19 December 2019
Citi analysts expect gold prices to near $1,525/oz over the next 3 months, but believe that prices could spike to touch 2,000/oz in the next 12-24 months propelled by trade and geopolitical uncertainties. Gold, a safe-haven asset, has returned ~15% so-far this year. Citi analysts maintain a bullish outlook for the yellow metal over the medium-term and set an average target price of $1,625/oz over the next 6-12month period.
Geopolitical concerns, however, have limited effect on the demand for gold in India, where it forms part of the religious and cultural lifestyle. Gold acts as a store of wealth and insurance for India’s rural (~67% of total population), and middle income populace. The Oct-Dec period remains critical for gold demand in India due to a combination of seasonal agricultural profits, weddings and festive gift-giving.
Given rich equity and credit valuations, Citi analyst believe that investors may benefit from a dynamic gold allocation that applies minimum-weightage to gold during equity market bull runs, while turning defensive with a higher weightage during periods of high volatility.
Investors may continue to stick to their strategic asset allocation as per their risk profiles and ensure diversification in investment portfolios. For more details and implications for your portfolio, please contact your relationship manager.