A strategist from the bank explains their bullish outlook, particularly regarding the shift in investor sentiment brought on by the global pandemic.
In a recent interview
with CNBC, Joni Teves, a precious metal strategist at UBS Investment Bank,
shared the bank's outlook for gold over the coming months, particularly
regarding the shift in investor sentiment brought on by the global pandemic.
According to Teves,
the slump that gold experienced during March's broad market selloff is long
gone, and the metal is primed to continue climbing as it has been doing since mid-2019. Over the
past weeks, gold has consistently closed trading sessions around $1,700, with
frequent climbs to around the $1,720 level.
Teves and her bank believe
that the steady upwards trend will continue, placing $1,790 as the target level
for gold in the short-term. Over a slightly longer period, Teves thinks that
there is plenty of room for gold to move past $1,800.
Speaking about the
reasons for her bullish forecast, Teves explained that investor interest in the
metal continues to grow, both among individual investors and funds that were
short gold not too long ago. Teves attributes this to nearly unprecedented
levels of uncertainty and expectations of low growth that were a significant
talking point even before the pandemic hit. Likewise, plummeting interest rates
will diminish the appetite for bonds, lowering the amount of choices investors
have to hedge their portfolios and diverting attention to gold.
Fat Prophets' resources
analyst David Lennox shares the view that central bank actions will continue to greatly benefit gold from
various angles. Whereas certain currencies might have been seen as a safe or
attractive investment prior to the coronavirus outbreak, the debasement of fiat
due to monetary stimulus will rapidly change this notion. Lennox, like many
other analysts, also points to the worrisome issue of global debt, one for
which there is no solution in sight and will greatly worsen as various
governments scramble to mitigate the damage to their economies caused by the
coronavirus.
As a side note, the
World Gold Council's end of April report revealed that the coronavirus was the
biggest driver of gold demand, with investors piling into the metal and funds
buying the most gold they have in four years. Prior to the coronavirus, global
central banks were spearheading bullion demand and have doubled their yearly
purchases between 2018 and 2019. Keeping the WGC's report in mind, it should be
interesting to see how the gold market's demand dynamics move, along with the
figures themselves, as the situation progresses.
