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Of metals and money

Review of the year
Last year was boom time in oil, while sterling produced one of its strongest performances since the debacle of its departure from the Exchange Rate Mechanism.

Oil has risen from $16 to $23 a barrel. This is, in part, due to the sanctions imposed on Iraq, but that's not the whole story. Growing demand has also helped squeeze the price higher.

Precious metals, by contrast, have had a dull year, with gold, despite a surge in January to $415 a troy ounce, obstinately stuck for most of the year between $400 and $370. It closed at $369 on Friday.

Platinum, with a price tending to greater volatility, has had no better a year. Other metals have also had a dismal year, with copper suffering in the fall-out from the Sumitomo Metals scandal.

On foreign exchanges, sterling started the year near its lows against the mark, at Dm2.22 to the pound. But after an awesome performance, it closed the year at a four-year high against the mark, of Dm2.631, and a three-year high against the Swiss franc.

Moves such as this have helped promulgate the view that sterling is becoming a "safe haven" among European currencies. While this may be scoffed at, given the pound's dismal performance over the last 30 years, and all the sterling crises to have engulfed it, there are some good reasons for the improvement in its fortunes. The UK economy is in better shape than its European colleagues. Politically, there is also an attraction because of the possibility it may be a late starter in monetary union. The keenness of Chancellor Kohl to achieve monetary union in the given timeframe has been one reason for the mark's weakness - although all transient factors, the recent base rate rise, the prospect of more to come, and the strength of oil have granted the pound further support.

For the yen, however, it has been an annus horribilis. It now stands at a four-year low against the dollar, after a battering from investors, who have been disposing of yen-denominated assets as fast as they can.