Proactive Investors - The price of XAU/USDis set to reach US$2,050 per ounce by the year-end and $2,100 per ounce by March 2024, analysts at UBS have forecast.
“We have always viewed gold as a hedge in a portfolio context, and during recent market turbulence, gold’s safe haven qualities have shined through again,” the analysts wrote in a note to clients.
UBS highlighted that gold touched a 12-month high on March 20, momentarily breaking through the phychological barrier of US$2,000 per ounce.
“Fears of a repeat of the global financial crisis drove a surge in demand for gold exchange-traded funds (ETFs), which registered inflows just shy of 22 metric tons over the week ending 17 March, according to World Gold Council data,” analysts wrote.
“The last time we witnessed weekly inflows of this level was a year ago during the outbreak of the war in Ukraine.”
However, UBS pointed out that the yellow metal has shed some gains in recent trading sessions, dropping back below US$2,000 as government intervention in the US and Switzerland largely assuaged investors of immediate concerns.
“But we believe it will take time for confidence to be fully restored, while tighter lending standards could precipitate a deeper slowdown in the US, even as the Federal Reserve signalled it's approaching a peak in interest rates,” the analysts wrote.
“Meanwhile, central banks continue to diversify into gold. So far, official purchases have totalled nearly 120 metric tons after more than 1,100 metric tons were purchased in 2022. Swiss gold export data also showed a surge in Chinese demand in February.”
These dynamics speak for holding gold as a hedge within a portfolio context, UBS’ analysts concluded.
“We target gold at USD 2,050/oz by year-end, and also recommend selling the metal's downside price risks,” they wrote. “Our recent shifts to least preferred on global equities and the USD support our positive view on gold.”
Gold was close to again breaking US$2,000 on Friday, trading at US$1,997.50 shortly before noon in New York.