$1,350 gold is next, firm says after bullions best quarter since 1986

Gold on Thursday sealed the deal on its best quarterly price performance since 1986.

Though Asian demand has played a significant role in the metals breakout performance this year, Western investors surprisingly provided the spark that gold needed as they sought safe-haven shelter from volatility on the stock market and concerns over Chinas slowdown.

Holdings in ETFs rose 21% to 1,761.3 metric tons in the period, the biggest gain in any quarter since the three months ended March 2009, Bloomberg reported. At the same time, trading volumes on the largest futures exchange, the Comex in New York, reached 14.1 million contracts, a record for a first quarter.

Now that first-quarter 2016 is history, some experts are weighing in on what the rest of the year holds. One of the major precious-metals consultancies, Metals Focus of London, thinks this quarters rally has legs.

30% gain from December 2015 low: Changing expectations towards the outlook for U.S. interest rates, concerns about monetary policy elsewhere, as well as turbulent equity and bond markets, have re-kindled institutional investor interest in the metal, said its director, Nikos Kavalis.

This impressive recovery will mark the end of the bear cycle that started in late 2011. Further gains later in the year are forecast to see gold peak at $1,350 by end-2016, almost 30% higher than its December 2015 low.

And count Investec Asset Management as a true believer in golds rebirth. We believe that this years upturn in gold has fundamental support and, whilst early, does appear to be the start of a longer-term rally for the sector, it wrote, citing limited scope for further Fed rate hikes, strong emerging-market demand, and equity-market turbulence.

Another metal consultancies are less bullish but nonetheless say gold likely has bottomed. Acknowledging bullions blistering start to 2016 based on a variety of global macroeconomic concerns, GFMS nonetheless foresees another pullback this year, largely based on the argument that current market turbulence will start to ease.

GFMS sees improving fundamentals: Though predicting that gold might drop below $1,200 this year, GFMS tempered that outlook by saying bullion will find support due to the improving market fundamentals, namely, supply and demand.

On the supply side, we forecast global mine production to drop in 2016, representing the first annual decline since 2008 and the largest in percentage terms in more than a decade. While we expect a modest recovery in scrap volumes, particularly from markets where the gold price is not expressed in dollar terms, this is unlikely to offset losses in global mine production, thus resulting in lower total supply.

By contrast, we expect physical gold demand to improve later in 2016, particularly for investment-grade jewellery, triggered by a rebound in pent-up demand from Asia. This is likely to be driven by concerns about the slowdown in China, heightened uncertainty in currency markets, particularly in emerging economies, and a growing desire to diversify personal wealth. Moreover, a clear uptrend in the gold price or, at least, signs of stabilisation are likely to see investors returning to the market and gold regaining its lustre. The forecast reduction in global mine output and a gradual recovery in demand will see the physical surplus narrow in 2016, providing support to the gold price and laying the foundation for better prospects.

Economic concerns to resurface: And CPM Group also sees gold maintaining strong support even if it does pull back, before rebounding toward 2017. CPM President Jeff Christian says easing fears about the global economy could take gold back down to $1,170 or even $1,130.

Our expectation is that the gold price comes down over the next two quarters second and third and by the end of year starts rising again as investor concerns of the economic outlook for 2017 starts to take hold again, he said.

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