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UBS Raises Gold Price Forecast Amid Rising Central Bank Demand and Geopolitical Tensions

UBS has raised its gold price forecast following a record surge in gold prices, driven by anticipated Federal Reserve rate cuts and a weakening U.S. dollar. The main factors behind the investment bank’s upgraded gold price prediction include softer U.S. economic data, increased central bank demand, and ongoing geopolitical uncertainties.

UBS Revises Gold Price Prediction

UBS has raised its gold price forecast to $2,500/oz by the end of September, up from $2,400/oz. Additionally, the global investment bank expects gold prices to continue rising, reaching $2,600/oz by the end of 2024 and $2,700/oz by the end of June 2025.

The UBS Chief Investment Officer (CIO) team explained in a note Thursday that on May 20, gold prices surged to a record high of $2,450/oz, driven by expectations of Federal Reserve rate cuts and a weakening U.S. dollar due to softer U.S. economic data. This unprecedented rise has led to significant revisions in gold price forecasts, reflecting the evolving economic landscape. The team noted:

There are three key drivers for the upgrade.

Firstly, softer U.S. economic data in April resulted in a reevaluation of Federal Reserve rate cut expectations, with money markets now anticipating approximately 40 basis points of easing in 2024, up from 28 basis points at the end of April. Lower interest rates typically drive exchange-traded fund (ETF) inflows, bolstering gold demand.

Secondly, the forecast for central bank gold demand in 2024 has been raised to 950–1,000 metric tons, up from the previous estimate of 800–850 metric tons. The first quarter saw record purchases of 290 metric tons. Despite a recent slowdown in purchases by the People’s Bank of China (PBOC), Swiss trade data indicates continued strong buying from China.

Lastly, the UBS CIO team detailed that ongoing geopolitical uncertainties, including the U.S. election, conflicts in the Middle East and Ukraine, and heightened U.S.-China trade tensions, are expected to sustain gold’s appeal as a safe-haven asset.