In a note to clients, UBS analysts asked investors to consider portfolio hedges amid ongoing macroeconomic uncertainty. However, they noted that although gold has traditionally served as a safe-haven asset, there are potential headwinds in the short-term.
Specifically, if markets lower their expectations for an interest rate cut by the Fed, gold prices could face downward pressure.
Spot gold prices ended the week at 2413.93 per ounce.
Despite these potential near-term challenges, UBS remains optimistic about gold's long-term prospects.
The bank maintains its forecast that gold prices will reach US$2,500 per ounce by the end of 2024. This optimistic outlook is supported by strong demand from the central bank and investors.
In addition, gold's role as a geopolitical hedge has been an important factor in its price rise this year, providing diversification and reducing overall portfolio volatility.
UBS also highlights the role of oil as a hedge against specific risks. With conflicts likely to escalate in the Middle East, oil prices may remain high.
UBS expects it to trade at US$91 per barrel in the coming months, driven by strong demand and efforts by OPEC+ countries to keep the market balanced.
For investors with a high risk tolerance, UBS suggests selling the risk of falling Brent prices.
Overall, while UBS acknowledges potential short-term volatility for gold, its longer-term outlook remains positive, supported by continued strong demand and its usefulness as a geopolitical hedge.
