Gold has been one of 2024’s standout performers, consistently breaking record highs as economic conditions deteriorate and global debt levels rise. UBS analysts predict the precious metal’s rally will persist, driven by the likelihood of lower interest rates and escalating geopolitical tensions.
“Gold reached an all-time high of $2,607 per ounce earlier this month, rising more than 25% year to date,” noted UBS analysts. They emphasized that factors beyond lower yields, such as macroeconomic uncertainty and geopolitical instability, continue to support gold’s upward trend. Additionally, central banks’ ongoing diversification away from the U.S. dollar is further strengthening demand for the metal.
UBS highlighted that ongoing geopolitical conflicts, including unresolved crises in Ukraine and Gaza, could stretch well into 2024, increasing demand for gold as a safe-haven asset. Moreover, the uncertainty surrounding the upcoming U.S. government policies adds to the pressure.
“Gold is likely to remain a favored hedge against both geopolitical and rate risks,” UBS stated, pointing out that the metal has consistently outperformed equities during periods of heightened volatility. They also noted that gold’s strong performance has continued despite less dovish expectations surrounding Federal Reserve rate cuts.
Looking ahead, UBS expects gold’s rally to extend, forecasting a price target of $2,700 per ounce by mid-2025. The bank also anticipates a rise in demand for gold exchange-traded funds (ETFs) in the coming months, as inflows into physically-backed gold ETFs have already increased for four consecutive months. Total gold ETF holdings now stand at 3,182 metric tons, marking the highest level since the start of 2024.
The bank recommends investors allocate 5% of a diversified USD-denominated portfolio to gold as a hedge against market volatility and economic risks.
Silver Set to Benefit from Rising Gold Prices
While gold has seen impressive gains, silver has lagged behind, according to UBS. The gold-silver ratio recently climbed back above 85x, signaling silver’s relative weakness compared to gold. This was partly due to broader commodity weakness and a slowdown in China’s solar exports.
Despite this underperformance, UBS maintains a positive outlook on silver, forecasting that it will benefit from gold’s bullish trend and Fed policy easing. The analysts expect silver to outperform gold over the next 12 months, with the gold-silver ratio potentially falling to just below 70x, its long-term average.
Moreover, UBS predicts that the silver market will remain in deficit in the coming years, leading to continued declines in above-ground inventories, which should support prices and attract investor interest.
Platinum and Palladium Outlook
Regarding platinum group metals (PGMs), UBS notes that potential Federal Reserve rate cuts have provided a lift to prices, though the metals have lacked a clear directional trade in 2024. While palladium prices face pressure due to market surpluses, platinum is expected to rise due to apparent supply deficits. Additionally, rising production costs, particularly in South Africa, should support platinum prices.
However, headwinds from weaker industrial demand and a softening vehicle market may pose challenges for PGMs. UBS advises that PGMs may be suited to volatility selling strategies in the near term.
Short-Term Gold Outlook
TradingView analyst Xanrox expects gold prices could climb above $2,800 in the near future, citing the metal’s historical uptrend. Xanrox highlighted that gold is currently moving within a bullish ascending parallel channel, suggesting further price gains. “I predict gold will hit the top of the channel in the coming days or weeks,” Xanrox said, projecting an 8% profit without leverage for short-term buyers.
From an Elliott Wave perspective, Xanrox noted that gold is in wave 3, which typically represents the strongest phase of a trend, further reinforcing the outlook for higher prices.
In summary, the combination of geopolitical risks, rate cuts, and macroeconomic instability sets the stage for continued bullish momentum in gold, with silver also poised to benefit as investors seek safe-haven assets amidst growing uncertainty.
You Might Be Interested In
- Gold Prices Hit Record Highs Amid Market Volatility and Fed Policy Adjustments
- Gold Hits Record High as Fed Cuts Rates, Titan Minerals Announces Major Stake Sale
- Gold Rally Dims Asian Demand, Despite India’s Import Duty Cut and Weak Chinese Imports
