Gold has been one of the standout performers in 2024, repeatedly reaching new all-time highs against a backdrop of worsening global economic conditions and aggressive debt issuance. According to analysts at UBS, this bullish trend is likely to continue, driven by expectations of lower interest rates and escalating geopolitical tensions.
“Gold reached a record high of USD 2,607/oz earlier this month, up over 25% year to date,” UBS analysts reported. They attribute the surge not only to lower yield expectations but also to ongoing geopolitical uncertainties and central banks diversifying away from the U.S. dollar.
The bank’s analysts highlighted that geopolitical risks, including uncertainty surrounding future U.S. policies and unresolved conflicts in Ukraine and Gaza, are likely to persist well into 2024. “We expect gold to remain a favored hedge for both geopolitical and interest rate risks,” they said, pointing out that gold has historically outperformed equities during periods of heightened volatility, a trend seen in recent months despite uncertainty around Federal Reserve rate cuts.
UBS forecasts the rally could continue, with a target price of $2,700/oz by mid-2025. The analysts also anticipate rising demand for gold exchange-traded funds (ETFs), noting that physically-backed gold ETFs saw inflows for four consecutive months by August, with holdings nearing 3,182 metric tons.
The bank recommends a 5% gold allocation in a diversified USD portfolio as a hedge, while noting that silver has lagged behind gold this year. The gold-silver ratio climbed above 85x after hitting lows of around 73x in May, with weakness in base metals and commodities dragging on silver prices.
Despite this, UBS remains optimistic about silver’s prospects, predicting it will benefit from rising gold prices and Fed policy easing. The bank expects silver to outperform gold over the next 12 months, with the gold-silver ratio potentially dropping below its long-term average of 70x.
The outlook for platinum group metals (PGMs) is more mixed. While platinum is expected to benefit from a market deficit, palladium prices remain burdened by market surpluses. UBS expects production cost pressures to drive platinum prices higher, particularly in South Africa, but warns that softer vehicle sales and weaker industrial demand could pose challenges for PGMs overall.
In the short term, TradingView analyst Xanrox believes gold could climb above $2,800 as it continues its upward trend. “Gold is inside an ascending bullish channel,” Xanrox said, forecasting an 8% profit potential for buyers in the coming days or weeks based on Elliott Wave analysis.
With a combination of geopolitical risks, economic instability, and expectations of Federal Reserve easing, gold appears set to remain a favored safe-haven asset through 2024 and beyond.
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