Gold Prices Soar to Record Highs in August 2024, UBS Analysts Remain Bullish
In August 2024, gold prices surged past $2,500, reaching record highs. Despite this remarkable milestone, UBS analysts are confident that the gold market is not overvalued.
The recent rally in gold prices has been driven by a favorable macroeconomic environment, with factors such as dovish Fed expectations, lower real rates, and a weaker US dollar contributing to the precious metal's ascent. Geopolitical risks and uncertainty surrounding the upcoming U.S. elections have also boosted gold's appeal as a safe-haven asset.
UBS analysts emphasize that market positioning does not appear overextended, with net long positions on Comex still below historical highs. Inflows into gold exchange-traded funds (ETFs) indicate sustained investor interest in gold as an investment.
Historical macroeconomic relationships that influence gold prices have been reestablished, with the metal's negative correlation with U.S. real interest rates stabilizing. Gold's dual role as a safe haven and a correlated asset with risk markets has become more evident, further supporting UBS's positive outlook on gold.
While physical demand in major markets like China and India has shown some weakness, UBS expects seasonal factors to support a rebound in demand. The official sector continues to purchase gold, with emerging market central banks expected to remain net buyers due to low gold holdings relative to total reserves.
In conclusion, the current macroeconomic environment, geopolitical uncertainties, and investor positioning all point towards a continued upward trajectory for gold prices. Investors should consider these factors when making decisions about their portfolios to take advantage of the potential opportunities presented by the gold market.