Swiss bank UBS sees further upside for the Philippines’ gold miners on expectations of continued uptick in gold prices.
Joni Teves, precious metals strategist of the UBS economics and strategy research team, said rising gold prices will be driven by the expected cut in policy rates around the world.
“In the sense that if we’re talking about the value of gold production in the country, therefore as a function of the global gold price, then I think you know there is upside from the price aspect given our expectation that gold prices has room to rally into next year,” Teves said.
UBS in a research note said despite of the constant recalibration of Fed policy expectations, investors currently view the threshold for the US Fed to pivot toward rate hikes to be quite high.
Demand is also expected to remain strong as “macro uncertainty and geopolitical risks remain compelling reasons to have an allocation to gold as a hedge and diversifier for portfolios.”
“Although it is probably still too early for investors to position specifically for the upcoming US elections, our conversations suggest that this is on the radar as far as gold views are concerned. We think that on balance, the bias is for the overall uncertainty around the event to be viewed as a positive for gold, adding to the list of reasons to have it in the portfolio as a diversifier,” it said.
UBS also noted “persistent official sector purchases and resilient buying in key physical markets” that further support the assertion that the gold’s uptrend is anchored on strong fundamental demand.
“These purchases have been acting as a cushion during periods when macro signals weigh on gold prices, keeping the downside limited and essentially providing a good foundation for the uptrend to continue,” it said.
Dutch lender ING, meanwhile, said gold prices are expected to be volatile in the coming months given recent developments.
ING said from an all-time high above $2,450 an ounce in May, gold is already down 5 percent from its peak after the stronger-than-expected US jobs data and China’s central bank halted its gold purchases.
“We see prices averaging $2,300/oz in the second quarter and an annual average of $2,255/oz in 2024. We see prices peaking in the fourth quarter, averaging $2,350/oz on the assumption that the Fed starts cutting rates in the second half of the year and the dollar and yields weaken,” ING said.
“If the Fed continues its cautious approach to easing, gold prices risk a pullback. We expect gold prices to remain volatile in the coming months as the market reacts to macro drivers, tracking geopolitical events and Fed rate policy,” ING said.
