UBS analysts are optimistic about the future of gold, asserting that the current rally in the precious metal is just beginning. In a report released on Wednesday, UBS raised its gold price forecasts, predicting that prices could approach $2,800 by the end of 2024 and reach $3,000 by 2025.
This upward adjustment is attributed to sustained demand for gold across various market segments, alongside a notable lack of significant selling pressure. The bullish sentiment is bolstered by several macroeconomic factors, including ongoing monetary easing not only by the U.S. Federal Reserve but also by central banks worldwide. UBS believes this environment will be favorable for gold purchases.
As interest rates decline, the cost of holding gold diminishes, prompting investors to allocate a greater portion of their portfolios to the precious metal. Furthermore, a weakening U.S. dollar is anticipated to provide additional support for gold prices, as investors seek alternatives to traditional currency holdings.
Geopolitical tensions and the upcoming U.S. elections add layers of complexity to the market, with investors increasingly viewing gold as a safe-haven asset amidst rising fiscal deficits and escalating government debt. UBS highlights that while there is a robust consensus supporting higher gold prices, market positioning remains relatively light, suggesting ample opportunity for increased gold allocations in the coming quarters.
“We expect central banks and other official institutions to continue adding to gold reserves,” UBS stated, noting that many central banks are diversifying their reserves in response to risks associated with sanctions and geopolitical instability, although the pace of gold purchases may moderate.
Additionally, consumer demand for physical gold, especially in major markets like China and India, is projected to remain steady despite rising prices. This consistent demand reinforces UBS’s positive outlook on gold as a valuable investment in the coming years.
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