Central banks’ wavering stand makes investors back gold now

By Ranjeetha Pakiam & Jasmine Ng

NEW YORK: Gold just picked up another backer in the form of Independent Strategy’s David Roche, who says that he’s concerned enough about central banks’ policy-making to reverse his bearish position.

“We’ve increased our holdings of gold, now that’s after a long, long time being short,” Roche, who’s president of the Londonbased group, said on Tuesday. “The reason for that is because we don’t know what central banks are going to do next.”

Bullion has rallied 17% in 2016 amid financial-market volatility and investor concern about the outlook for global growth. Central banks in Europe and Japan have intensified their drive to spur their economies, embracing negative interest rates, and while the Federal Reserve raised borrowing costs late last year, it’s yet to boost them further. BNP Paribas has said gold may gain to $1,400 an ounce, citing the risk of central banks’ overreach.

Investors may turn to gold as an “insurance policy” against the uncertainty surrounding central banks’ policies, said Roche, who was until 1994 head of research and global strategist at Morgan Stanley. While the Bank of Japan will continue to try to get money circulating to get inflation back to target, that won’t produce further growth, he said.

Gold for immediate delivery traded little changed at $1,237.45 an ounce at 1:38 pm in Singapore. Holdings in exchange-traded products have surged 20% this year, according to data tracked by Bloomberg. Roche didn’t give a forecast for prices.

Investors are looking to two meetings this week. Although the Federal Reserve isn’t expected to raise rates on Wednesday, investors are waiting for guidance on the future trajectory of any increases.