“We maintain our bullish gold outlook and expect to see new highs in 2025, though year-on-year gains are likely to be slower than 2024. There is still room for strategic gold allocations to rise and this should keep driving gold prices higher,” said Joni Teves, Precious Metals Strategist at UBS Investment Bank.
The current market landscape offers a compelling narrative for gold investors as Teves points to several key drivers supporting gold’s bullish trajectory. While the near term may see some price consolidation, UBS maintains an end-of-2024 price target of $2,700.
This corresponds with markets contemplating the macro outlook for the year ahead as one slowly gets more insights into what the US policies are probably going to look like.
“As we get closer to year-end, thinner volumes as investors become increasingly protective of year-to-date performance as well as the potential for profit-taking could also contribute to some choppy price action. Overall, we think a breather would be healthy for the market in the long run,” Teves added.
Focusing purely on these traditional macro drivers, market participants may start to get concerned that gold has become too expensive. UBS’s simple gold model, which uses two factors and a measure of uncertainty (average of MOVE and VIX indices), shows that gold spot prices have been trading at a record-high premium over “fair value”.Also read: Adani shares crash up to 20% after Gautam Adani indicted in US on bribery, fraud chargesHowever, the report states that the other aspects which cannot be captured in quantitative models have been legitimately contributing to gold’s positive performance as diversification and safe haven flows have been key to gold’s strong move higher.
Contrary to fears of market saturation, the global brokerage firm’s research indicates that gold’s current popularity is still modest compared to previous bull runs. The value of gold held in ETFs and Comex remains below peak levels seen during the COVID pandemic and the 2012-2013 bull market, leaving significant room for further growth.
The bank’s outlook further suggests that investors should view any short-term price fluctuations as opportunities rather than setbacks. With persistent geopolitical risks and evolving global economic challenges, gold remains a strategic asset for those seeking stability in an unpredictable market.
Also read: Rising dollar puts Indian markets on edge. These sectors are feeling the pinch
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
