Investment Veteran Roche Changes Tack to Back Gold's Outlook

  • `We don’t know what central banks are going to do,' Roche says
  • Bullion has advanced 17% so far this year amid rising demand

Gold just picked up another backer in the form of Independent Strategy Ltd.’s David Roche, who says that he’s concerned enough about central banks’ policy making to reverse his bearish position.

“We’ve increased our holdings of gold, now that’s after a long, long time being short,” Roche, who’s president and global strategist of the London-based group, said in a Bloomberg TV interview on Tuesday. “The reason for that is because we don’t know what central banks are going to do next.”

Bullion has rallied 17 percent in 2016 amid financial-market volatility and investor concern about the outlook for global growth. Central banks 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. BNP Paribas SA has said gold may gain to $1,400 an ounce, citing the risk of central banks’ overreach.

Investors may turn to gold as an “insurance policy” against the uncertainty surrounding central banks’ policies, said Roche, who was until 1994 head of research and global strategist at Morgan Stanley, according to Strategy’s website. While the Bank of Japan will continue to try to get money circulating to get inflation back to target, that won’t produce further growth, he said.

Holdings Jump

Gold for immediate delivery traded little changed at $1,237.45 an ounce at 1:38 p.m. in Singapore, according to Bloomberg generic pricing. Holdings in exchange-traded products have surged 20 percent this year, according to data tracked by Bloomberg. Roche didn’t give a forecast for prices.

Investors are looking to two meetings this week. Although the Federal Reserve isn’t expected to raise rates on Wednesday, investors are waiting for guidance on the future trajectory of any increases. The BOJ will expand stimulus on Thursday, according to a slim majority of economists surveyed by Bloomberg.

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