Gold’s rally ought to proceed in 2025, says UBS

Investing.com — UBS strategists count on gold to construct on its positive aspects heading into 2025.

The bullion has remained regular round $2,650/oz this week, constrained by the energy of the US greenback, rising US Treasury yields, and improved danger urge for food for US equities.

Gold rose 28% for the reason that begin of the yr, outperforming the S&P 500 fairness index.

In a notice printed Wednesday, UBS strategists highlighted a number of catalysts anticipated to proceed driving upside in gold costs subsequent yr.

Amongst these are central banks’ accumulation of gold, which UBS believes will proceed in 2025 as a part of their diversification methods.

Knowledge from the Worldwide Financial Fund (IMF) reveals world central banks’ internet gold purchases in October have been the best month-to-month degree recorded this yr. UBS has revised its forecast for official sector gold purchases to 982 metric tons for 2024, up from a earlier estimate of 900 metric tons.

Whereas this determine is beneath the degrees of the previous two years, it represents a considerable improve in comparison with the post-2011 common of round 500 metric tons. Strategists consider this development will persist, stating,

“We predict the sturdy shopping for momentum will proceed amid de-dollarization efforts and count on central banks to purchase one other 900mt of gold or extra in 2025,” strategists led by Mark Haefele wrote within the notice.

Investor demand for gold as a portfolio hedge can also be prone to rise. Though the coverage agenda of US President-elect Donald Trump has been broadly mentioned, uncertainties stay relating to fiscal, commerce, and geopolitical developments.

Coupled with ongoing conflicts in Ukraine and the Center East, UBS believes these elements will drive elevated demand for safe-haven belongings, boosting inflows to gold exchange-traded funds.

Furthermore, decrease rates of interest are one other issue anticipated to bolster gold costs subsequent yr. UBS forecasts the Federal Reserve will scale back charges by 25 foundation factors on Wednesday, with further easing anticipated within the coming yr.

“This could scale back the chance price of holding the metallic, which is non-interest-bearing,” strategists defined.

A weaker US greenback, pushed by decrease charges and issues over the US debt trajectory, is prone to gas gold demand by making it extra inexpensive for non-dollar buyers.

Thus, UBS stays bullish on gold for the subsequent 12 months, projecting costs to achieve $2,900/oz by the top of 2025.

“We advocate an allocation of round 5% inside a USD-based balanced portfolio as a diversifier,” strategists stated.

Wanting additional forward, in addition they see development potential in copper and different transition metals, pushed by rising investments in energy technology, power storage, and electrical transportation.