UBS strategic rating gold, still "attractive", target price $4200 per ounce.

This Friday, the global financial markets were turbulent, with stocks, commodities, oil, and even cryptocurrencies experiencing sharp declines, while only gold prices remained strong. After surging above $4000 per ounce, how much more room does the gold price have to rise? A recent research report by UBS pointed out that the cumulative increase in gold prices this year has exceeded 50%, and despite potential short-term volatility, the uptrend in gold prices has not yet ended. UBS forecasts that the price of gold will rise to $4200 per ounce in the coming months and maintains a "attractive" strategic rating for gold. Multiple macro factors inject momentum into gold UBS believes that the breakthrough in the gold price this time is not an isolated event, but the result of multiple macro variables resonating: US government shutdown and fiscal concerns: The prolonged US government shutdown has injected new momentum into gold trading, with market concerns about US fiscal stability heating up; meanwhile, recent changes in the political leadership in Japan and France have raised uncertainty about the fiscal outlook in both countries, further boosting safe-haven demand. Fed rate cut cycle and long-term concerns about the value of the US dollar: The Fed's restarting of rate cuts, combined with market doubts about the long-term purchasing power of the US dollar, have become important supports for gold. UBS analysis indicates that the "opportunity cost" of holding gold - US real interest rates (nominal interest rates minus inflation) has fallen to its lowest level since mid-2022, and there is still the possibility of further decline into negative territory, which will continue to weaken the attractiveness of the US dollar and guide funds towards gold. Safe-haven and hedging properties highlighted: Gold has outperformed major global stock and bond indices since the beginning of this year, not only reflecting its core value in hedging economic, political, and geopolitical risks, but its low correlation with stocks and bonds (especially in times of market pressure) also makes it a high-quality diversification tool. Gold price has ample momentum for further upside UBS emphasizes that even though the current gold price is at a high level, there are still three core logics that support its continued rise in the future: 1. Fed easing + sticky inflation: Falling real interest rates benefit gold As a "non-yielding asset", the attractiveness of gold is inversely related to real interest rates. The market currently expects the Fed to gradually cut rates, while US inflation remains above the 2% policy target, leading to a further decline in real interest rates. UBS predicts that real interest rates could further fall into negative territory, significantly reducing the opportunity cost of holding gold, while suppressing the US dollar and indirectly driving demand for gold investments. 2. Global demand close to historical highs: Central banks, retail, and ETF resonance From the demand side, the gold market is showing a trend of "blooming in multiple points": Central bank gold purchases close to historical highs: UBS predicts that global central bank gold purchases will reach 900-950 tonnes by 2025, slightly lower than the historical peak in 2024, but still at historical highs, becoming the "ballast" of the market. Strong demand for ETFs and retail: Holdings of gold exchange-traded funds (ETFs) are close to historical records; retail demand is also strong, as data from the Perth Mint shows a 21% month-on-month increase in gold sales in September. Potential incremental demand expected: If private investors follow the trend of central banks "reducing US Treasuries holdings and increasing gold holdings", this will provide additional upward momentum for spot gold prices. UBS forecasts that global gold total demand will be around 4850 tonnes by 2025, reaching the highest level since 2011. "Stabilizer" for asset portfolios In the current context where stocks are at historical highs and market uncertainty persists, the "safe-haven + diversification" properties of gold become increasingly important. UBS points out that gold's value storage characteristics, high liquidity, and ability to hedge conflict risks make it an indispensable part of a diversified investment portfolio. UBS's investment advice is: allocate gold + diversified assets to hedge market risks Gold allocation ratio: For investors seeking portfolio risk resistance, UBS suggests increasing the gold allocation ratio to "medium single-digit percentage" to hedge against inflation and uncertainty. Diversified asset allocation: In an environment where stocks are at high levels, in addition to gold, high-quality bonds, hedge funds, and other tools should be used to further diversify risks and reduce the impact of single asset volatility on the portfolio. Long-term perspective: UBS emphasizes that the value of gold allocation is not for short-term speculation, but based on its long-term hedging properties and value storage functions, it is suitable for inclusion in a long-term strategic asset allocation framework.