What a terrible year 2013 was for investors in gold and emerging markets. The yellow metal declined a phenomenal 29.3 per cent. For their part, emerging market equities were down 4 per cent compared with a 24.5 per cent rise for developed world equities, based on data from S&P Dow Jones Indices. The intriguing question is whether the falls in these two very different asset classes were linked.

It is tempting to rationalise such declines with reference to the actions of central banks, yet this fails to provide wholly satisfying explanations. In a year when central banks expanded their balance sheets to unprecedented levels, demand for gold as a hedge against inflation might have been expected to increase. Not so. There is a better case for blaming the plight of emerging market equities on the US Federal Reserve’s decision to reduce, or taper, its bond-buying activities. The taper tantrum undoubtedly contributed to a reversal of capital flows, but much of the turmoil in emerging markets from June also came from investors’ closer scrutiny of economic fundamentals in individual countries.

The reason I raise the possibility of linkage is that emerging market consumers of gold have historically exerted the biggest single influence on the gold price. In a paper last year, Amit Bhartia, a portfolio manager, and Matt Seto, a researcher, both at GMO, the US fund manager, pointed out that between 2000 and 2010, consumers in emerging markets accounted for 79 per cent of total demand for gold, with India and China by far the biggest drivers of that demand. Over the same period, central banks were actually net sellers, while exchange traded funds accounted for only 7.5 per cent of demand.