Barani Krishnan/Investing.com | Investing.com
Posted May 19, 2023 00:38
Investing.com – Gold investors waiting at the door to get out with the prospect of a US debt ceiling deal by the end of the week should stop and think about the long-term benefits of owning the yellow metal, UBS analysts said Thursday.
“We still see potential for gold to reach $2,100/oz by the end of the year and $2,200/oz by March 2024, and we maintain our highly favorable rating for gold along with our positive stance on the broader commodities,” the analysts said.
“We believe that gold should remain a hedge in a portfolio context, as our analysis shows that allocating an average single-digit percentage percentage to gold in a balanced USD-based portfolio would improve risk-adjusted returns and reduce drawdowns over recent decades. “
The UBS research team said there are three reasons to buy gold now.
They said: “Gold prices have retreated from recent highs as US President Joe Biden expressed confidence in avoiding a government default amid progress on debt ceiling negotiations, better US data, and hawkish comments by some Fed members.” The market had fallen by at least 4% from the record high of around $2,080 reached earlier this month.
But UBS analysts also noted that the yellow metal is still around 8% higher than it was at the start of the year.
They added, “We believe it is likely to break its all-time high later this year with several drivers in the medium to long term.”
The UBS research team said that among the factors leading to higher gold prices is the increasing demand by central banks.
Analysts said: “Last year marked the thirteenth consecutive year of net gold purchases by global central banks and the highest level of annual demand ever dating back to 1950.” They added that “at 1,078 tons in 2022, central bank purchases of gold more than doubled from 450 tons in 2021.”
The note said that based on first-quarter data from the World Gold Council, central banks are on track to buy about 700 tons of gold this year, well above the average since 2010 of less than 500 tons.
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Written by: Investing.com