In a note to clients, UBS analysts told investors to consider portfolio hedges amid ongoing macroeconomic uncertainty. However, they noted that while gold has traditionally acted as a safe-haven asset, there are potential short-term headwinds.
Specifically, if markets reduce expectations for 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 near-term challenges, UBS remains bullish on gold’s long-term prospects.
The bank maintains its forecast for gold prices to reach USD 2,500 per ounce by the end of 2024. This optimistic outlook is supported by strong central bank and investor demand.
Additionally, gold's role as a geopolitical hedge has been a significant 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 the potential for escalating conflicts in the Middle East, oil prices could remain elevated.
UBS expects Brent crude to trade at USD 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 tolerance, UBS suggests selling the risk of Brent prices falling.
Overall, while UBS acknowledges potential short-term volatility for gold, its long-term outlook remains positive, underpinned by continued strong demand and its utility as a geopolitical hedge.