Goldman Sachs has found the safe-haven gold more attractive after a volatile December.

The bank on Thursday raised its gold forecasts to $1325, $1375 and $1425 per troy ounce over the next three, six and 12 months respectively from $1250, $1300 and $1350 per troy ounce. Based on gold’s current price, that forecast represents a 10.7 percent increase over the next 12 months.

“Going forward gold will be supported primarily by growing demand for defensive assets. The same is also true of central bank buying, with rising geopolitical tensions incentivizing more central banks to re-enter the gold market,” Goldman’s Jeffrey Currie said in a note to clients on Thursday.

Fears on slowing economic growth and the uncertainties around the Federal Reserve’s monetary policy have stirred the financial markets for a few months. Risk assets took a big hit in 2018 with the stock market suffering the worst December since the Great Depression. But during this volatile time, gold has outperformed the markets, returning more than 4 percent since the start of December, according to Goldman. The SPDR Gold Shares (GLD) returned about 5 percent in December.

“The last few weeks have seen a sharp deterioration in risk sentiment following soft macroeconomic data in December and renewed concerns about the future direction of growth, particularly the risk of U.S. growth catching down towards weaker economies,” Currie noted.

The double whammy of weaker economic outlook and the Fed’s policy uncertainty has spooked the markets. The U.S. manufacturing PMI (Purchasing Managers Index) hit a 15-month low in the same month. Manufacturers’ confidence in business also slipped to the lowest level in nearly two years.

The Fed had been tightening monetary policy aggressively until recently Fed chair Powell signaled Wall Street that policymakers will be patient with policy moves and are attuned to the messages coming from markets. That pause may be the time for gold to outperform, Goldman said.

“Rather, we find that as the hiking cycles matures, the usual (negative) correlations between these indicators and gold starts to weaken, or even turn negative,” wrote Currie. “This is because gold begins to price much more off fear of the next recession than off the opportunity cost of holding gold, or the purchasing power of investors / EM households.”

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