investors prepare to usher in a new year in which the money supply could tighten, even as the threat of the Coronavirus Omicron variant continues, gold stumbled on the dollar’s rally.
Gold prices fell about 4% in 2021 as the recovering global economy pushed more investors towards riskier assets and curbed interest in safe haven assets.
Adding to the mix were indications that central banks would be quick to rein in the pandemic-led massive money printing to stimulate the economy.
Although gold is considered a hedge against inflation that usually results from broad-based stimulus, higher interest rates may translate into a higher opportunity cost of holding gold, which carries no interest, and raises US Treasuries and the dollar.
Silver prices have fallen more than 12% this year, their worst performance in seven years, and platinum has fallen more than 10%.
Palladium fell 4.8% to $1871.68, heading for its worst annual decline in six years.
In a related context, oil prices ended the year 2021, with annual gains, the highest in 12 years.
The significant gains in oil prices came, driven by the global economic recovery from the recession caused by the Coronavirus pandemic and restrictions adopted by producers.
In the trading of the last day of 2021, Brent crude futures ended the year up 53%. US crude futures gained about 57%, which is the strongest performance of the two benchmark contracts since 2009, when prices rose by more than 70%.
“We’ve had Delta and Omicron and all manner of lockdowns and travel restrictions, but demand for oil has remained relatively firm. You can attribute that to the effects of stimulus supporting demand and restrictions on supply,” said CommSec Chief Economist Craig James.
However, on Friday, oil prices stopped increasing after rising for several consecutive days. COVID-19 cases rose to new high levels globally, from Australia to the United States, due to the highly contagious Coronavirus Omicron variant.
Brent crude futures fell 86 cents, or 1.1 percent, to $78.67 a barrel. US West Texas Intermediate crude futures fell 80 cents, or 1 percent, to $76.19 a barrel.