Since the start of the year, gold price unexpectedly shot up. On the 14th of this month, spot gold price crossed the
This latest run — the precious metal is up 10 per cent this year — is unlikely to last long. Investment managers are not buying gold for the longer term at the current levels though some may be trading to take advantage of the short sharp movements within the price band of
Gold is seen as a safe haven investment against any uncertainty and also, a hedge against inflation.
Expectations of a rising inflation in
We saw the US S&P500 declining in the last two weeks in the aftermath of the slide in emerging markets.
"Also, the physical demand in the emerging market remains quite good," he said. "At least we have a seen sort of stabilisation in the ETFs [exchange traded funds] liquidation. That was a big, big issue last year."
The US Federal Reserve's tapering or the gradual winding down of the stimulus by reducing
As weak US manufacturing data came in on the back of weak retail data, doubts were cast on the pace of the US tapering, with speculation suggesting there could be a pause in the monetary tightening policy. That led to gains in the holdings in exchange traded funds (ETFs).
Some analysts are cautious for the longer term and see a lower price at the year-end. In fact one of the investment managers
He added that some of his clients do own some physical gold, but not for investment reasons.
The problem with that view of seeing gold as a hedge against uncertainty is that chances of a tailrisk event has decreased significantly, says
Currently, they do not have gold in their portfolios. Instead, he is playing the cyclicals by being long equities and specifically being long cyclical companies.
"We don't think that tailrisk event is going to happen because our view is growth will accelerate through the year," Perez told
What's been happening in the last few weeks, according to the Emirates NBD's chief investment officer is since the last tapering in January, which was followed by weak US economic data, there is a lot of speculation in the market that the Fed will actually pause its monetary tightening at the next meeting in mid-March.
"The moment it pauses its tapering — in other words, starts printing earlier amounts of money that it promised to do, that then is inflationary again," said
Even if the speculation turns out true, Mahendran reckons that it will be a short-term episode.
For the rest of the year, he expects alternating cycles of risk on and risk off. If the Fed stops tapering, then it will be risk on, and that potentially could happen from about March until May. If things start revving up and jobs start being created, then Fed will come back and announce the start of tapering again.
"So, you will have another risk off, similar to what we saw in February so far, which is the US S&P500 giving up about five per cent to 10 per cent and Nikkei falling in
"Whereas when you have risk on — when jobs are being created, corporate profits are rising, equities and high yield bonds start running, gold and 10- year bonds take a pause. Such alternating cycles probably will be playing out this year. So, the recent run up in gold prices is not permanent."
In fact a
"Given our base case scenario of a stronger dollar, modest growth, tame inflation, and fewer tail risks set against the backdrop of changing gold correlations, we believe that the key relationships to track this year will be the US dollar, US 10-year Treasuries, and macro data releases," said the
Further it added: "The downside risks to gold have continued to build as tail risks have subsided, providing fewer motives for gold to attract a safe-haven bid. Key support will be dictated by whether the physical market in
"Our economists at
According to Perez, gold will probably trade sideways this year and the
"We see it below
Steel sees the bullion market trading around the
While he doesn't see it by any means collapsing, but he believes further upside will be increasingly difficult from
"I think the [gold] market on any emerging market bubble or any further euro strength and the persistent Chinese demand is likely to repeatedly move to the upside. I think it might be volatile but I think the market still looks encouraging in the near short term [the coming two months] — may go up
"[To predict] the range itself would be tough — we don't actually give a prediction on where it will end of the year," he said.
Mahendran predicts gold price will be between
"I reckon we won't see much of an upside," he said.
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