“Gold cannot fully replace government bonds in a portfolio, but the case to reallocate a portion of normal bond exposure to gold is as strong as ever,” Goldman analysts including Sabine Schels said in a note Friday.

“We still see upside in gold as late cycle concerns and heightened political uncertainty will likely support investment demand” for bullion as a defensive asset.

The precious metal climbed to a six-year high in September as the Federal Reserve cut borrowing costs and the total pile of debt yielding less than zero climbed to a record US$17 trillion, boosting the appeal of non-interest bearing gold.

Hedge funds and other large speculators boosted their bullish bets on the precious metal by 8.9% in the week ended Dec 3, government data showed Friday. That’s the biggest gain since late September.

Gold has fallen more than 6% from the peak to close at US$1,460.17 in the spot market Friday.

While Goldman said the correction on bullion prices has further room to run, the bank is still sticking to its forecast prices will climb to US$1,600 over the next year.