The US dollar weakened against the Japanese yen and emerging market currencies, but gained against the euro.
The US Federal Reserve's continuation of its highly accommodative monetary policy, together with political compromise to avoid hitting the so-called fiscal cliff of higher taxes and lower government spending, are all highly likely.
As a result, the US dollar could devalue further against other, stronger, currencies.
Events in the eurozone also remain a key concern. Comments from European Central Bank president Mario Draghi on the German economy finally being hurt by the eurozone crisis, together with disappointing German industrial production data, indicate that the full effects of global austerity programmes are yet to be seen.
Trade data suggests that the Chinese economic growth rates are slower and weakness in demand from the eurozone, China’s largest trading partner, is a large part of the problem.
The eurozone’s problem of fragmentation and the cultural opposition to fiscal unification among citizens of various member states seem to be getting worse.
There is evidence of re-nationalisation of banking systems and differences in the member states’ cost of funding that go beyond the fundamentals, as Draghi pointed out in his recent speech.
Indeed the polarisation of the electorate in troubled states, with substantial shifts to extreme left or right political parties, is alarming.
The historically high unemployment rate, especially at the entry-level of the workforce, is the root of unrest and violent clashes with the police that seem to grow in strength and regularity in Greece and Spain.
Continually tightened fiscal austerity measures necessitated by the crushing demands of external debt are likely to further depress the local economies and prolong unemployment, supporting extreme polarisation.
In this environment of growing risks with little visibility of workable and sustainable solutions, investors are risk-averse and looking for safe havens.
Gold is one asset that has historically been favoured by investors in times of instability and inflation.
Continued printing of money by desperate governments is likely to stoke inflation and the socio-political instability is set to continue.
Gold is on track for its 12th year of consecutive annual price increases.
Performance of indices over 10-yrs
Source: FE Analytics
Given the size of problems in the global economy and their unlikely resolution in the medium-term, the rising trend is set to continue for several years in the future.
It is therefore surprising that investors seem to ignore the producers of this most valuable commodity.
Shares in gold mining companies have languished and lost value in the last 18 months. This has happened despite the fact that most producers have enjoyed growing cash flows and rising profits during this period even though operating costs have also been rising rapidly.
An explanation for the valuation mismatch between gold mining shares and the price of gold is that, in times of uncertainty, investors do not like holding assets whose value can be influenced by sentiment.
Should the global equity markets experience a rapid correction for whatever reason, shares in smaller companies can be significantly marked down in price as buyers evaporate, regardless of fundamentals. However short-term this situation and view might be, investors can shy away from exposure.
Another indication of current investors’ preferences is the global allocation of pension fund assets, which have recently been reported to be overweight in bonds and underweight in equities.
Furthermore, their equity allocations tend to favour larger capitalisation companies that offer greater visibility, balance sheet quality and some dividend yield.
The result has been that the main stock-market indices, the FTSE 100, Dow Jones Industrial Average and Eurofirst 300 are trading near multi-year highs.
Performance of indices over 5-yrs
Source: FE Analytics
Conversely, indices relating to commodity producers trade at multi-year lows as investors perceive that there is greater risk to that sector from slowing economic growth and mining shares that are typically less liquid and more volatile than the market.
This situation is likely to change soon. Large industrial companies have been reporting slowing profits and have warned about risks to their activity as a result of the slowing economy.
Inflation rates have been rising and are likely to impact corporate profitability as companies will be unable to pass higher costs to consumers in a weak marketplace.
Conversely, the strength in commodity prices, most notably gold, is likely to improve earnings and profitability of the miners. Once investors accept that the confluence of inflation, a slowing economy and large obstacles to its recovery are likely to support gold prices higher for longer, they will buy the mining shares again, promoting a significant re-rating.
Angelos Damaskos is the manager of the MFM Junior Gold fund. The views expressed her are his own.