UBS Analysts' Bullish Outlook on Gold

UBS analysts have reaffirmed their optimistic view on gold, emphasizing its role as a hedge against rising macroeconomic and geopolitical uncertainties.

Gold has surged by 23% this year, reaching all-time high spot prices, driven by expectations of lower US yields and central banks' ongoing diversification away from the USD.

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

Historically, gold has outperformed equities during times of heightened volatility, a trend that has been evident in recent months.

Despite lower expectations for significant cuts in Federal Reserve rates post-US CPI release, gold remains resilient, bolstered by the European Central Bank’s rate reductions.

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

The bank’s target for mid-2025 is USD 2,700/oz, underpinned by growing demand from gold ETFs.

In August, physical gold ETFs experienced their fourth consecutive month of inflows, fueled by increased safe-haven demand and a cooling US labor market.

North America has seen significant inflows, while Asia, especially India, continues to trend positively due to favorable tax and budgetary changes.

UBS maintains a 'Most Preferred' status on gold within its global asset allocation strategy, emphasizing that its hedging properties make it crucial for a diversified investment portfolio amid ongoing global economic uncertainties.