Goldman expects gold at $1,600 per ounce in 2020 on fear driven demand

(Reuters) - Goldman Sachs has kept its 3, 6 and 12 month forecast for gold at $1,600 per troy ounces, saying investment demand will be supported by fears of recession and political uncertainty.

Gold has gained about 14% so far in 2019, on track for its biggest annual rise since 2010, but is down about 6% from a six-year peak of $1,557 an ounce in early September.

Goldman, in a note dated Dec. 6, attributed this fall to rising global risk appetite on an easing in U.S.-China trade tensions and a strong U.S. labor market.

However, “without a major growth acceleration, recession fears are likely to remain elevated supported by a low unemployment rate and an inverted yield curve,” it added.

“Household savings in major developed economies are growing strongly which, combined with a slump in global capex, resulted in a global savings glut. That should boost the demand for defensive assets such as gold,” Goldman said.

The U.S. investment bank predicted a small depreciation in the U.S. dollar, which should make gold cheaper for holders of other currencies, in 2020. It also expects political uncertainty due to prolonged trade tensions and the U.S. elections, which should drive demand for gold.

Geopolitical uncertainty is already translating into greater gold demand, Goldman said, adding that 2019 will likely be a record year for global central bank (CB) buying with a target of 750 tonnes combined purchases.

“Next year, we see CB purchases slightly below 2019 but likely to remain elevated due to high geological uncertainty, a low level of rates globally and a low share of gold in a number of EM CB reserves.”

Reporting by Sumita Layek in Bengaluru; Editing by Alexander Smith