UBS Investment Bank remains optimistic about gold's trajectory, forecasting that the precious metal is likely to extend its rally into the second or third quarter of 2025, supported by persistent global uncertainties and a dovish shift in US monetary policy.
Joni Teves, UBS's precious metals strategist, said that despite recent volatility triggered by tariff announcements, the broader outlook for gold remains positive.
“Given the downside risks to growth, we think the United States Federal Reserve (Fed) will continue to ease its policy, thus creating a positive backdrop for gold,” she said during a virtual media briefing.
Teves noted that gold continues to be a highly attractive safe-haven asset, particularly as long-term trends such as asset reallocation and de-dollarisation gain traction.
“Investors should continue to diversify their assets, especially in gold,” she advised.
Despite the ongoing rally, she said there remains room for further investor participation, with net long positions in Comex gold futures still relatively low during the first quarter of 2025.
“Gold was under pressure when the Fed was hiking interest rates, and many gold positions were cut down due to the monetary policy stance,” Bernama cited her saying today.
In the short term, Teves sees the potential for consolidation in the market, creating opportunities for those who have yet to enter.
“For physical investors, gold demand has picked up across various regions during the first quarter of 2025, and we think this will continue for the remainder of the year.”
UBS maintains its year-end price forecast of US\$3,500 per ounce for both 2025 and 2026, though Teves cautioned the rally could begin to ease by mid to late 2025.
On the question of gold versus cryptocurrencies, Teves maintained gold’s superiority as a crisis hedge.
“In the midst of headlines of geopolitical risk escalation, gold would continue to stand out as the preferred safe haven compared with cryptocurrencies, which are more of a risk asset,” she said.
Teves expects demand to be underpinned by a broad spectrum of buyers, including sovereign entities, private wealth managers, institutional funds, and retail investors.
While jewellery demand may remain subdued due to higher prices, strong physical investment demand is expected to offset this weakness.
“There are upside risks out of China, given very strong bullish sentiment onshore and the volumes we’ve seen so far this year,” she added.
However, she also warned that downside risks include a more stable tariff environment and a shift towards a more hawkish stance by the Fed. - May 15, 2025
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