UBS: Gold to rise to $2700! Silver may perform even better

In 2024, gold is one of the best-performing assets, hitting historical highs multiple times amid deteriorating economic conditions and ongoing debt issuance. UBS stated that with the prospect of interest rate cuts and escalating geopolitical tensions, the upward trend of gold is expected to continue.

Analysts at UBS pointed out in a report, "Gold prices have risen by over 25% so far this year. In addition to expectations of low yields, macroeconomic and geopolitical uncertainties have further supported gold prices. Furthermore, central banks' continued diversification of foreign exchange reserves is also favorable for gold prices."

They stated, "Geopolitical tensions are likely to 'persist beyond the fourth quarter, with the next US government (and its policies) still uncertain,' and emphasized that 'there are significant unresolved conflicts in Ukraine and Gaza with no clear catalyst for resolution.' The bank wrote:

"We expect gold to continue to be the preferred safe haven for geopolitical and interest rate risks. Historically, during periods of increased volatility, gold outperforms stocks. Although market expectations for the pace of Fed rate cuts are less dovish, recent months have once again proven this."

Analysts expressed that in their view, "gold may continue to rise further," setting a mid-2025 gold price target of $2,700 per ounce.

They said, "In addition to short-term risk-driven factors, we expect demand for gold ETFs to accelerate in the coming months. According to official gold ETF data released by the World Gold Council, physically-backed gold ETFs saw inflows in August for the fourth consecutive month, with total holdings rebounding to nearly 3,182 tons, the highest level since the beginning of the year, narrowing outflows to 44 tons year-to-date.

Analysts stated, "We recommend diversified USD-denominated investment portfolios to allocate 5% of funds to gold as a broad portfolio hedging tool."

They pointed out that while gold has served its function as a store of value, silver has lagged behind gold.

They emphasized, "The widely watched gold-silver ratio reflects the relative value of the two metals, rebounding to over 85 times after hitting a low of around 73 times at the end of May. Weakness in base metals and broader commodities may drag down silver."

They added, "Nevertheless, we still adhere to our view that silver will benefit from the environment of rising gold prices, consistent with Fed easing policies. We expect the silver market to remain in a supply deficit for the next few years, meaning inventories will continue to decline, helping to fundamentally support prices and fuel investor interest in investments."

Analysts stated, "We expect silver to outperform gold in the next 12 months, with the gold-silver ratio possibly testing slightly below the long-term average level of 70 times."

Regarding platinum group metals, they noted, "The prospect of further Fed rate cuts has recently boosted platinum group metals (PGM) prices." They then pointed out, "PGM prices lack clear directional trading this year." They said, "Although the consideration of market oversupply may continue to put pressure on palladium prices, the significant shortage in the platinum market indicates that prices may rise. Favorable production costs also support prices, especially for platinum, with PGM basket prices trading more than 20% above South African miners' cost curve. Adverse factors come from weak automotive market and soft industrial application demand."