Gold prices continue to rise, up 8.2 percent since the beginning of this year. UBS economists think gold could break its all-time high later this year, with many medium and long-term factors. Based on this, economists list three reasons to buy gold.
Three reasons to consider to buy gold!
Central bank demand will remain strong
Central banks are on track to purchase about 700 metric tons of gold this year. This figure is well above the average of less than 500 metric tons since 2010. UBS economists predict that this buying trend of central banks will continue due to rising geopolitical risks and rising inflation.
Widespread US dollar weakness supports gold
Meanwhile, the direction of the weakening US Dollar is clear. Economists say that the decline in the yield of US Treasury papers will continue to put pressure on the dollar. Gold has historically performed well when the US Dollar weakened due to the strong negative correlation between them. From this point of view, economists predict that the US Dollar will weaken one more round in the next 6-12 months.
Rising recession risks in the US could trigger safe-haven flows
cryptocoin.comAs you follow, the latest data from the USA shows that the country’s growth is slowing down. Tighter credit conditions were also revealed in the Fed’s latest Senior Credit Officer Opinion Survey. This is likely to put pressure on growth and corporate profits. Economists point out that, according to data from 1980, the relative performance of gold against the S&P 500 increased significantly during the US recessions.
Price forecast: Gold’s downside potential is limited
The yellow metal is experiencing its biggest weekly loss since early February. The price of gold fell below the psychological level of $ 2,000, which it maintained for a while. However, Commerzbank strategists say the potential for further downside is limited. The main reason behind this is the hope that an agreement will be reached soon in the disagreement over raising the US debt ceiling. From this point of view, strategists make the following assessment:
The gold price slid to a six-week low on the back of a good US economy and strong labor market indicators. After all, these once again dampened hopes for a rapid rate cut. What’s more, the still smoldering US debt dispute no longer seems to be providing any support given the growing hopes that a settlement will be found over time. However, we think that the further downside potential for the gold price is limited as the US Federal Reserve has completed its rate hike cycle.
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