UBS precious metals strategist Joni Teves said that although the gold price has reached the year-end target, there are still strong bullish factors supporting gold. Investors have a relatively low allocation, with a tendency for risks to rise. Teves is optimistic about the outlook for gold, expecting it to continue to be supported by the Fed's loose policy and central bank buying behavior next year. UBS's year-end target price is $2,800, with a target of $3,000 in 2025, believing that there is still room for increasing gold allocation in the market
UBS precious metals strategist Joni Teves said, although the price of gold reached the bank's year-end target several months early, gold is still supported by strong bullish factors, and investors' allocations remain relatively low, so the risk still tends to be on the upside.
In an interview on Monday, Teves was asked about the future of gold after it broke through $2700 per ounce and continued to set new highs. She said, "We remain optimistic about gold, and we believe the outlook for next year is quite positive. The Fed's loose policy will continue to support gold, and the fundamentals remain positive. We expect central bank buying to continue, and we believe that even if the price of gold continues to rise, physical demand will remain strong."
UBS also believes that investors still have ample room to build gold positions. She added, " We believe the market is still underweight in gold investments, so there is still room to increase allocations further."
When asked when UBS expects spot gold to break through $2800 per ounce or even $2900 per ounce, Teves said, " Our year-end target for gold is now $2800, but given the price action of the past week, the upside risk is increasing. Our target for gold in 2025 is $3000. Considering the uncertainty leading up to the U.S. presidential election and ongoing geopolitical risks, we may see price fluctuations in the coming weeks, but we believe the upside risk for gold remains significant."
Teves was also asked about the views of Mohamed El-Erian, former CEO of Pacific Investment Management Company (Pimco) and one of the most respected voices in the international financial community. He pointed out in an article that the decoupling between the price of gold and its traditional driving factors and related assets continues.
Teves said, "There have indeed been some fluctuations and disconnections in the traditional relationship between gold and real interest rates, to some extent, the U.S. dollar as well, I think this is due to the driving factors of gold itself. First, central bank purchases have been a key factor supporting the gold market in recent years, as central banks have increased their purchases, especially after the U.S. imposed sanctions on the Russian central bank. In addition, physical demand, especially strong at the beginning of the year, has also supported the market."
Regarding whether one should hold physical gold or invest in mining company stocks when the price of gold is at record highs, Teves said that this decision depends on the reasons for investment and individual risk preferences.
She said, "Portfolio allocation actually depends on investors' risk preferences and investment objectives, so it depends on the type of investor. Some investors, especially those concerned about credit risk, tend to hold physical gold, while those seeking higher leverage tend to invest in stocks or other precious metals, such as silver, which can also provide greater leverage for changes in the price of gold."