Gold prices have reached record highs despite facing various challenges, and according to UBS, the trend is expected to continue with a possible pullback in the near term followed by a rally to even higher records later in the year.
UBS highlights several factors supporting the price of gold, including the potential for interest rate cuts by the US Federal Reserve, central bank and investor demand, as well as geopolitical risks. UBS Chief Investment Officer Mark Haefele remains optimistic about gold, projecting a price of USD 2,250/oz and recommending it as a portfolio hedge.
The significant increase in global central bank purchases of gold in recent years and strong demand from Chinese investors indicate a cautious approach towards other markets such as equities and property. Additionally, UBS Wealth Management anticipates a resurgence in ETF buying as investors anticipate rate cuts from the Fed.
Geopolitical risks, such as the US election campaign, tensions between the US and China, and ongoing conflicts in Ukraine and Palestine, further enhance gold’s appeal as a safe haven asset. UBS views gold as a reliable portfolio hedge against sudden spikes in risk, while also expressing a preference for certain gold mining companies.
Haefele suggests that gold miners, which have not fully mirrored gold’s price rally, may present attractive value compared to physical gold and offer income-generating opportunities for investors. This perspective underscores the potential benefits of diversifying a portfolio with exposure to gold miners in addition to the physical metal.
