Gold has been highlighted by UBS as a valuable hedge against market volatility, especially in light of political uncertainties following the recent US presidential election.
UBS warns that the new administration"s policies could introduce significant risks that may not be fully priced into the market. The bank recommends maintaining a balanced portfolio with a 5% allocation to gold, particularly during price declines.
UBS notes that the current downward trend in the US dollar and US Treasury yields could support gold prices in the coming months. The demand for gold remains strong due to its role as a hedge and diversifier in investment portfolios, and this demand is expected to be further bolstered by ongoing economic uncertainties.
UBS also highlights the unpredictable nature of the new administration"s policy agenda, which could lead to significant market fluctuations. The bank advises investors to remain cautious and emphasizes the importance of gold as an essential component of a diversified investment strategy.
The report also mentions the likelihood of continued inflows into gold-backed exchange-traded funds (ETFs) as the US Federal Reserve is expected to cut interest rates further. Central banks are also expected to increase their gold holdings as geopolitical tensions and economic uncertainties persist. The ongoing demand from central banks, along with potential tariffs and the growing US budget deficit, may drive investors towards gold as a protective measure.
Gold is currently trading at approximately $2,614.10, reflecting its status as a sought-after asset in uncertain times. UBS"s recommendations highlight the importance of gold in a well-rounded investment portfolio, considering the evolving market dynamics.