Despite a recent correction following a surge at the start of the year, UBS expects gold prices to rebound.
On Tuesday, gold traded slightly lower at 4,121.20 USD per ounce, down 0.80 USD (0.02%). After soaring, the price of gold fell below 4,000 USD last month, but has already bounced back to the 4,100 USD level.
It’s now just 5% behind its all-time high of 4,350 USD per ounce.
According to Barron’s, UBS predicted in an analysis note on Monday that gold prices will reach 5,000 USD per ounce sometime next year or in 2027.
UBS highlighted that core portfolios are becoming more resilient and that gold is now viewed as a long-term strategic asset and a key element in asset allocation.
Investors, who once saw gold as a short-term speculation or a hedge against risk, now consider it a core asset amid inflation and global uncertainties. This shift indicates that investors are turning to gold as a crucial safeguard for their long-term portfolios against inflation and unpredictability.
UBS further explained that as gold becomes a long-term core asset in portfolios, it enhances resilience, making portfolios less volatile and better equipped for market downturns. Gold is seen as a safe haven during market turmoil because it often moves independently of stocks and bonds.
Owing to these advantages, UBS noted that the gold investor base is rapidly expanding. It explained that as investors sell stocks, bonds, dollars, and other assets to flock to gold, a virtuous cycle is driving gold prices higher.
UBS also projected that since the gold market is smaller compared to stocks, an influx of investors could create significant upward pressure on prices, potentially leading to substantial profits for gold investors.
Central banks are reducing their U.S. dollar holdings while aggressively purchasing gold, and individual investors are also buying gold through exchange-traded funds (ETFs), leading UBS to anticipate further price increases for the precious metal.
Jeff Jacobson, Managing Director at 22V Research, stated in a recent analysis note that he still expects a bullish trend for gold. He pointed out that technically, gold has maintained its 50-day moving average despite recent weakness. Staying above this short-term trend line is a positive sign that gold prices have additional upward momentum.
Jacobson suggested that the sustained upward momentum, despite sharp price declines, indicates that now might be an opportune time to buy gold at lower prices.
Pictet Asset Management also believes that despite the recent drop in gold prices over the past few weeks, the overall trend remains intact.
Pictet acknowledged that while gold prices have surged over 55% this year, leading to very high valuations, the fundamentals still justify these prices. They identified falling real bond yields, ongoing dollar weakness, and significant public debt expansion in developed countries as the underlying supportive factors.
However, they expect gold prices to exhibit high volatility in the short term.
Austin Pickle, Investment Strategy Analyst at Wells Fargo Investment Institute, noted in an analysis on Monday that gold has shown a prolonged upward trend, and the recent weakness represents a healthy correction for further gains. He predicted that it will take time for the gold market to stabilize and that volatility may remain elevated over the next few months.
