OCBC says gold not safe haven asset for now, downgrades year-end outlook

KUALA LUMPUR: Gold is not a safe haven asset at the moment, said OCBC Bank.

The bank said gold prices had fallen despite the uptick in risk aversion this month, highlighting the yellow metal’s disfavour with investors as a safe haven asset.

OCBC noted that since the turn of the year, gold prices had declined from US$1,300 (RM5,233) an ounce to as low as US$1,278.5 an ounce in the middle of this month.

It downgraded its gold outlook to US$1,300 an ounce at yearend.

“While a firmer US dollar in the third quarter of this year could potentially keep gold bulls at bay, some unwinding of the dollar strength in the fourth quarter will likely give gold the necessary boost to our year-end target,” said OCBC in a report yesterday.

It said physical gold demand remained lacklustre.

The World Gold Council reported that overall gold demand of 973.5 tonnes in the first quarter was the lowest since 2008.

This was led by a sharp downturn in Indian jewellery demand (down 12 per cent year-on-year), while China’s bar and coin demand fell by an alarming 26 per cent over the same period.

Central bank demand for gold increased 42 per cent year-onyear, the highest first-quarter growth since 2014. The higher demand was led by Russia, Turkey and Kazakhstan.

Industrial demand rose by a tepid four per cent in the first quarter.

OCBC said paper demand of gold, however, remained strong into month-end.

Gold exchange-traded fund holdings continue to climb even as gold prices tumble, suggesting that investors need to diversify given that uncertainties can still be seen.