I would agree with RBC that the sentiment in gold is slowly changing for the positive. Gold has held up very well when we consider what oil and other commodities have done. Combine that with the gold ETF additions and there is reason to be positive on gold moving forward.

It is important to note that RBC is not calling for a skyrocketing gold price. It will be a grind upward with drops on the way up. With a long term mindset gold is a great buy at these levels but if you are looking to make money now watch out for the next 3 to 6 months.

Here is what RBC said. This post first appeared on the Scrap Register website (click here to visit)

NEW YORK : As investors continue to  questions whether or not gold’s recent upswing can be sustainable, analysts from  one bank say there are five reasons they maintain their positive investment  thesis for the metal.

“While investors should remain skeptical when told ‘it’s different this time,’ we would argue that there are a number of factors that support our view that gold is building a fundamental base that should lead to higher prices,” said analysts from RBC Capital Markets.

According to the analysts, one of the main reasons to remain optimistic on gold has been its resilience in to a stronger U.S. dollar.

“The DXY was up 9% in 2015, we find it remarkable that gold was only down 9%,” they said. “It is also unusual for gold to be firm versus the Economist Metals Price Index (down 24%) and WTI (down 30%). Periods when gold delinked from a strong negative correlation with the U.S. dollar include: late 2004 to mid-2005 (June 2005 Fed rate hike); mid-2007 (sub-prime crisis); late 2008-early 2009 (the GFC),” they added.

The analysts also pointed out that demand is fundamentally supporting the gold prices, especially from non-U.S. dollar holders, reported Kitco News.

“An estimated 50% of the global gold demand comes from China (26%) and the Indian  sub-continent (24%). Non-U.S. dollar economies, which make up 90% of global demand, have seen their domestic gold prices stronger, providing a hedge to the  dollar strength,” they said.

Retail investors are also becoming more interested in gold as seen with since the beginning of the year. “There has been 1.2M oz added to the global gold ETF holdings since the start of 2016. The Comex speculative positions suggest a more positive outlook as well,” they noted.

Not only has investor sentiment turned positive, but demand from the official sector can also prove to be gold positive this year, the analysts  said.

“Central banks became net buyers of gold since 2010 and in 2015 the central bank of China bought ~6% and Russia ~4% of global supply, respectively. This is in addition to China becoming the world’s largest gold producer with 15% of global mine supply, while Russia is ranked 4th globally  (8%).”

Finally, one of the major factors expected to weigh on gold this year is U.S. monetary policy and the central bank’s plan to normalize interest rates. However, the analysts said they do not see the yellow metal being dragged down that much, especially since it’s been in a “corrective phase” since late  2011.

“The gold price peaked prior to the QE-3 announcement in September 2012 and has declined since then,” they said. “While uncertainty remains concerning the duration of the current Fed rate hike cycle, we are of the view that gold is discounting a ‘low and slow’ hiking cycle in 2016.”

Gold  started off the week on a positive note, again trading above $1,100 as global equity markets continue to be in turmoil. February Comex gold futures were last up $10.30 at $1,106.50 an ounce.