Gold’s Rally is Not Over Yet, According to UBS

UBS analysts maintain a positive outlook on gold, asserting that the rally in this precious metal is far from over. In a recent note, UBS has increased its gold price forecasts, projecting prices will reach approximately $2,800 by the end of 2024 and potentially climb to $3,000 by 2025.

This revision is indicative of sustained overall demand for gold, driven by various sectors in the market alongside minimal selling pressure. The optimistic outlook is backed by several macroeconomic factors. UBS indicates that ongoing monetary easing—both by the U.S. Federal Reserve and other central banks worldwide—will foster an environment supportive of gold purchases.

As interest rates decrease, the cost of holding gold lessens, encouraging investors to increase their allocations to this precious metal. Furthermore, a weakening U.S. dollar is anticipated to serve as a benefit for gold, as investors look for alternatives to standard currency holdings.

Geopolitical tensions and the approaching U.S. elections add more complexity to the market. Investors are increasingly viewing gold as a safe-haven asset in light of rising fiscal deficits and escalating government debt.

UBS analysts also point out that while there is strong agreement on the likelihood of higher gold prices, market positioning is relatively slim, indicating there is potential for further gold allocations in the near future. The firm expects central banks and other official entities to continue accumulating gold reserves, particularly as many institutions diversify their holdings due to risks from sanctions and geopolitical instability, even though the pace of gold purchases may moderate.

Meanwhile, consumer demand for physical gold, especially in key markets like China and India, is expected to remain steady, despite rising prices.