UBS Analysts Remain Bullish on Gold

UBS analysts reaffirmed their bullish stance on gold this week, emphasizing its importance as a hedge against rising macroeconomic and geopolitical uncertainties.

Performance Highlights

Gold has surged by 23% this year, reaching all-time high spot prices. This increase is attributed to:
– Expectations of lower US yields
– Ongoing USD diversification trend by central banks

Investment Recommendation

UBS recommends investors allocate around 5% of a balanced USD portfolio to gold.

Historical Performance

According to UBS analysts, gold has historically outperformed equities during periods of high volatility, a trend observed recently.

Market Dynamics

Despite reduced expectations for larger Federal Reserve rate cuts after the US CPI release, gold remains strong. This strength is particularly supported by the European Central Bank’s rate cuts.

While prices dipped briefly after an unexpected rise in US core inflation, UBS considers this a temporary fluctuation.

Future Outlook

The bank’s mid-2025 target for gold is USD 2,700/oz, driven by increasing demand from gold ETFs. In August, physically-backed gold ETFs experienced their fourth consecutive month of inflows, spurred by:
– Increased safe-haven demand
– Cooling US labor markets

Regional Trends

North America reported strong inflows, while Asia—especially India—continues to show positive trends due to favorable tax and budget changes.

Conclusion

UBS remains “Most Preferred on gold” globally, noting gold’s essential role in a diversified investment strategy amidst ongoing economic uncertainty.