GLDM - UBS sees three reasons to buy gold with drop below $2000 an opportunity

2023-05-19 09:57:26 ET

Gold has pulled back from the $2,000-plus level and now lags 4% below its YTD high reached earlier this month, but analysts at UBS believe the yellow metal will still break its all-time high later this year and see three reasons to buy gold right now .

Central bank gold demand should stay robust, UBS said, noting 2022 was the 13th straight year that central banks were net buyers of gold, and based on Q1 2023 data from the World Gold Council, central banks are on track to buy ~700 metric tons of gold this year, much higher than the average since 2010 of less than 500 metric tons.

Broad dollar weakness is a second reason to buy, according to UBS, as "the direction of a weakening dollar is clear," with the Federal Reserve signaling a pause in its current tightening cycle after 500 basis points of rate hikes over the past 14 months, and gold typically performs well when the U.S. dollar softens due to their strong negative correlation.

Finally, rising U.S. recession risks could drive safe haven flows, as recent data showed U.S. growth is slowing, with weaker than expected Q1 GDP, six straight months of contracting manufacturing activity, and the weakest consumer sentiment since November.

Saying investors should not be alarmed by gold's recent consolidation after a strong rally, UBS said, maintaining its forecasts for gold at $2,100/oz by the end of the year, $2,200 by March and a new June 2024 target of $2,250.

ETFs: ( NYSEARCA: GLD ), ( GDX ), ( IAU ), ( NUGT ), ( PHYS ), ( GLDM ), ( AAAU ), ( SGOL ), ( BAR ), ( OUNZ )

More analysis on gold:

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• Gold Prices Up 7-Fold SoFar This Century And The Best Is Yet To Come
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