Best Year in a Decade for Gold

Gold delivered its best annual return in a decade in 2020, soaring 25 percent. The precious metal closed the year just above $1,900 an ounce on the active futures contract traded at the COMEX futures exchange.

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As the COVID-19 pandemic spread in February, financial markets unraveled. Major holders of gold were forced to liquidate positions in early March to cover losses in the stock market. But investors quickly bid gold higher, reaffirming its status as a safe haven.

By August, Gold was at a new record above $2,000, as the Federal Reserve tried to stimulate the economy by chopping short-term interest rates to near zero percent. Since gold does not pay interest, it benefits when yields on competing investments decline.

Falling interest rates and a struggling U.S. economy pressured the U.S. dollar lower against major foreign currencies. That was another positive for gold since the precious metal is traded in U.S. dollars around the globe, making gold more affordable for overseas buyers who dominate the market. Some investors believe the stimulus efforts will lead to currency debasement and inflation, further reasons to own gold.

Gold has now generated positive returns in four of the past five years, rising by 8.6 percent in 2016, 12.6 percent in 2017, dipping one percent in 2018, and then rebounding by 18.8 percent in 2019. In 2009, and again in 2010, gold rose more than 27 percent, which may provide encouragement for gold investors during the next 12 months.

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