NEW YORK (Kitco News) -- While the turmoil in global equity markets is weighing on the industrial metals this month, gold is benefiting from a revival of safe- haven demand, said research firm Capital Economics on Thursday.
Over the past month, precious metals' performance diverged sharply, with gold the only metal ending the month higher despite the U.S. Federal Reserve hiking interest rates in December for the first time since 2006.
Gold and silver are benefiting from safe- haven demand on the back of the fall in global equity markets, exacerbated by the recent oil price declines and escalating tensions in the Middle East, said Julian Jessop, commodity economist for the U.K-based firm.
In contrast, palladium and platinum fell by nearly 10% and 2% month over month, respectively, on fears that a slowdown in China would translate into lower demand for the metals.
Despite his renewed hope for gold, Jessop recently lowered the yellow metal's forecast for 2016 to $1,250 an ounce, down from his original call of $1,400 by year's end.
'The key driver of gold last year was the strength of the U.S. dollar and the anticipation of the U.S. Fed tightening,' Jessop said. 'We think they will remain major headwinds throughout the course of this year,' he added. Jessop noted that despite the recent turmoil in global equities, he expects the U.S. Fed to raise rates, and at a greater percentage than markets anticipate.
On a bullish note for gold, there are three key positives for the metal, Jessop said.