By Dave Brown - Exclusive to Gold Investing News

With the World Gold Council (WGC) issuing its fourth quarter report, the focus was on a decade of consecutive annual gold price appreciation driven by a recovery in key sectors of demand and continued global economic uncertainty. The price of the yellow metal delivered strong investment performance in addition to relatively stable volatility measurements, providing a critical foundation for a well diversified portfolio.

Net inflows into gold via exchange traded funds ( ETFs) and similar investment vehicles remained robust during 2010. Physical Gold backed ETFs saw net inflows of 361 tonnes during 2010, the second largest on record after the 617 tonnes of net inflows experienced during 2009. This brought total holdings to a new high of 2,167 tonnes by the end of December, worth $98 billion at the year-end gold price as investors saw in gold an invaluable asset for risk management and hedging purposes.

In India, gold ETFs (the majority of which are currently wholly backed by physical gold bullion, but can also contain a percentage of derivative contracts) also grew significantly during 2010 to approximately 15 tonnes by the end of December and a fund of funds investing in offshore ETFs was introduced in early January.

Chinese investment demand

Investment activity in China remained high with physical delivery at the Shanghai Gold Exchange totaling 836.7 tonnes in 2010, with 236.6 tonnes delivered during the fourth quarter. Moreover, physical delivery as a percentage of trading volume had increased to 33 percent by the fourth quarter, as Chinese investors sought to get hold of gold bullion. Anecdotal evidence suggests continuing strong demand for retail investment products. Of note was the successful launch, on 16 December, of the Industrial and the Commercial Bank of China (ICBC) gold accumulation plan (GAP) in Beijing.