UBS on the headwinds for gold (UBS refer to these as ‘short-term’):
- surprisingly resilient US economic data & concerns over the Federal Reserve’s likely response
- fed fund futures … markets are pricing roughly even chances of another rate hike by November
- has pushed both nominal and real US yields higher, adding to dollar strength and undermining gold’s near-term appeal
UBS say these factors don’t erode the portfolio case for gold, and that “Higher gold prices are delayed, not canceled.”
- the next potential leg up in prices will in part be driven by an anticipated revival in demand for exchange-traded funds (ETFs)
- A rise in ETF gold buying typically occurs just ahead of a US easing cycle—the timing of which we anticipate will become clearer by year-end as we get more data and the Fed decisions are behind us.
- Gold has also historically performed well when the USD softens, and we see another round of dollar weakness over the next 6–12 months.
- Gold still looks attractive to us as a longer-term portfolio hedge—especially in the context of an uncertain global growth outlook, volatile equity market dynamics, and unsettled geopolitics.
And conclude:
- So, with US recession risks now fading and dollar strength back, we have cut our year-end gold forecast slightly to USD 1,950/oz and downgraded the precious metal to neutral within our global strategy.