In a note to clients, UBS analysts advised investors to consider portfolio hedging amid ongoing macroeconomic uncertainty. However, they noted that while gold has traditionally acted as a safe-haven asset, there are potential near-term headwinds.
In particular, if markets reduce expectations of Federal Reserve rate cuts, gold prices could face downward pressure.
Spot gold prices ended the week at 2,413.93 per ounce.
Despite these potential short-term problems, UBS remains bullish on 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 central banks and investors.
Additionally, gold’s role as a geopolitical hedge has been an important driver of gold prices this year, providing diversification and reducing overall portfolio volatility.
UBS also emphasizes the role of oil as a hedge against specific risks. Given the potential for escalation of conflicts in the Middle East, oil prices may remain high.
UBS expects oil prices to trade at US$91 per barrel in the coming months, driven by robust demand and efforts by OPEC+ countries to maintain market balance.
For investors with a high risk appetite, UBS suggests selling the risk of falling Brent oil prices.
Overall, while UBS acknowledges gold’s potential short-term volatility, its long-term outlook remains positive, supported by continued strong demand and its usefulness as a geopolitical hedge.