UBS Predicts Gold Prices Will Rise 10% in 2024 Amidst Fed Policy Pivot

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UBS, a financial services company, predicts that 2024 will be fruitful for gold, forecasting a price increase of 10% over current market prices. According to UBS analysts, this price increase will be powered by a pivot in the current policy of the U.S. Federal Reserve, which is projected to start cutting interest rates as soon as May.

UBS Predicts Gold Price Rise, Rate Cuts

UBS, a Swiss financial services company present in over 50 countries, has predicted a bullish year for gold. In a note released on Friday, USB analysts predicted that gold prices could rise to 10% over current market prices despite the price reduction that the precious metal faced in December.

The institution expects that gold might be able to reach $2250 per ounce this year, given that there are still different factors that could push the demand for gold. One is the possibility of a U.S. Federal Reserve interest rate cut, that would awaken new interest in gold markets.

In this sense, UBS states that the “power of the Federal Reserve’s policy pivot should not be underestimated.” While there is still not a clear answer on the issue of when will the Federal Reserve start cutting interest rates, UBS expects a 100 basis points rate cut as soon as May. This would start “putting pressure on the U.S. dollar and real interest rates, which should spark fresh demand, particularly from exchange-traded gold funds.”

In December, the World Gold Council (WGC) anticipated a flat performance for gold in case of a “soft landing” scenario, which U.S. Treasury Secretary Janet Yellen has already declared as reached.

UBS concluded that “ongoing macro and elevated geopolitical risks continue to justify holding exposure to gold for hedging and diversification purposes,” given that the asset is traditionally considered a crisis hedge due to its lack of credit risk and negative correlation to risk assets, according to WGC’s analyst Johan Palmberg.

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