Gold's Record Highs Shouldn't Halt Its Climb: UBS
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UBS maintains its positive outlook on gold, predicting further price appreciation in the coming months despite the precious metal reaching record highs this week, in a note published Friday by its Chief Investment Office.
Gold prices surged past USD 2,758 per ounce this week, marking a new all-time high and culminating in a remarkable 32% gain since the beginning of the year. This rally has been driven by several factors, including accommodative central bank policies worldwide, escalating geopolitical tensions, and uncertainty surrounding the upcoming US election.
UBS believes that the current confluence of supportive factors will persist, propelling gold prices even higher. The Swiss bank anticipates continued easing from the Federal Reserve, with interest rate cuts projected throughout 2025.
"The Federal Reserve easing cycle is still at an early stage, in our view, with 100 basis points of cuts expected in total this year, and another 100bps in 2025." the note states.
Historically, gold has performed exceptionally well during periods of Fed easing, often rallying as much as 10% in the six months following an initial rate cut.
Beyond monetary policy, UBS highlights heightened geopolitical risks as a key driver of gold's safe-haven appeal. Ongoing conflicts in Ukraine and the Middle East, coupled with rising tensions between the West and other nations, are fostering an environment of uncertainty that is likely to bolster demand for gold as a hedge.
Further supporting the bullish outlook for gold, UBS points to a global trend of central bank diversification away from the US dollar and into gold. This shift has been fueled by geopolitical considerations and a desire to mitigate risks associated with the weakening US dollar. As central banks continue to diversify their reserves, demand for gold is expected to remain robust. According to data from World Gold Council, central banks purchased a record 483 tons in the first half of 2024, with Turkey, India, China, and Poland leading the list.
UBS maintains an "Attractive" rating on gold and forecasts prices to reach USD 2,850 per ounce by March 2025.