Source: Zhitong Finance
UBS strategists believe that in a context where the Federal Reserve may cut interest rates, the price of gold may be 10% higher than the current level by the end of this year.
Although the price of gold fell in early 2024, UBS strategists believe that in the context of the Federal Reserve's possible interest rate cut, the price of gold may be 10% higher than the current level by the end of this year. UBS reported that considering the 15% increase in gold prices in 2023, recent price fluctuations were “insignificant” and stated that “the power of the (Federal Reserve) policy shift should not be underestimated.”
UBS strategists said that the price of gold is still above the psychological threshold of 2,000 US dollars per ounce and is expected to rise to 2,250 US dollars per ounce by the end of the year, although the price of gold has fluctuated greatly recently.
Scotiabank analysts maintained more cautious expectations, but raised price guidance. Scotiabank analysts said on Monday that they believe gold and silver prices will rise this year and next two years, and will raise the year-end gold price forecast from 1,900 US dollars per ounce to 2,000 US dollars per ounce at the end of the year.
The price of gold can be affected by many factors. Geopolitical instability and market uncertainty may increase the appeal of gold as a “safe haven” asset, and a high interest rate environment is unfavorable to gold.
The market is increasingly uncertain whether the Federal Reserve will start cutting interest rates in March. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the market currently expects the possibility of cutting interest rates to be around 48%, and just a week ago, this possibility was as high as 81%. Two key data on the US economic growth and consumer spending price index for the fourth quarter will also be released this week.
Investors are also watching the upcoming monetary policy meeting between the Bank of Japan and the European Central Bank.
According to the World Gold Council, gold rose 15% to 2,078 US dollars/ounce in 2023, setting the highest annual closing record. Analysts believe this is related to interest rate expectations and global turmoil caused by the Israeli-Palestinian conflict. Central banks have also been major buyers of gold in 2022 and 2023.
According to the UBS report, since the market expects the Federal Reserve to cut interest rates starting in May, a total of 100 basis points, “putting pressure on the US dollar and real interest rates, this should stimulate new demand, especially from gold exchange-traded funds.”
UBS said: “In our view, the continued rise in macroeconomic and geopolitical risks continues to make sense to hold gold to hedge and spread risk.”
As of press release, COMEX's February gold futures rose 0.05% to $2023.2 per ounce.