UBS has increased its gold price forecast to $2,500 per ounce by the end of September, up from $2,400 per ounce. Furthermore, the global investment bank anticipates gold prices will continue to rise, predicting $2,600 per ounce by the end of 2024 and $2,700 per ounce by June 2025.
In a note on Thursday, the UBS Chief Investment Officer (CIO) team explained that on May 20, gold prices hit a record high of $2,450 per ounce. This surge was driven by expectations of Federal Reserve rate cuts and a weakening U.S. dollar due to softer U.S. economic data. The team noted:
There are three key drivers for the upgrade.
Firstly, softer U.S. economic data in April led to a reevaluation of Federal Reserve rate cut expectations, with money markets now predicting approximately 40 basis points of easing in 2024, up from 28 basis points at the end of April. Lower interest rates typically drive exchange-traded fund (ETF) inflows, bolstering gold demand.
Secondly, the forecast for central bank gold demand in 2024 has been increased to 950–1,000 metric tons, up from the previous estimate of 800–850 metric tons. The first quarter saw record purchases of 290 metric tons. Despite a recent slowdown in purchases by the People’s Bank of China (PBOC), Swiss trade data indicates continued strong buying from China.
Lastly, the UBS CIO team detailed that ongoing geopolitical uncertainties, including the U.S. election, conflicts in the Middle East and Ukraine, and heightened U.S.-China trade tensions, are expected to sustain gold’s appeal as a safe-haven asset.
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