The institution expects that gold might be able to hit $2250 per ounce this year, given that there are still different factors that could push the demand for gold
UBS, a Swiss financial services company present in more than 50 countries, has forecasted a bullish year for gold. In a note released on Friday, USB analysts forecasted that gold prices could rise to 10 per cent over current market prices in spite of the price reduction that the precious metal faced in December.
The institution expects that gold might be able to hit $2250 per ounce this year, given that there are still different factors that could push the demand for gold. One is the possibility of a U.S. Federal Reserve interest rate cut that would awaken new interest in gold markets.
In this sense, the financial services company says that the “power of the Federal Reserve’s policy pivot should not be underestimated.” While there is still not a clear answer on the issue of when will the Federal Reserve start reduction interest rates, UBS expects a 100 basis points (bps) rate reduction as soon as May. This would start putting pressure on the U.S. dollar and real interest rates, which should trigger fresh demand, especially from exchange-traded gold funds.
In December, the World Gold Council (WGC) anticipated a flat performance for gold in case of a “soft landing” scenario, which U.S. Treasury Secretary Janet Yellen has already declared as reached.
UBS stated that “ongoing macro and elevated geopolitical risks continue to justify holding exposure to gold for hedging and diversification purposes,” given that the asset is conventionally considered a crisis hedge because of its lack of credit risk and negative correlation to risk assets, as per WGC’s analyst Johan Palmberg.