FameEX Hot Topics | UBS Forecasts a 10% Increase in Gold Prices in 2024 Due to Shift in Fed Policy

UBS, a prominent Swiss financial services company operating in over 50 countries, forecasts a bullish trend for gold in 2024. The firm anticipates a substantial 10% rise in gold prices compared to current market levels, a significant rebound from the price drop the metal experienced in December.

The company's analysts believe that gold could potentially reach a high of $2,250 per ounce this year. This optimistic projection is based on several factors that could boost gold demand. Notably, a potential cut in the U.S. Federal Reserve's interest rates is expected to rekindle interest in the gold market.

UBS underscores the significant impact of the Federal Reserve's potential shift in policy. Though the exact timing of the interest rate cuts remains uncertain, UBS envisages a notable reduction of 100 basis points as early as May. Such a change could exert downward pressure on the U.S. dollar and real interest rates, likely resulting in increased demand for gold, particularly from exchange-traded gold funds.

In contrast, the World Gold Council (WGC) had predicted steady gold performance in a "soft landing" scenario, a situation U.S. Treasury Secretary Janet Yellen believes has been achieved. Such a scenario typically stabilizes gold prices.

Despite these varying forecasts, UBS emphasizes the continuous relevance of gold as a secure investment option amidst ongoing macroeconomic uncertainties and heightened geopolitical risks. Gold's traditional role as a crisis hedge, characterized by its absence of credit risk and a negative correlation with riskier assets, is particularly highlighted. This perspective is supported by WGC analyst Johan Palmberg, who advocates for maintaining gold in investment portfolios for its hedging and diversification benefits.

UBS's analysis positions gold as a resilient asset in the face of potential economic shifts and global challenges. The forecast not only reflects the evolving dynamics of the financial markets but also underscores the enduring appeal of gold as a safe-haven asset, particularly in uncertain economic times. The potential for a shift in Federal Reserve policy and its implications for the gold market reveals the interconnected nature of global finance and the continued significance of traditional assets like gold in investment strategies.

Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.