Price of gold expected to continue to shine in 2024, suggests UBS

(Alliance News) - UBS thinks the gold price has further to run in 2024 despite its strong start to the year.

The Swiss bank pointed out gold has risen by around 13% this year, outperforming global equities and bonds in recent weeks despite a strong USD and reduced Fed rate cut expectations.

On Monday, the price of gold traded at 2,338.24 per ounce. It has risen 18% in the last 12 months.

UBS explained it had previously expected gold to rise to USD 2,250 per ounce by the end of the year.

"But it has rallied faster and more forcefully than our already bullish expectations," the broker noted.

The rally thus far has been driven by buyers who haven't traditionally made material purchases, while the usual exchange traded fund buyers have remained net sellers, UBS commented.

In fact, ETF holdings stand at a 4-year low, it remarked.

UBS said a combination of market concerns, "including the sanctioning of USD-based assets, CNY devaluation fears, and renewed inflation risks, supported solid demand from central banks and Asian investors."

In January and February, preliminary data indicates central banks bought around 64 metric tons of gold and China imported 132 metric tons from Switzerland, a key gold refinery hub, it noted.

"We expect these buyers, who are less price sensitive, to continue accumulating gold in the months ahead," UBS commented.

"Furthermore, despite record-high prices, we expect gold ETF holdings to increase once the Federal Reserve starts cutting rates around mid-year, as these buyers tend to move more in sync with interest rate adjustments."

"This event could trigger another step-up in demand via ETFs," UBS suggested.

With this catalyst still ahead, UBS increased its forecasts by USD 250 per ounce, expecting gold to trade at USD2,300 per ounce in June and at USD2,500 per ounce at end-2024 and end-March 2025.

"Renewed price setbacks in the short term remain possible if US economic data delays Fed rate cuts, but so far these setbacks have been shallower than we had expected," UBS stated.

By Jeremy Cutler, Alliance News reporter

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