Gold will continue to shine as a safe-haven asset with prices pushing above $1,300 an ounce within the next three months, according to juggernaut investment firm Goldman Sachs.
Thursday in a note to clients, Jeff Currie, global head of commodities research at the bank, said he was raising his gold price forecast for 2019 as growing recession fears continue to ripple through financial markets.
He added that central-bank gold demand, which saw strong growth throughout 2018, will continue to be a dominate theme in the marketplace.
“Going forward gold will be supported primarily by growing demand for defensive assets. The same is also true of central-bank buying, with rising geopolitical tensions incentivizing more central banks to re-enter the gold market," he said.
In its updated forecast, Goldman Sachs now sees gold prices pushing to $1,325 an ounce within three months, rising to $1,375 in six months and pushing to $1,425 an ounce by the end of the year. The new outlook is an upgrade from its previous three-month, six-month and 12-month forecasts of $1,250, $1,300, and $1,325 respectively.
Goldman’s 2019 year-end target represents a gain of nearly 10.5% for the year. Gold prices have remained stubbornly firm around its recent six-month highs. February gold futures last traded at $1,290.40 an ounce, up 0.24% on the day.
Currie's comments come as gold prices saw significant investor demand in the fourth quarter. Last month was a particularly strong for gold as the bank noted that equity markets saw unprecedented weakness, the worst December since 1931.
Currie also noted that data is starting to signal a growing risk of a slowdown in the U.S. economy, which will be supportive for gold.
“The last few weeks have seen a sharp deterioration in risk sentiment following soft macroeconomic data in December and renewed concerns about the future direction of growth, particularly the risk of U.S. growth catching down towards weaker economies,” he said.
Currie is also positive on gold as it looks like the Federal Reserve is ready to halt its tightening cycle. Thursday, Federal Reserve Chairman Jerome Powell reiterated his earlier stance that because of tame inflation pressures, the central bank can afford to be patient to wait and see how the U.S. economy will perform.
Currie noted that at this stage in the business cycle, gold has less to fear from further monetary policy tightening.
“We find that as the hiking cycles mature, the usual (negative) correlations between these indicators and gold starts to weaken, or even turn negative," he said. "This is because gold begins to price much more off fear of the next recession than off the opportunity cost of holding gold...”