Singapore’s United Overseas Bank (UOB) says fears of stagflation outweigh expectations for a more aggressive Federal Reserve when it comes to gold price action. The bank’s latest outlook for the precious metal brings with it new price forecasts for the year.
“Fear of stagflation has replaced the dominant driver for yellow metal”
The main drivers for the precious metal will continue to be fears of inflation, slower economic growth and increased demand for safe havens. Heng Koon How, head of market strategy at UOB, said:
This growing fear of stagflation, coupled with strong safe-haven inflows, has replaced the gold price as the dominant drivers and dampened the negative impact of expected rate hikes from the US Federal Reserve.
cryptocoin.com As we reported, two weeks ago, gold hit record highs by testing $2,070. The move comes after the US announced additional sanctions against Russia, including an oil import ban. The famous analyst states that there is a growing fear of stagflation among global investors amid the ongoing rally in energy and commodity prices since the beginning of Russia’s invasion of Ukraine.
UOB’s updated gold price forecasts
Investors are also more inclined to allocate more resources to gold. The bank report states that the increased demand for gold is realized both in ETFs and physical. “There are renewed inflows into gold ETFs,” the analyst said, adding that purchases of gold jewelry from individual investors will likely intensify as the global central bank diversifies its reserves into gold. In addition, the analyst makes the following assessment:
Before the Russian invasion of Ukraine, the precious metal was trading at $1,900. In line with this recent round of strengthening in the gold price, there has been a clear rebound in inflows to gold ETFs. This renewed influx of gold ETFs is likely a return to safe-haven buying gold.
According to the report, there will be more demand from central banks. “Various central banks continue to convert their reserve assets into gold, particularly in the Emerging Markets area. This new geopolitical risk arising from the Russia-Ukraine conflict is likely to reinforce this diversification trend.
UOB’s updated price forecast shows gold transactions at $2,100 in the second quarter, $2,150 in the third quarter and $2,200 in the fourth quarter. These targets are above the previous year-end price target of $1,900-2,000.
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