Gold is set to benefit from sinking expectations for higher US interest rates and the potential for further market turmoil, according to DBS Group Holdings, the Singapore-based bank that turned overweight on bullion last year before the metal surged.
“Volatility in financial markets due to the Chinese/global slowdown and low oil prices and doubts regarding the effectiveness of monetary easing could continue,” Manish Jaradi, senior investment strategist at DBS’s Chief Investment Chief Investment Office, said.
“This could keep risk appetite in check and the US dollar rates low, supporting gold.”
Bullion rallied to the highest level in a year last week as traders cut bets on tighter US monetary policy and negative rates spread in Europe and Japan, boosting the metal’s allure. The advance was buttressed by volatility in financial markets, sinking oil prices and concern that the global economy may be faltering. DBS’s positive stance contrasts with the outlook from Goldman Sachs, which this week reiterated its forecast that gold will tumble.
Goldman Sachs analysts have recommended that investors short gold, setting out their bearish case in notes on February 15 and February 8. The price will probably retreat to $1,100 an ounce in three months and $1,000 an ounce in 12 months, they said.