UBS Raises Gold Price Forecast to $2,600 Per Ounce: Factors and Recommendations
UBS Raises Gold Price Forecast to $2,600 Per Ounce
UBS revises its gold price forecast, anticipating a rise to $2,600 per ounce by the end of 2024, up from the previous target of $2,500 per ounce.
Record High Driven by Market Factors
Gold surged to a record high of $2,450 per ounce on May 20, attributed to increased expectations for Federal Reserve rate cuts and a weakening US dollar amidst softer US economic data.
Factors Behind the Revised Forecast
Repricing of Federal Reserve Rate Cut Expectations: Softer US data in April led to a repricing of Federal Reserve rate cut expectations, with money markets now pricing in 40 basis points of easing in 2024, up from 28 basis points previously. Lower rates typically boost gold prices by driving exchange-traded fund (ETF) inflows.
Increased Central Bank Demand
UBS has raised its central bank demand forecast for 2024 to 950–1,000 metric tons, up from 800–850 metric tons. Despite recent moderation in gold purchases by the People's Bank of China, the World Gold Council reported record first-quarter purchases of 290 metric tons. Swiss trade data also indicates continued strong buying in China.
Geopolitical Uncertainties
Ongoing geopolitical uncertainties, including the approaching US election, conflicts in the Middle East and Ukraine, and heightened US-China trade tensions, are expected to support gold as a hedge.
UBS's Recommendations and Long-Term Outlook
UBS suggests buying gold on dips around $2,300 per ounce or below, emphasizing its role as a long-term portfolio diversifier. Additionally, UBS introduces an end-June 2025 forecast of $2,700 per ounce.
