Background of the Prediction
UBS has recently raised its gold price forecast to $3,500, attributing it to the ongoing rally of the precious metal. Gold has already reached several record highs this year and is currently trading above $3,200 per ounce. This rally is driven by several factors:
- Geopolitical Tensions and Trade Wars: The ongoing tensions between the US and China, including the increase in tariffs, have boosted demand for safe-haven assets such as gold.
- Weaker US Dollar: A weaker US dollar increases the value of gold, as it is traded in dollars.
- Central Banks and ETFs: Central banks continue to purchase gold to strengthen their reserves, and the demand for gold ETFs is rising, further driving prices up.
Structural Changes
UBS’s forecast indicates several structural changes in the gold market:
- Increased Demand from Central Banks and Institutional Investors: Central banks and institutional investors such as insurance funds in China are increasing their gold holdings, which supports long-term demand.
- Shift in Asset Allocation: Investors are shifting their investment strategies and placing more emphasis on gold as part of a diversified portfolio, which sustainably increases demand.
- Limited Supply Response to Higher Prices: Despite rising prices, the supply of gold is not responding significantly, which further drives prices up.
Implications for Private Investors
This development is of interest to private investors as gold is considered a safe investment in uncertain times. UBS regards an allocation of around 5% of the portfolio to gold as optimal for diversification. Rising gold prices could also positively impact the stocks of gold mining companies such as Newmont Mining, as they benefit from higher gold prices.
Overall, UBS’s forecast suggests a long-term rally in the gold price driven by structural changes in the market. This development may encourage private investors to consider gold as part of their investment strategy.