Gold is down 18% since March, but UBS says it has major upside looking ahead and recommends investors go long on the precious metal.
Rising interest rates and a strong dollar have left gold in the dust this year. But UBS forecasts a rebound in prices for the precious metal, saying it will rise 13% by next winter. Gold has traditionally been considered an inflation hedge. But rising interest rates have drawn investors away from bullion by raising the opportunity cost of holding the zero-yield asset. Gold has declined 18% since March after prices topped $2,000 an ounce, close to an all-time high.
UBS is not only forecasting that the Federal Reserve will pause rate hikes by February, but also expects the central bank to cut interest rates by 175 basis points by the end of 2023. "We think gold should benefit and therefore holding a long gold position would offer an attractive risk-reward as the tightening cycle ends," their analysts said.
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