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The Gold price has already risen sharply this year, but according to Deutsche Bank analysts, it is still interesting to buy gold. Increasing stress in the financial system, the looming increase in defaults on corporate loans in the United States and the risk of a sharp depreciation of the Chinese currency are reasons to seek safe havens, according to analysts at the bank.
In a new report released today, analysts at Deutsche Bank write that buying gold is justified under the current circumstances.
"Gold is like a type of insurance, and we know that most people are reluctant to buy insurance. The current Gold price might deter some investors from buying gold. However, we would like to emphasize that given the negative interest rates worldwide, the cost of holding gold has become negligible. Therefore, the current gold price is justified."
One of the arguments against Buy gold is that the precious metal does not generate income in the form of interest or dividends. But now that central banks of Japan, Switzerland, Sweden and the ECB, among others, are pushing for negative interest rates, this argument is becoming less strong.
"We think economic risks are on the downside. Gold tends to be less profitable in times of strong economic growth. Due to the global slowdown, the gold price is under less pressure."
Until recently, Deutsche Bank had a price target of less than $1,000 for a troy ounce of gold by the end of this year. But just like ABN Amro, Germany's largest bank has also had to revise its price target. They now think that the bottom in the gold market is behind us and that the precious metal will yield $1,230 per troy ounce by the end of this year.
It is striking that Deutsche Bank only adjusts its price target for gold after the price has risen by 15%. Apparently, the bank, like ABN Amro, did not see a sudden price increase for the precious metal of 16% in euros, 17.5% in dollars and even 24% in British pounds coming this year.
Deutsche Bank: "It's time to buy gold"
