SINGAPORE -- Gold could regain its safe-haven status before the year-end, according to analysts, though investors should expect further near-term price volatility as the metal maintains its correlation with risky assets.
In recent months, gold has traded broadly in line with industrial metals and equities as investors seek cash due to fears over the eurozone debt crisis and slowing global growth.
The correlation with risk has raised questions over gold's status as a store of value, but analysts say central bank buying from countries including Mexico, Ukraine, Kazakhstan and the Philippines, and demand from emerging economies, indicates faith in the long-term safe-haven trade.
According to data from the International Monetary Fund (IMF) released last week, Mexico, Kazakhstan and Ukraine were active buyers in the gold market in April, while the Philippines' central bank lifted its reserves by more than one million troy ounces in March. It was the seventh consecutive month the Filipino bank added to its official gold reserves.
In the near term, gold is vulnerable to shifts in macroeconomic sentiment, Societe Generale metals analyst Robin Bhar said. However, he noted that gold can regain its safe-haven status following major risk-off events.
He cited gold's correction and recovery following Lehman Brothers' collapse in September 2008 as an example of gold's ability to reassert its safe-haven status after a period of trading in line with risky assets. Gold surged on safe-haven buying in the immediate aftermath of Lehman's collapse, before falling over the following two months amid cross asset class liquidation. It then resumed its uptrend in December 2008.
In Bhar's view, a return to prices of $1,640 to $1,660 per ounce would be the minimum necessary in today's market to indicate the return of the safe-haven trade.
Gold is trading at about $1,575 a troy ounce, down 5.4 percent since the start of May following fund-led selling and just 0.7 percent higher since early January. In the first three quarters of 2011, when gold's safe-haven status was largely intact, gold rose 14.3 percent.
