Precious metals are 2010's top performing asset

Precious metals were the best performing asset class for the second successive year and the fourth time in the past five years, according to new research by Lloyds TSB. In 2010, investors enjoyed a return of 42% from precious metals. Continued uncertainly over the prospects for the global economy contributed to the increase in the price of precious metals as investors sought to maintain the value of their investments.

Commodities were the top performing asset class over the first two months of 2011, providing a return of 7.5%. Within commodities, cotton recorded the largest price gain since the start of the year with a price rise of 38%, driven by a combination of increasing demand from Asia and greater supply side pressures as flooding affected some of the major cotton producing countries.

Silver outperformed the other precious metals in 2010 with prices rising by 80%; more than two and a half times the increase in gold prices (29%) and four times the rise in the value of platinum (20%). In addition to its position as a safe haven investment, pressures on the supply side and high demand for industrial uses contributed to the strong rise in the price of silver. Silver continued to shine brightest into 2011 with prices rising by 9.3% over the first two months of the year.

All nine asset classes analysed delivered positive returns over the past year with five asset classes delivering double-digit growth in 2010. Commodities (30.0%) achieved the second highest returns, followed by UK shares and Commercial property (both 14.5%).

Precious metals have also recorded the highest return over the past decade (365%), followed by residential property (198%) and commodities (176%).

Suren Thiru, economist at Lloyds TSB, commented: "It is unsurprising that precious metals were the top performing asset class in 2010. Investors looked to protect the value of their investments amid the renewed uncertainty over the global economic outlook including the debt concerns in the Eurozone and rising inflation. Silver continues to outshine gold and platinum with the relatively low value of silver providing greater scope for larger gains as well as offering investors similar benefits to those of gold."

"Going forward, the level of demand from emerging economies, particularly from China and India, is likely to remain an important determinant of many assets prices as well as the pace at which the global economic recovery continues."