Gold is not a safe haven asset at the moment as reflected from its dwindling prices, according to OCBC Bank.
The bank said gold prices had faded lower despite the uptick in risk aversion into June, highlighting the yellow metal’s disfavour with investors as a safe haven asset.
OCBC Bank noted that since the turn of the year, gold prices had declined from its US$1,300 an ounce handle to as low as US$1,278.5 an ounce in mid-June.
The bank downgraded its gold outlook to US$1,300 an ounce at the year-end.
“While a firmer US dollar story into third quarter 2018 (3Q18) could potentially keep gold bulls at bay, some unwinding of the dollar strength in the fourth quarter of 2018 will likely give gold the necessary boost to our year-end target,” OCBC Bank noted in a report today.
It said gold physical demand remained lacklustre.
The World Gold Council reported that overall gold demand of 973.5 tonnes in the first quarter (Q1) was the lowest Q1 print since 2008. This was led by a sharp downturn in Indian jewelry demand (down 12 per cent year-on-year), while China’s bar and coin demand fell by an alarming 26 per cent yoy over the same period.
Central bank demand buoyed demand at 42 per cent yoy, the highest 1Q growth since 2014. The higher demand was led by buying seen in Russia, Turkey and Kazakhstan.
Industrial demand rose by a tepid four per cent in 1Q, though the positive print does also suggest the healthy demand in industrial products especially in the wireless and memory sectors.
OCBC Bank said paper demand of gold, however, remained strong into end-June.
Gold exchange-traded fund holdings continue to climb even as gold prices tumble, suggesting that investors’ need to diversify given ongoing uncertainties can still be seen.
By New Straits Times(Published: 26/06/2018) https://www.nst.com.my/business/2018/06/384242/gold-disfavour-investors
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