Gold on Track for Best Year Since 2010

A struggling U.S. Dollar helped boost gold at end of year, acting as the metal's biggest driver.

As seen on Reuters, gold recently hit its highest level in 2 and a half months, putting it on track to its best year since 2010. The metal rebounded towards the end of the year due to a myriad of factors, most of which, according to the article, had to do with the U.S. dollar.

The greenback had a difficult year as several geopolitical events subdued it. Aside from increasing the appeal of owning gold, the article states that the U.S.-North Korea conflict also harmed the dollar, giving more ground to the yellow metal.

Persistent low inflation in the U.S. remains a significant headwind for the dollar. The article references Georgette Boele, an analyst at ABN Amro, who said that inflation concerns allowed gold to thrive even after three interest rate hikes by the Fed in 2017. The same concerns have also impacted market sentiment, letting gold hold its ground against rate hike predictions in 2018.

Boele added that the dollar remains the most important driver of gold prices, followed by yields. Aside from a dollar that didn't profit from successive rate hikes, 2017 also saw weak trade and meager yields, both of which bolstered gold. While Boele said that a recovery in the dollar could harm gold prices in 2018, it's worth noting that the issues placing pressure on the greenback are still ongoing.

As the dollar had its worst showing in three months with a potential to post its worst year since 2003, gold breached the $1,300 level to hit $1,302 an ounce this past Friday afternoon. The article notes that ScotiaMocatta's technical team pointed to $1,306, gold's October high, as the next level gold could capture before the year ends.

The analysts said that gold has benefited from technically driven momentum, adding that the metal broke its 100-day moving average in a markedly positive development. With enough strength in the closing days of 2017, gold is poised to have its best month since August.

Other precious metals also enjoyed a favorable year, with palladium's gains standing out the most. The metal recently hit $1,072, its highest level since February 2001, amid worries over availability after years of market deficit. Palladium enjoyed an unusually large premium over platinum in the fourth quarter, with the latter rising 3.8% this year.

Silver's gains were somewhat higher, having risen 6.5% so far this year, last closing at $16.97 an ounce.