UBS expects interest rate cuts to send gold prices above $2,000

AFRICAN STOCKS AND FINANCEFebruary 11, 2024 at 2:01 PM UTC

TLDR

UBS forecasts that gold and silver prices will continue to climb in 2024.
The anticipated Fed easing and a weaker dollar are likely to propel gold prices higher.
UBS maintains its outlook for the Federal Reserve to adopt an easing policy.

UBS forecasts that gold and silver prices will continue to climb in 2024, driven by expectations of interest rate cuts by the US Federal Reserve.

According to Joni Teves, UBS's precious metals strategist, the anticipated Fed easing and a weaker dollar are likely to propel gold prices higher, with the metal potentially reaching $2,200 per ounce by the year's end.

Although uncertainties persist regarding the timing and magnitude of rate cuts, UBS maintains its outlook for the Federal Reserve to adopt an easing policy. Despite the Fed's recent decision to keep rates unchanged in January and dismiss hopes of a rate cut in March, UBS remains steadfast in its expectations.

Key Takeaways

Gold's status as a haven asset has surged since the onset of Israel's conflict with Hamas on October 7th. This escalation contributed to gold prices reaching a historic high of $2,100 per ounce last month. Typically, gold prices exhibit an inverse relationship with interest rates. When interest rates decline, gold becomes more attractive relative to other investments such as bonds, which offer diminished returns in a low-interest rate environment. Consequently, as interest rates decrease, the appeal of gold increases. Moreover, lower interest rates tend to devalue the dollar, thereby making gold more affordable for international buyers, and consequently boosting demand.

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