Investing.com – Gold prices could tick up to another record high in 2025 as investors hunt for safe havens in response to likely “bouts of equity market volatility”, according to analysts at UBS.
The yellow metal surged by 27% in 2024, touching an all-time high of $2,788 per ounce in October and setting a record annual average price of $2,389 per ounce.
Despite a sell-off following a rush into riskier assets following Trump’s US election victory, it was still gold’s strongest yearly gain since 2020.
In note to clients on Tuesday, the UBS analysts predicted that a recently stronger US dollar and elevated US government bond yields could weigh on gold in the first half of 2025. A higher dollar can make bullion more expensive for foreign buyers, while a jump in yields may dent the appeal of non-yielding gold.
The greenback has strengthened and Treasury yields have marched higher in recent days as investors dial back expectations for Federal Reserve interest rate cuts this year. Worries have grown that solid economic data, along with President-elect Donald Trump’s sweeping tariff plans, could reignite nagging price pressures, giving the Fed less room to slash borrowing costs.
Still, demand for gold as a portfolio “diversifier” to help hedge against inflation should “more than offset” headwinds from the dollar and yields, the UBS analysts argued.
Periods of volatility in stocks are tipped to become more frequent, particularly given “high sector and geographical concentration across portfolios” as well as lofty equity valuations, they added.
“These uncertainties point to another year of strong official sector gold purchases alongside diversification demand from less rate-sensitive parts of the investment community,” the analysts wrote, noting that they are targeting a price of $2,850 per ounce for gold by the end of the year.
This post is originally published on INVESTING.
