BNP Sees Risk of Central Bank `Overreach’ With $1,400 Gold – by Lilian Karunungan and Ranjeetha Pakiam (Bloomberg News – April 21, 2016)

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Gold may advance to as much as $1,400 an ounce over the next 12 months, according to BNP Paribas SA, which cited rising investor concern about the efficacy of central banks’ policies to sustain growth.

“There has clearly been an uptick in general investor concern about the eroding effectiveness and potential overreach of global central bank policies,” BNP’s wealth-management arm said in a briefing paper at a conference in Singapore on Thursday. “We expect this concern to remain an important component of the investment landscape in coming quarters.”

Bullion has rallied 20 percent in 2016 amid financial market volatility and investor concern about the outlook for global growth. Central bankers in Europe and Japan have intensified their drive to spur their economies, embracing negative interest rates, and while the Federal Reserve raised borrowing costs late last year, it’s yet to boost them further.

The expected range for bullion from BNP over the next year was from $1,150 to $1,400. “We have been recommending gold as a portfolio hedge,” Prashant Bhayani, Singapore-based chief investment officer for Asia at BNP Paribas Wealth Management, said during a presentation. “As a hedge we think it makes sense, especially with the negative-interest-rate world we’re in right now.”

Gold’s Rally

Bullion for immediate delivery gained as much as 2.1 percent to $1,270.38 an ounce, the highest since March 17, and was at $1,269.79 at 2:12 p.m. in London, according to Bloomberg generic pricing. It last traded above $1,400 in September 2013. Holdings in gold-backed exchange-traded products have surged 20 percent this year, according to data tracked by Bloomberg.

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