(Bloomberg) -- Goldman Sachs Group Inc. said investors should diversify their long-term bond holdings with gold, citing “fear-driven demand” for the precious metal.

“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 $17 trillion, boosting the appeal of non-interest bearing gold.

Gold has fallen more than 6% from the peak to trade at $1,459.81 at 3:26 p.m. in New York 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 $1,600 over the next year.

To contact the reporter on this story: Yvonne Yue Li in New York at yli1490@bloomberg.net

To contact the editors responsible for this story: Luzi Ann Javier at ljavier@bloomberg.net, Reg Gale

©2019 Bloomberg L.P.