'Gold losing its pull as alternate asset'

Gold is losing its allure as an alternate asset and is likely to remain subdued on waning appeal, says a DBS report.

According to the global financial services major, the July-September quarter of 2018 is one of the worst performing quarters for the yellow metal since 2016.

"As such, we do not see an immediate catalyst for gold price," DBS said adding that strong fund outflow from gold related ETFs signals that it is losing its attractiveness as an alternate asset.

In July 2018, outflow from ETFs amounted to USD 1,530 million, a drastic turnaround from an inflow of USD 1.383 million in March quarter and USD 1,420 million in June quarter of this year.

"Accordingly, we estimate the ETF flows in the second half of this year (July-December) to be a net negative, which will be a key contributor for gold price weakness in near term," the report added.

The price of gold plummeted to USD 1,174.2/oz on August 16, down 13.2 per cent from a high of USD 1,353.4/oz recorded on April 11.

The decline was largely owing to the rising US dollar and increasing uncertainties in the global economy amid the escalating trade war. Moreover, depreciation of emerging currencies is also likely to dampen jewellery demand.

"We lower our forecast for gold to USD 1,200/oz in December quarter and expect it to extend weak performance in 2019 due to surplus in gold market," the report said.

It further noted that the growing divergence between the stable markets in developed economies and uncertain and volatile emerging markets are likely to persist.

"We expect trade weakness to show up in the data soon, emerging market capital flows to weaken further, and geopolitical risks to exacerbate in the last four months of the year," it added.