Don’t Forget About Gold Just Yet; ‘Expect The Unexpected' - RBC Capital Markets
“We see a number of risks in the marketplace to either side but our baseline view is the reason to hold gold is as a risk overlay, especially in this market of low volatility,” Chris Louney, commodities strategist for the bank, said in a Bloomberg interview Wednesday, quoting a recent report from the bank.
He added that the risks currently in the market are “inherently difficult to forecast” and that makes gold an attractive safe-haven asset for investors.
“Gold is a good opportunity and merits an allocation in a lot of portfolios,” he said.
The risks Louney refers to include political uncertainty in the U.S. with the Trump administration as well as unknowns when it comes to the Federal Reserve’s pace of tightening for the remainder of the year. There are also persistent geopolitical tensions in Russia, North Korea and the Middle East.
Gold prices have rallied as a safe-haven play amidst the uncertainty but have failed to sustain gains. After posting six straight trading days of gains recently, gold prices have lost some momentum, last trading at $1,255.60 an ounce.
“We’ve seen that buy-and-hold strategy pick up or at least that’s what we’re expecting to continue to happen in the market, especially given the number of risks that are happening,” Louney explained.
Although RBC is expecting low volatility in the gold market, there is potential for prices to move higher over the longer term.
“For this year overall, we’re still in the $1,250 but going into 2018, we have our price target at $1,303 on average over the year, so there’s some opportunity for price appreciation,” he said.
“But again, the real reason why we’re advocating gold is because of the risks in other markets, we think gold has a helpful correlation – or lack thereof really – with many of other assets.”