Goldman Sachs Group Inc. says that “fear” has made a comeback and gold is benefiting as stocks slide and investors fret more about the possibility that the US economy may tumble back into recession. Bullion’s recent advance “happened on the back of the market sell-off and spike in volatility,” analysts including Mikhail Sprogis and Jeffrey Currie, wrote in a report dated October 30. “In our view, it represents a rebound in fear-related demand for gold with ETFs beginning to build after several months of declines.”
Bullion is heading for the first monthly gain in seven after equities slumped and trade-war concerns festered, hurting the outlook for growth. The US has a greater than 50-50 chance of tipping into a recession in the next two years, according to a model tracked by JPMorgan Chase & Co. The spike in market worries on the possibility of a recession have been the primary reason behind a rebound in gold investment demand, according to Goldman.
“While we think that the U.S. cycle still has room to run it doesn’t mean that markets will not worry about it coming to an end,” Goldman said, describing U.S. growth as “still strong”. Still the bank added: “Going forward, we expect market ‘fear’ of a U.S. recession to strengthen. Recession worries and gold investment may increase further after U.S. growth begins to slow down.”