Gold price could hit $2,700 by mid-2025, silver will outperform gold – UBS
NEW YORK (September 23) Gold has been one of the best-performing assets of 2024, climbing to new record highs on multiple occasions amid a backdrop of deteriorating economic conditions and non-stop debt printing, and according to one bank, the rally is expected to continue with the prospect of lower interest rates and rising geopolitical tensions.
“Gold reached an all-time high of USD 2,607/oz earlier this month, rising more than 25% year to date,” noted analysts at UBS. “It's not just the expectations of lower yields at play, with further support from macro and geopolitical uncertainties, and the continuing trend of USD diversification by central banks.”
They said that geopolitical tensions are likely to “extend well beyond the fourth quarter, with the next US government (and its policies) uncertain” while also highlighting that “significant unresolved conflicts centered in both Ukraine and Gaza possessing no obvious catalyst to end.”
“We expect gold to remain a favored market hedge for both geopolitical and rate risks,” they said. “Historically, the metal has outperformed equities during periods of elevated volatility, which again proved to be the case in recent months despite a less dovish market consensus on the pace of Federal Reserve rate cuts ahead.”
The analysts said that, in their view, “This rally could go further,” giving a price target of $2,700/oz by mid-2025.
“Alongside the near-term risk drivers, we anticipate greater gold ETF demand to gather pace in the coming months,” they said. “According to the official gold ETF data published by the World Gold Council, physically-backed gold ETFs rose in August to mark the fourth consecutive month of inflows. Total holdings have rebounded to nearly 3,182 metric tons, the highest since the start of the year, narrowing the year-to-date loss to 44 metric tons.”
“We recommend that a diversified USD-denominated portfolio should include a 5% allocation to gold as a broad portfolio hedge,” the analysts said.
While gold has served its role as a store of value, silver has lagged the yellow metal, they noted.
“The well-followed gold-silver ratio signaling the pair’s relative value rose back above 85x after hitting lows of around 73x in late May,” they highlighted. “Weakness across base metals and wider commodities likely acted as a drag, while China solar exports and domestic installations also showed signs of weakness recently.”
“Despite this, we maintain our view that silver is set to benefit from a rising gold price environment, which is aligned with Fed policy easing,” they said. “Our expectation that the silver market will remain in deficit over the coming years implies continuous declines in above-ground inventories, which should help fundamentally underpin prices as well as act as a tailwind for investor interest.”
“We see silver outperforming gold over 12 months, with the potential for its ratio to test the long-term average of just below 70x,” the analysts said.
As far as the platinum group of metals, they noted that “Prospects of greater rate cuts by the Fed have given the platinum group metal (PGM) prices a bit of a lift as of late,” before noting that “PGM prices have been lacking a clear directional trade this year.”
“While market surplus considerations should remain a burden for palladium prices, platinum’s apparent market deficit suggest that prices are likely to move higher,” they said. “Production cost aspects also favor higher prices, especially platinum, with PGM production basket prices trading more than 20% into the cost curve for South African miners. Headwinds come from a softer vehicle market and weaker industrial application demand.”
“In summary, the PGMs lend themselves for volatility selling strategies,” they concluded.
In the near term, TradingView analyst Xanrox said that gold could climb above $2,800 as the yellow metal “has started its historical uptrend.”
“Right now we can see that the price is inside this ascending blue parallel channel, which is, of course very bullish,” Xanax noted. “I predict GOLD to hit the top of the channel within the following days or weeks. This is an 8% profit without leverage if you buy now or wait for a small intraday pullback. From the Elliott Wave perspective, we are in wave (3), and usually, wave 3’s are the strongest.”
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