Gold prices are expected to rise significantly in the coming years due to increased demand from sovereign entities and investors, anticipated lower interest rates, and a weakening U.S. dollar.
The International Monetary Fund's data shows that global central banks' net gold purchases reached the highest monthly level of the year in October. UBS has adjusted its expectations for official sector purchases and now forecasts a total of 982 metric tons for 2023.
Investor interest in gold is also expected to increase due to ongoing geopolitical tensions and economic uncertainty. The policy agenda of U.S. President-elect Donald Trump and geopolitical conflicts are likely to drive investor demand for gold as a hedge against instability.
The prospect of lower interest rates and a weaker U.S. dollar further adds to the appeal of gold. UBS maintains a bullish outlook for gold prices and recommends a 5% allocation in gold for USD-based portfolios.
In addition to gold, UBS also sees long-term investment opportunities in copper and other transition metals. Despite short-term fluctuations, the overall trend suggests a positive future for gold, supported by strong demand dynamics and favorable macroeconomic factors.