Gold prices hold firm above the 2,000 mark UBS strategists: There will be another 10% increase this year
Finance Associated Press, January 23 (edited by Zhao Hao) UBS strategists recently said that although gold prices fell at the beginning of the year, gold prices may be about 10% higher than current levels this year against the backdrop of potential interest rate cuts.
As of press time, spot gold was trading at $2021 an ounce, down nearly 2% since the beginning of the year and down 5% from its all-time high in December 2023. In this regard, UBS pointed out in the report that the recent downward trend is "not worth mentioning" compared with the cumulative increase of nearly 15% in 2023.
UBS said the market should not underestimate the future support of the Fed's monetary policy for gold prices, strategists added that gold is sitting above the psychological level of $2,000 an ounce, and despite recent volatility, the bank still predicts a rise to $2,250 by the end of the year.
Scotiabank remained more cautious about the outlook, but also raised its price guidance for gold. In a report released during the day, the bank raised its price forecasts for gold and silver in 2024 and 2025, with analysts expecting gold to remain at the $2,000 mark by the end of the year, compared to $1,900 previously.
Media analysts believe that gold prices may be boosted by multiple factors, including geopolitical instability, uncertainty in financial markets, etc., which will increase the attractiveness of gold as a "safe haven" asset, and the expectation that the Federal Reserve is expected to cut interest rates within the year may push up dollar-denominated commodities.
But rate cuts may not be coming anytime soon. CME Group's FedWatch tool shows that traders see just over a 40% chance that the bank's March meeting will start a rate-cutting cycle, up from more than 80% the week before. Given that there are two sets of key data later this week, U.S. GDP and PCE, the probabilities may change.
UBS explained that the bank's expectations for gold prices are based on the premise that the Fed will "start cutting rates in May" and "cut rates by 100 basis points for the year", as this path will put pressure on the dollar and real interest rates, triggering new demand for gold, "especially from gold-backed ETFs." ”
According to the World Gold Council (WGC), gold broke several record highs in December last year and reached its highest closing price of $2,078 an ounce. Analysts believe that in addition to the potential interest rate path of the Federal Reserve, the impact of the Palestinian-Israeli conflict on global commodity volatility is difficult to ignore.
The Financial Associated Press previously mentioned that a number of experts have said that the further expansion of the Palestinian-Israeli conflict may become the largest "gray rhinoceros" incident in 2024. According to the latest news, a spokesman for Yemen's Houthis issued a statement on Monday (January 22) saying that they had attacked a US cargo ship "Sea Jazz" in the Gulf of Aden with missiles.
"In our view, ongoing macro factors and rising geopolitical risks continue to justify holding gold exposure for hedging and diversification purposes," UBS strategists wrote. ”
(Finance Associated Press Zhao Hao)