A host of global factors mean gold’s price is set to maintain its strength at least for the next six to 12 months, according to an economist from a top Singapore bank.
“The world right now is in a precarious state and gold is due to benefit from this situation,” said Howie Lee, economist at Oversea-Chinese Banking Corporation.
Gold was changing hands at about $ 1,495 per ounce on Wednesday midday Asia time — having risen nearly $ 12 on the day. Lee said Tuesday that the metal is set to soon breach $ 1,500.
“We are seeing a perfect mix of ingredients in the melting pot: We have low rates, we have soft dollar, we have trade tensions, we have geopolitical tensions along the Persian Gulf,” Lee told CNBC’s “Capital Connection.”
He added that such a barrage of risks had propelled gold to its more-than-six-year highs, and is leading investors to take a “risk-off” approach to their portfolios. In other words, investors are uncertain about near-term global economic trends and are likelier to gravitate toward low-risk assets.
“They are piling their funds into gold,” Lee said.
Among those risks driving the purchase of gold, the economist said the latest round of U.S. tariffs on Chinese goods will be “particularly detrimental” to the global economy because a large portion of the affected goods are directly related to consumers.
When asked about the chances of other metal commodities, such as silver or platinum, seeing similar price gains, Lee predicted gold will remain the standout.
“Gold still stands up among all the precious metals because of its pure usage as a safety hedge,” he said.