FXStreet reports that strategists at UOB Group's Quarterly Global Outlook suggest the ounce troy of the precious metal could edge higher to the $1,800 mark in early 2021.
"Global central banks have all cut rates all the way down to the zero bound and re-introduced Quantitative Easing (QE), yet gold did not seem to respond well to this latest round of monetary policy easing. More importantly, gold would appear to have failed spectacularly as a risk aversion hedge."
"The main culprit to gold's puzzling behaviour is the on-going USD funding crunch that is holding financial markets hostage at the moment. As a result, gold was sold off alongside the equities melt-down as global investors rushed to raise cash."
"Going forward, once this USD funding crunch dissipates after 2Q, gold should respond well to the massive amount of global monetary policy easing. By then, there is significant default risk as the global economy slows down drastically. Hence, gold's safe haven role should return with a vengeance. Furthermore, recent global lockdowns have resulted in a shortage of physical gold as global transportation links get cut. As such, we would expect Gold to rebound significantly in the quarters ahead. We update our gold forecast to USD 1,650 in 2Q, 1,700 in 3Q, 1,750 in 4Q and 1,800 in 1Q21."
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