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Gold (XAU/USD) depreciated 10% in 1Q21, but this does not signal a gold bear market. Joanne Goh, Strategist at DBS Bank, believes there is still upside potential for gold to trade towards $2,000/oz by year-end.

See –  Gold Price Analysis: XAU/USD set to retest the key support at $1682 – Credit Suisse

Central bank demand for reserves diversification provides stability to gold prices

“Gold price has been recovering after its 10.5% depreciation in the first quarter. We reiterate that this is not the beginning of a gold bear market. A lower US Treasury yield after peaking at 1.75% last quarter should set the stage for a better quarter ahead for gold.”  

“We believe there is still upside potential for gold to trade towards our price target of $2,000/oz by the end of the year.”

“Demand for physical gold jewellery comprises about half of gold’s total demand and was weak last year. Primarily, lockdowns prevented festive and wedding celebrations, and loss of income held back discretionary spending. We expect discretionary demand to pick up this year in line with economic recovery and re-opening.”

“Central banks which hold about one-third of total available gold supply is a key source of stable demand. We believe central banks are likely to increase their gold holdings to diversify from concentrated currency risks. Gold is also seen as an alternative investment to the growing pile of negative interest rate debt.”